Where it says week 5. This is the last week of a five-week program in Procurement Basics. The topic is Stakeholder Management. I think the first thing we need to do is probably define what stakeholder means. So a stakeholder is an internal customer, somebody that you and procurement is working with to get what they need, whether it's a direct or indirect material. So just a couple examples so we understand. So let's just say in manufacturing, you may be in charge of buying, packaging of raw materials for a manufacturing plant, you might be in a plant, you might be a corporate headquarters. So you're stakeholder, one of the key stakeholders is going to be the manufacturing person. Your contact there that is bringing materials into the plant. Conversely, on the indirect side, it might be at a corporate headquarters and you might be buying them, we've talked about printed materials before, printed materials for a marketing launch. So your marketing person would be your stakeholder. I think probably the most important thing about stakeholders is that you have to manage your stakeholders correctly. They generally not always control the budget that they have, not you. In order to make them successful, you have to give them what they want and of course you want to give them value for money or a good cost, and then lastly you want to make sure that the company gets what they want. So you have to balance this with the stakeholder. Let's just take this question here. Why do you want to have a good relationship with those stakeholders or internal customers? I'll give you about 30 seconds to go through this and then when we come back we'll talk a little bit about this question. First of all, let's just make the point that procurement really doesn't buy things for themselves. I mean, they might buy a few things, office supplies or something that they need to. But generally they're buying things for other people, other stakeholders in the business. Generally, the stakeholders control their own budget, particularly on indirects that we talked about a couple of times before. But even in manufacturing, certainly that the goods that you shipped to them have to have good quality and be on time and have a good collaboration with the local people in manufacturing. Sometimes in the way companies are set up today, that the actual price of those goods remains in procurement under what we call purchase price variance. But that's a detail we don't need to worry about. It's still you're stakeholder, and you've got to make sure that you create value for them in manufacturing. The same thing's true in the indirect side. So is very important to be successful in procurement and in the company, and in your job that you have to work closely with the stakeholders. Your success is tied how well you work with the stakeholders, and what you want to do is to be able help them succeed in what they want to do, and what you need to have done, and if you do that your company will also be successful. I'm going to give you 10 steps for better stakeholder management. These are practical list of 10 items. Here are the first five. Again, I'm not going to read them, I don't read slides unless I have to, and we want to go through each one of these individually. Then here's the second five, six through 10. So let's get started. So the first one is you need to understand your stakeholders requirements. You want to use their terminology, don't use procurement speak. What do I mean by that? So you don't want to walk into one of your stakeholders, particularly if it's the first time and say, "We're going to do RFPs, RFQs, RFIs. We're going to use the P2P system to pay your suppliers and we're going to do strategic sourcing." They don't relate to that. So you want to really not talk about those types of terms. You want to go in and do your homework before you talk to stakeholders. What you want to do over time and maybe not initially. You want to become the expert such that at a later time that they come to you because you're the expert, not them. You don't want to start talking about reducing costs or price on day one. They may be interested, let's say the marketing example with printed materials, they may be interested in using that printed material to help sell products. Yes, they're interested in cost, but it's probably secondary. So if you go on and talk about cost out of the shoot so to speak, they're probably not going to be interested. So you want to start to build relationships with them. If you do that, the savings will definitely come later. The second one, you want to profile the stakeholder. Not all stakeholders are created equal. A marketing person probably is different than a planning MRO supervisor. Some people are introverts versus extroverts, some people have a particular learning style, they want to e-mail or face-to-face type of things instead of writing a text or whatever you're doing. So what I would do is talk to people around the key stakeholders before you see them, and try to understand them, and how they want to be dealt with, and that'll help make you successful to the stakeholder. Three, you want to align your procurement activity to their business needs. You want to say, "What is your key objectives for this year? How can I support you? What can you offer to me to help me? We work together to help the company be better." You don't want to push on the cost side, 79 percent of cheaper criminal officers will tell you that probably cost-savings are the most important. It certainly the first priority, but it's not necessarily the one for your stakeholder in the business. So you want to listen and see what their objectives are and think about how you're going to help them succeed in their objectives and I guarantee that if you do that, you can help them. So an example would be that, listen to these can help you sell more product, you can say, "Look, if we work together and we get the right print vendors, we can deliver print materials quicker to you and thereby you can get your products out in the market." Just one simple example about aligning your activities with theirs. You really want to develop a deeper knowledge of the category that you're in, suppliers and markets, and you want to use those conversation to create value for your stakeholders. You want to prove that stakeholders that you know more than they know, and if you do that, you can educate them. I find that generally, most stakeholders know a lot about a particular supplier, they know they've worked with them for years, they know their name, and a lot of stuff. They don't know much about the general category, and they certainly don't know a lot about the market in particular, that's not their area of expertise. So you want to go, do your homework, find out the number of suppliers, who are their top suppliers, what markets they are in, maybe he knows couple of new suppliers, let's take the printed example, just one small example, so we bringing this up, but we went into the people and said, "How are you doing today? Did you know