Running a business is stressful, time consuming, and complicated; riddled with issues and challenges. While business can be complex for the leadership team, it can also be complex for management and staff as well. When our teams run into problems, more often than not, they try to solve the problems as quickly and as effectively as they can. Management teams may even thank their employees and encourage them to repeat that same level of initiative again. While the staff are well-intentioned, they might be inadvertently adding to the overall complexity of the business and possibly adding risk to the enterprise.
Leaders come in all flavors. It seems there are as many management styles and philosophies as there are stars in the sky and there is no shortage of books out there which suggest that leaders are anxious to learn and improve their effectiveness. My years of experience has taught me that leaders and managers can be classified into two broad groups – Caretakers and Change Agents.
The caretaker manages with what they inherit from their predecessor. They tend to manage within the same organizational structure, using the same performance metrics – setting modest goals and objectives and striving for improved performance in incremental levels. Caretakers may nibble around the edges trying to fine-tune an existing organization structure and may achieve some incremental improvements. The approach can be considered tactical but they are not likely to reinvent the organizational processes.
The change agent will usually take some time to survey the operation he or she takes on. They will have discussions with team members at all levels, get customer input, and probably investigate performance metrics to see what the organization deems important. The change agent will likely check for alignment of the organization mission and verify the skillset of the staff is such that they can accomplish the mission. They are not afraid to radically change an organization if the performance is poor, alignment hasn’t been created, or processes are viewed as too complex to satisfy the client. A change agent may see any number of the following:
- Employees expected to execute the mission without the right tools and equipment and litle or no direction from the management team
- Employees playing roles in the organization without the training, expertise and support to perform effectively
- Management that is indifferent to inefficiencies and are unwilling or afraid to challenge the status quo
Complexities in the Spend Management Space
Since my experience lies in logistics and spend management, I see countless examples of complexities and inefficiencies in organizations every day. Complexities in the spend management space include:
- Managers and employees who do not know which suppliers to use so they source a new supplier and hire them to solve a problem.
- AP Departments initiating 1,200+ checks to pay suppliers each month even though the organization really only needs 250-300 suppliers to satisfy all expense categories.
- Managers signing long-term supplier contracts without locked pricing or business terms.
- Employees on the receiving end of spiffs and gifts from suppliers that encourages them to keep less-than-ideal suppliers in the rotation.
- Managers introducing new services, specifically in the marketing space, not realizing that they already subscribe to a similar service, creating redundancies and adding new expenses.
Leadership’s Role – Simplify the Complex
If we agree that it is the role of leadership to simplify the complex and to ensure that our organization runs efficiently and effectively, we are not likely to do that by nibbling around the edges. Rather, we need to be ready to challenge the status quo, think strategically and be willing to break some eggs in the process. We need to devise strategies that set our employees up for success. We must install policies that provide guidance to employee actions within defined limits and provide structures that will ensure that the organization runs efficiently and effectively.
To begin to simplify the complex in the spend management space, consider the following actions which are designed to provide clear lines of control and responsibility.
- Centralize purchasing control – who makes the purchasing decisions?
- Limit Commitment Authority – who is allowed to sign a contract and for how long?
- Optimize the Supplier Base – install a Preferred Supplier Program (this process is detailed in our blog post titled “Preferred Supplier Strategy: Reduce Expenses – Increase Profitability.”)
- Negotiate Fixed Pricing for High Usage Items & Services
The above are just four quick examples of where leadership can provide policy changes that will provide clarity among employees, reduce risk, and drive new efficiencies and effectiveness – thereby simplifying the complex.