The Black Hole of Contract Management

Anyone else singing, "black hole sun, won't you come and take away the rain"?  Ok, maybe it is just me!

By now, most of us likely have invested in a contract management system.  And, if we take a critical eye to how it is working, we probably have a really expensive repository of contracts with unreliable data, therefore, reporting that isn't good.  This results in at least knowing you have the contract, but really nothing else about it.  Does that ring true?  If not, congratulations to you!  You are a rare unicorn for sure.

Then, there are a handful of us, that truly have no idea what contracts we have.  We are told by our stakeholders or suppliers that the contracts are expired.  And, heaven forbid, that there is a merger or divestiture.  That is when the consultants start marching in.

It is truly amazing that most of us are still at this state.  Beyond saving money for our companies, we are accountable for adding value.  We are accountable for driving performance of our suppliers, to manage cash, to drive innovation, to mitigate risk - and we have no idea what we have actually signed up for with our suppliers.  It is like our contracts have been sucked up into a vast black hole.

So, what have we learned for this situation?  We have to think differently about how we manage contracts.

We need to manage the data better.  If fact, I would question why are we managing the data from the contract.  We are in 2016 - there is technology for that!  There are several solutions that are up and coming that take unstructured data and present it in a structured way.  You will still have to review the results and train the technology to learn more about your contracts, but it has the ability to keep your data up to date and reliable.  It will also allow you to find clauses in your contracts, like the infamous assignment clause.  If you are looking to improve your contract management process, you must look at these technologies.

We need to organize around the process.  There are very few sourcing professionals that like spending their time in contract management technologies.  No matter how easy the redlining and clause libraries are, that is not where we spend our time.  Therefore, there might be an opportunity to create a small, but mighty team who are experts in the contract management process.  They can do the processes in the system to gain the full functionality of the system - and much, much faster.

If you do not have the opportunity to organize around the process, then there are several solutions that allow for those processes to actually be managed in word (just like we are comfortable with doing).  Once you perform the redlines, it is magically also managed in the solution.   Your solution should have this functionality.

We should also think end to end.  If your legal team, risk team, insurance team, finance team, your stakeholders are not interested in using the solution, it is almost guaranteed that your contact management solution will mostly be a repository.  If fact, the ROI vastly decreases to the point that you should just buy a repository.  If you want something more than that, those other users need to be part of the business case, part of the process design, part of the change.  They need to be fully bought in.

During this Thanksgiving week, I am truly grateful for all the learnings we have had in the contract management space.  Now, we need to take those learnings and do something better.   Have a great Thanksgiving with friends and family!  Blessings to all of you.  

Mysterious Robotic Process Automation

Happy Halloween everyone!  What a better topic to talk about to get yourself in the mood than robotics?  Those scary, eerie, mysterious bots...

Unlike the picture above, we are not talking about physical robots.  We are talking about robotic process automation or RPA for short.  Have you heard about this?  My advice for you - get educated and get ready for RPA, if you have not already.  It is wicked - in a good way!

What is RPA?  
The easiest way to explain RPA is like a slightly more sophisticated macro.  It is a software program that you "tell" to do repeatable, high volume, logic or rule based steps that are performed in a system.  And when I say "tell", you are really recording the steps within the software so it can repeat those same steps over and over again without much human intervention.

Why is it Wicked?
Most of us have found macros to be a huge help to our organizations.  In fact, when we hire talent, we sometimes ask if they can write macros because we find so much value in those skills.  RPA removes the limits because you can use these robots on any system.  Think highly transactional, repeatable processes within Procurement or AP that are performed in a system.  Those could be recorded so the bots can perform repeatable tasks, so teams can focus on more value added tasks.

Bots do not take vacations.  They do not get sick.  They work all hours of the day.  They are super productive.  I have heard that 1 bot is equal to 3-5 traditional FTEs.  They also do not commit fraud, forget steps in the process, or try to avoid the correct, standard process.

And, they are somewhat cheap compared to a fully loaded headcount.

