by Dr Paul Joesbury
A brief review of some of the older academic literature pertaining to procurement perception within organisations.... Have things changed!
The perception of procurement has, for a long time, been one of poor relation. Even with its early beginnings the profession still lacks the confidence to take its rightful position within the enterprise. Stronger relationships and understanding between procurement and the rest of the business, especially the CEO and CFO is key to procurement being recognised for the contribution that it can make. This point is explored at some length within this review of the academic literature on perception, as a poor perception of procurement may be instrumental in limiting its potential to be effective in terms of acceptance and in its ability to attract the best talent.
According to Kraljic (1983), one big international company vastly improved the status of the purchasing division by promoting a dynamic sales executive with broad international expertise to head it. This is a recurring theme in that the purchasing “professionalism” and specialist knowledge is often not recognised as it is frequently the case that a non-procurement professional is appointed to lead the function. It would be an interesting comparison to see how many CFO’s are appointed without the specialised knowledge of finance and accounting!
Ferguson et al., (1995), postulated that purchasing must continue to demonstrate its ability to positively impact on organisation financial effectiveness. The obvious inference here is that a positive perception of procurement is not being effectively delivered or received, Thompson (1996), states that while the strategic changes needed inside businesses are not necessarily very complex, they are hindered by an inherent lack of expertise and understanding of purchasing. Top managers rarely put purchasing at the top of the agenda and only a very few chief executives have actually come from the purchasing function. Dumond (1996), comments that both General Electric Company and Tektronix found in their operations that the interaction process among team members was more effective if the team members operated at the same level of authority. Consequently, both of these organisations had to elevate procurement to a level consistent with its counterpart functions. This assertion is also supported by Cox (1997), who comments that the opportunities to raise the profession’s profile are rarely stimulated by the purchasing professional per se. They tend to be created by the decisions and actions of other senior colleagues and functions within the reporting hierarchy. This also raises the question of whether there are inherent skills lacking within the profession with regard to self-marketing, communications and promotion, an assertion that is tested within this research.
Quale (1998), refer to Carter and Narasimhan (1996), and suggest the status accorded the purchasing function in an organisation frequently is determined by the image the function projects to personnel outside purchasing. Unfortunately, most non-purchasing personnel have a very simplistic view of the purchasing function, and they understandably demonstrate little regard for internal purchasing performance measures which they view as mainly tactical (Cavinato, 1987). Carter and Narasimhan also suggest the linkage between purchasing strategies and organisational performance began to be established when organisations started to realise the impact that the purchasing function can have on their competitive position and they are now gradually shifting the role of purchasing from tactical to strategic.
The concept of preconceived ideas about purchasing is discussed by Hult and Nichols (1999), who comment that often great purchasing ideas fail to be translated into practice because they conflict with deeply held internal images of how purchasing systems work i.e., mental models and images that limit the purchasing practitioner to familiar ways of thinking and acting (Senge, 1990). Some of the mental models include: -
Purchasing decision are made solely on the basis of purchase price
The purchasing process involves too many rules and regulations, requires too much time and adds too little value
Purchasing does not keep users informed regarding the status of materials and/or services requests
Purchasing personnel really do not understand user requirements
Purchasing personnel would prefer to do business with their favourite suppliers rather than those that can best serve the requirements of the user
Callender and Mathews (2000), suggest that today’s purchasing professionals are beginning to be viewed as top level executives and programme managers instead of “those generally unglamorous individuals” (Stewart, 1994). The comment regarding the unglamorous individuals is a perception that is quite widespread and supports the “mental models” theory discussed earlier, and may well be a barrier to the profession moving forward. Snider (2006), comments that one group of authors captured this concern over the field’s identity in describing public procurement as the “Rodney Dangerfield” of government activities; that is, it gets no respect due to its routine and mundane features. This is also potentially the case in smaller organisations as Ramsey (2008), state that many managers in SMEs do not regard purchasing as a key task, and some do not even perceive purchasing as a distinct activity (Ellegard, 2006). It may therefore be the case that within SME’s the procurement function becomes an “add-on” activity to other executives’ portfolio’s, and only when the organisation reaches a certain size and scale does procurement become a function in its own right.