you had a 172 print suppliers?" Well, I don't. Are they may? Yeah. How's it going with the print suppliers that you use most of the time. I see you have these top six year that used most of the time, that fourth and sixth one they had pretty bad quality and the third one doesn't deliver on time. Well, maybe we can work together and look at the market and see what's going on, maybe we can get you some better suppliers and maybe we can improve the suppliers we have. So that's a way you start and I guarantee when you do that, they'll gain respect for you as working with them. Number 5, you really want to start small establish some credibility and achieve quick wins. I'll just give an example, hard to read here, but it's basically fulfillment advertising paper, goods, etc. The point would be here is, don't take the most difficult one first, take something easy that you can have a success. So in the case of us with the marketing people in the indirect space, we didn't go tackle advertising right off, that's a very difficult one, very strategic, very political. So we picked printed materials because a lot of people use printed materials and we could be able to create an opportunity. So find an immature procurement group and go after that first, and you always want to give credit, so when you're successful, you want to say, "I didn't do that, the stakeholder and his team did it." So by doing that, by giving them acknowledge that they are the people that really made this happen, I think you'll find that they'll want to work with you more often. Focus on face-to-face engagements where possible. So you're going to have limited time with these people and you're going to know a little bit about them because you've worked with them trying to figure out what people they are. I would opt for face-to-face over e-mail, phone, and text if you can, if the guy will do it. You want to take them, invite them to every supplier meeting, they may not show up, but just inviting them, showing that they're part of the process is credit, just asking for them. So I think you want to try to do a particularly initially if it's a new category or a new marketing person try to do face-to-face where possible. Seven. You could co-locate having your procurement people sitting with stakeholders. So you got to pick the right kind of person to do this. But an example would be, in Mars, we knew that the advertising and portion of marketing with the biggest spend. So what do we do? We took one of our procurement people and seated them in marketing, and he got to know the people in marketing, he was part of the team, he went to meetings, and I think it was very critical. So sometimes, it's easy to be a far and working with people, but if you consider co-locating even for a short period of time, I think that's a real win for the stakeholder as well as yourself. Number 8, this one you got to be careful with. Be careful not to be a policy enforcer, be an enabler. Generally, in a procurement department, you have all sorts of procurement corporate policies about what you can and can't do. Let me just give you an example so you understand. So when we're going after indirects in 2008, we put some very strict rules in it. Everybody, there was no requisitions. So we had to have electronic requisition and you were not allowed to order it unless it went through procurement type of thing. So the first time somebody tried to do something outside the policy, we would e-mail them and say, "Look, you just ordered this without our approval. You have to go through the requisition, don't do it again." The second time we would go visit them face to face and say, "Please don't do that." The third one, we would escalate it to their manager. I think sometimes that's needed, particularly if happens multiple times, but it does not build relationships. So you want to be a problem solver. So maybe an example would be maybe they are putting too many orders in the system. We can say, we'll set up a blanket order or a blanket agreement that you can release off and you don't have to write requisitions every time. So come to them with solutions. So my point here is that don't be the Clint Eastwood here, don't be the enforcer because what happens as you lose, you get people mad at you and they don't want to work with it. For large expenditures, we use cross-functional teams. So it's worn out but I'll use printed material. There's printed material used in marketing, sales, HR, even supply chain, various departments. So you would form a cross-functional team. So everybody puts all the requirements together and we use a common system to be able to do it. Consultants is another one. Consultants are used all over the business. So we decided that we're going to go after these consultants and we had a methodology and a procedure to use when we wanted to go use consultants and we use these cross-functional teams to manage it. It really creates buy-in from the stakeholders, particularly if it's multiple departments and I think it's a good way to do a win-win with your stakeholders. This one's a little bit outside your control, but you could consider a large cross-functional steering committee. So again, not to wear an output 2004-2008 because we were trying to push through a lot of savings from 2004-2008, particularly on indirects. So we had a senior management cross-functional team that was led by the COO. It had meetings every 4-6 weeks and they talked about where we're successful, where we had roadblocks, how we can work it out, and there's a lot of peer pressure, because it was won by the COO, Chief Operating Officer, to be able to succeed. When he went there, he wanted to know what roadblocks we were running into and how can we remove them as a group? Then, the guy in marketing says, "Hey, look. I worked with these guys and printed materials and they really helped me out." The guy that maybe in legal, he doesn't want to work with procurement. He says, "Okay. Maybe we'll do it." So you may not be your responsibility to do it, but you could if your lower level, might recommend that to your boss or your boss's boss is another way to create buy-in in the organization. So let's wrap it up. So first of all, internal stakeholder management is really the key success, whether it's direct or indirect. It's your job to create value for the company, it's your job to create value for that stakeholder. If you do that, you will be successful. We hid and talked multiple times that indirect materials are more difficult than direct, mainly because you're not on the same team. So generally, if you're indirect, you're part of the overall team for example. As you recall, I used to work in supply chain management. So I was in supply chain management and these are all my friends in supply chain management. Not always the case with indirects. So this stakeholder management is even more critical. So with that, we're going to close down course number 2, procurement basics, and we'll be moving on next week to do strategic procurement. Look forward to seeing you there.