Feeling a little freaked out?
The first time I was introduced to RPA, I was freaked out.  This is a game changer.  It changes how we think about talent, for we need to start thinking about managers who are capable of managing bots.  They need to know the process, how to train them, and how to manage the quality of the results.  We also have to think about how to train and build capability for talent performing the repeatable tasks today because they will be shift to more value added tasks.

It changes how we make decisions about transforming our organizations.  Does it change if we should outsource?  Does it change the need for large scale ERP implementations?  Does it change how we integrate systems together?  The great thing about RPA is that you can apply it even if you are not on a ERP, even if you are not considered world class in your processes.  If applied correctly, your organization could leap frog quickly with much less investment.

They are still eerie to most.
There will be several people that are scared about this change.  There are real concerns about this functionality.  IT security is going to need to get onboard related to the risks and controls in place.  For instance, what protections are there from hacks?  A hacked bot could do a good amount of damage.  Internal Controls / Internal Audit will also need to get onboard with the amount of controls in place and that what you tell the bot to do is correct.

Lastly, Procurement and AP leadership, above all else, will need to get onboard.  Given this has such game changing potential, we might get in our own way (remember we naturally like our comfortable existence.)  I truly hope that more and more unicorns consider the new potential to transform their processes and organizations through using RPA.

Ready to be scarily awesome?
If you are geeked out about this, there are things to start working on to prepare for this change:

• Document what is actually occurring today in these repeatable processes.  It is important to be as accurate and detailed as possible when documenting these processes.   This will help determine where to apply the bots and how to tell them what to do.  
• Build your business case.  The business case could be about reducing headcount - but that is a small part of the opportunity.  Think about what you could get after as a result of the RPA implementation.  For instance, could you gain more discounts because your processes are more efficient?  Could you drive more spend under management because of the implementation?  What are the results of what your team can do for the company because of this new technology?
• Think about the process and organization to support this change.  As you might know already about me, technology is only the enabler.  If you do not have the process and organization to support the tech, you are not going to get very far.  It is time to start thinking about how you would perform QA, do you need bot managers, how do you audit the processes that the bots are supporting?

Anyone now dressing up as a robot on Monday??  Again, Happy Halloween and enjoy the possibilities! 

The Great Divide Between AP and Procurement

"Hello over there!!"  At times, I feel like we are yelling across the great divide to Accounts Payable.  "Where are my supplier's invoices?  Why can't you pay them on time?  Why are my payment terms wrong?"

Think about it.  If you are a Procurement professional, we have all been there one time in our careers. Feeling like there is there is something eating the suppliers' invoices, similar to your laundry machine eating your socks, and you have no idea why.  But you do know, it is all AP's fault.  They just can't seem to get it right.

For that is the easy answer.  But, could not be further from the truth.  Get ready Accounts Payable professionals (enter theme music), it is almost never Accounts Payable's fault alone.

So, what is it then?  How do we - together- close this divide?

1) Understand the scope of what AP is there to do.  AP has three to four functions.  That is it.  They are accountable to receive invoices, process invoices, pay invoices, and sometimes manage the accounting aspects of the invoices in the most effective and efficient manner possible.  That is it.  No more, no less.  If the AP function is doing more than that today, it is because there are upfront process issues in Procurement that are causing downstream impacts.

2) Get the upfront process right.  AP does not like not paying invoices on time.  They do not sit around with evil schemes hoping to get angry calls from suppliers and Procurement regarding past due invoices.  If there is a struggle with past due invoices, it is a result of the Procurement ordering processes being ineffective.  A simple example would be that AP cannot pay an invoice until the goods receipt is created.  Is that a AP role to make sure good receipts are created?  Nope.  It is part of the Procurement process.  Therefore, if you want to fix invoice and payment issues, you need to start with a hard look at the ordering processes, then the AP processes.

3) Have a common goal or goals.  Increasing on time payment and electronic invoicing are common AP goals.  Those are great goals for AP, but they cannot achieve those goals alone.  For, the ordering process greatly impacting on time payment and without Procurement building in electronic invoicing into their supplier conversations/negotiations, it makes increasing electronic invoicing very difficult.  These goals need to be shared, thus creating a large bridge across that divide.  It is the common ground to springboard from to close the divide.

