Managing a transformation journey will require a deeper understanding of organization constructs, meticulous action planning and a collaborative approach involving all stakeholders
Running an effective Change Management program for employees is a key enabler that allows the procurement transformation program to unlock enterprise value and achieve its strategic imperatives
The procurement function is responsible for acquiring goods and services at an optimum cost. It is a key area which demonstrates maximum potential for operating cost savings for any organization. This is usually achieved by implementing procurement-specific enterprise applications such as Ariba and Oracle Procurement, thereby automating the sourcing and purchasing processes. Automating these processes and mapping them to online systems have streamlined the procurement value-chain and infused a greater degree of efficiency and transparency besides achieving substantial cost savings. While technology-driven procurement changes have many benefits, they have also introduced workforce-related issues that need to be managed sensitively. This article focusses on how a technology-led procurement transformation program brings in human capital related challenges and the change management approach to streamline the transition process for employees.
Impact of a technology-led transformation program on human capital
One of the spin-offs of implementing technology in the procurement space is the outsourcing of some of the activities in the procurement value-chain and the creation of shared service centresin low-cost destinations. The idea is to manage tactical repetitive processes such as invoice processing and payment processing as managed services from shared service centres. While technology drives efficiencies of scale and cost savings, it also leads to manpower rationalization and lay-offs within the parent organization. Lay-offs can be an expensive affair and depending on the sector, prevalent regulation and degree of unionization, they may lead to long-drawn legal battles between trade unions/work councils and the management. Other impacts of such change are lower employee morale, loss of trust in management and rumors running across the organization. This usually leads to higher attrition and absenteeism, along with reduced productivity per employee. Sometimes, even an organization’s culture can be impacted, leading to deep-rooted distrust towards the management, lack of transparency and openness.
Automation, coupled with outsourcing and process changes, has an impact on retained roles within the organization. Some of these roles often get re-engineered, with changes in KPIs and KRAs along with reporting relationships. One of the perennial problems that organizations face is stakeholder resistance to change at all levels. These acts of resistance are due to perceived loss of autonomy with regard to ordering goods and services, loss of clout by the buyers/sourcing officers and opposition from approvers. There is substantial inertia among employees to upskill and re-train themselves to be able to use the new system and associated functionalities. It also takes some effort for them to align themselves to new processes and a distributed operating model with shared responsibility between the organization and the shared service centre.
Change management approach to effectively manage workforce transition
Managing such a transformation journey will require a deeper understanding of organization constructs and meticulous action planning, along with a collaborative approach involving all stakeholders impacted by the change. Fundamentally, the activities should not be limited to just implementing procurement technology but rather the adoption of the overarching change so that it is able to deliver enterprise value. Organizations that effectively manage a procurement transformation program invariably adopt a structured approach to change management and most importantly, ensure that the expectations of impacted stakeholder groups (both internal and external) are managed effectively. Usually, such a change program is designed as a three-phased approach which starts with change diagnostics, followed by change actualisation and, finally, change sustenance.The fundamental idea is to buy-in stakeholders by understanding their concerns and supporting them to adjust to change.
Typically, in a large-scale change program, the first step is to conduct a change diagnostic, which is a systematic approach to diagnose the ‘as is’ state of the procurement function in the organization. Essentially, the idea is to understand the change, the impacted stakeholder groups, the degree of impact on them, influence of stakeholders on the project success, impact on existing roles and responsibilities, other similar ongoing change programs and, finally, the inherent capability of the organization to manage the change. This data can be gathered by conducting selective interviews with key stakeholders, conducting focus group discussions (FGDs), administering surveys and skimming through relevant documentation, policies and procedures. Information collected as part of the diagnostic phase acts as a valuable input for the creation of a change strategy and high-level change plan.
The next stage starts with the creation of a detailed change project plan. This is a critical component of the change actualization stage as it provides granularity on specific activities, tasks, sub-tasks, along with key dependencies and timelines. Once the change plan has been signed off, change impact assessments and stakeholder assessments are initiated. While change impact assessments help the project team to understand the impact on existing procurement processes, stakeholder assessments capture the corresponding differential impact on the roles and responsibilities of various stakeholder groups. Findings from these assessments feed mitigation strategies and primarily lead to the creation of the training and communication strategy and plans.
While the training programs are meant to upskill and re-train employees on the new procurement systems and processes along with the related policy and procedural changes, communication activities provide information on what is changing and by when. The project team also engages with local leadership to explain the future state of the processes to them, and gets their buy-in at an early stage of the project. Apart from this, a host of other parallel activities are undertaken, such as setting up of a change agent network to create a buy-in among stakeholders, change readiness surveys to assess the readiness to adapt to change and role mapping to identify role redundancies and mitigations. Role mapping is a critical activity and involves evaluating the cumulative impact on existing roles, identifying potential new roles and mapping existing employees to new roles. The entire exercise is fairly complex, with outcomes that lead to job rotation, job enrichment, as well as job redundancies.
Change sustenance is the last stage of a change program. The probability of business disruption is maximum just after the go-live. Hence, it becomes critical that the organization creates a governance structure which will cater to stakeholder and business issues that might crop up post implementation. Tactical issues related to using new system or processes can be effectively managed by setting up helpdesks while taking into account language restrictions as well as time-zone sensitivities. The project team also needs to conduct a post-implementation assessment of change management interventions, identify failures/gaps and develop a sustainability action plan for managing stakeholder expectations. This includes developing the inherent capability of the organization to manage any issues that arise at a steady state long after the go-live date.
Transforming the procurement function has many long-term benefits such as cost savings due to greater control on spends as well as efficient yet less time-consuming processes. The key is to manage stakeholder expectation by proactively gaining the buy-in of senior leadership and providing the right level of support to end users so that they are able to comfortably use the new system. Running an effective change management program for employees is a key enabler that allows the procurement transformation program to unlock enterprise value and achieve its strategic imperatives.