Expectation management is raised by Faes et al., (2000), who argue that procurement synergy initiatives often fall short of management’s expectations and might even distract managerial attention, which supports the point that CEOs or presidents are sometimes less satisfied with the effectiveness of their purchasing staff and would like to see responsibilities to be more widely spread throughout the organisation than is actually the case (Deloitte, 2016). This point may be a contributor to the seemingly constant flip-flopping of trends within organisations to “Centralise” (in order to achieve synergy benefits) then de-centralise (when the procurement function is not seen as close enough to the operating units) (Nixon / KPMG, 2012). Brandmeier and Rupp (2010), states procurement is often demoted to order fulfilment, not integrated into decision-making processes and not respected cross-functionally for their expertise - a lot of procurement effort just evaporates, regardless which levers are applied. The procurement department does not belong to the “chosen few” departments where fast track careers are developed. Sales and marketing, production, research departments are considered better places to start a successful company career and learn the trade (Rupp 2010). This observation speaks volumes and could well become self-fulfilling, as if the profession is not able to attract the very best talent, then it will always struggle in the internal competition for recognition.
As can be seen from this review, the position of a poor perception has not really changed over time. There appears to be a real conflict on what “should be” the case i.e., it is obvious that there is real merit for the procurement function to be more strategic with an organisation, as compared with the current situation where there is still an issue over the perception of procurement both within and outside of the profession.
References
Kraljic, P., 1983. Purchasing must become Supply Chain Management. Harvard Business Review, pp. 109 - 117., Ferguson, N. S., Langford, D. A. & Chan, W. M., 1995. Empirical study of tendering practice of Dutch municipalities for the procurement of civil-engineering contracts. International Journal of Project Management, 13(3), p. 157., Thompson, M., 1996. Effective purchasing strategy: the untapped source of competitiveness. Supply Chain Management, 1(3), pp. 6-8.,Dumond, E., 1996. Applying value-based management to procurement.. International Journal of Physical Distribution & Logistics Management, 26(1), pp. 5-24.Cox, A., 1997. On power, appropriateness and procurement competence. Supply Management, 2(20), p. 24., Quale, M., 2001. Purchasing in the UK and Switzerland: An empirical study of sourcing decisions. European Business Review, 13(1), p. 42., Carter, J. R. & Narasimhan, R., 1996. Is Purchasing Really Strategic?.. International Journal of Purchasing and Materials Management,, Volume 32, pp. 20-28., Hult, G., M, T. & Nichols, E. L., 1999. A study of team orientation in. JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, 14(3), pp. 194-210.. Cavinato, J., 1999. Fitting purchasing to the "Stages of strategic management. European Journal of Purchasing and Supply Management, Volume 5, pp. 75-83., Senge, P., 1990. The Fifth Discipline. s.l.:Currency Doubleday., Callender, G. & Matthews, D., 2000. Government purchasing: An evolving profession?. Journal of Public Budgeting, Accounting & Financial Management, 12(2), p. 272., Stewart, J., 1994. The Lie of the Level Playing Field. Melbourne: The Text Publishing Company., Snider, K. F., 2006. PROCUREMENT LEADERSHIP: FROM MEANS TO ENDS. Journal of Public Procurement, 6(3), p. 274., Ramsay, J., 2008. Purchasing theory and practice: an agenda for change. European Business Review, 20(6), pp. 567-569., Ellegard, C., 2006. Small company purchasing: a research agenda. Journal of Purchasing and Supply Management, 12(5)., Faes, W., Matthyssens, P. & Vandenbenpt, K., 2000. The pursuit of global purchasing synergy. Industrial Marketing Management, Volume 29, p. 539–553., Deloitte, 2016. The Deloitte global chief procurement officer survey 2016 - Procurement: at a digital tipping point?, s.l.: Deliotte., Nixon / KPMG, R., 2012. The Power of Procurement - A global survey of procurement functions, s.l.: KPMG., Brandmeier, R. A. & Rupp, F., 2010. Benchmarking procurement functions: causes for superior performance. Benchmarking: An International Journal, 17(1), pp. 1463-5771.