4) Talk openly with each other.  This is not about blame or scapegoating.  This is about creating a process that no one thinks about.  It just happens.  That takes coordination, open communication, a bunch of humbleness, and willingness to change.

Are you ready to get after this?  If so, asking if you are doing the above is a great starting point. Getting the procure thru pay process right is the entry point for great Procurement functions.  It removes the noise, improves relationships internally and with suppliers, allowing for a shift in focus to innovative changes in Procurement.

Want to hear more?  At the APP2P Conference on Monday (Oct 24-26th) in Las Vegas, we will be discussing "AP and Procurement: Effective Partnering" from 9:20-10:20 on Wednesday! Hope to see you there! #fallapexpo APP2P.com

The Spend Analysis Enigma

One of the foundational elements to Procurement is to have good access to data.  However, it would seem that most Procurement departments struggle with spend analytics.  Now, don't get me wrong, there are several companies that have a spend analytics tool, but do they actually have robust analytics that are trusted and leveraged for decision making?

So, where do we go wrong?  Why is such a foundational element of Procurement so hard to tackle? (Yes, it is Saturday morning during football season!)

Let's start with technology.  This does not seem to be the problem.  There are plenty of tools out there, whether it is a specialized spend analytics solution or one of the great visual tools like Tableau, Power BI, etc..  The technology is able to manage huge data sets, create visualizations, and allow end users to interact with the data easily.  In fact, if you want to do some fun reflection, think about how the technology around spend analytics has progressed vs many of the processes/practices of Procurement.  Now that you are done laughing, we can move away from the spend analytics technology being the problem - or the solve.

So, this brings to me to the issue - getting crap faster.  Yes, that is it.  We are getting crap faster with most spend analytics technology implementations.  Why?  Because spend analytics is a process issue.  Let's discuss a couple of examples.

1) The data itself.  If you do not have the data in systems or have the ability to manage unstructured data effectively, the best tool does not do much for you.  For instance, having low compliance to a Non Po No Pay policy will result in struggles in your data.  Also, not having good master data management and governance will result in messy data.  These items are not easy to fix.  They require new policies, investments in people, new processes to be put in place.  Dissecting the root cause in your data and driving process change will enable actual spend analytics.  (Note:  It does not need to be perfect, but it cannot be overlooked.)

2) Scope of the data.  Building a spend cube is not too hard, especially for some of those millennials on your team.  However, where there is glory in your data is relating it to other business data to solve business problems.  How is the supplier's spend relating to other key business trends?  How does the spend relate to the past RFP activity or upcoming contract expirations?  To be problem solvers for the company, combining spend data with business data is critical.  If you are only building a data set to see spend, you are falling short of the "analytics" part of the equation.

3) People. Do you have actual qualified individuals on your team that support analytics?  Not reporting but true analytics?  There is talent out there who received masters degrees in advanced analytics.  Are you investing in them?  How often do you get the same request for data within your team?  I would guess rarely.  Having the right people who can build ad hoc analytics, who can solve data problems, who know how to combine data with other business data are, in my opinion, a more important investment than even the technology.

4) Adaptability.   Things change all the time.  Company strategies, leadership, requirements for your data sets.  There is a absolute need to have the ability to manage those changes yourself versus having to open an IT project for every change.  First of all, that is expensive.  Second of all, it is the number one killer of the sustainability of the analytics offerings.  If the analytics platform (the data available and how it is used) cannot keep up with change, it will not be used or valuable any longer.

So, the next time you are hearing that your need a spend analytics technology and it will be a solve to your data and analytics needs, question why we still collectively struggle with spend analytics.  The examples above are not easy to solve.  Like my Father always tells me, "If it was easy, it would be done already".  We can tackle this enigma if we think process vs technology.

How to Deal with Millennials

This was a question that was echoing through the hallways at a recent event that I attended.  How do we deal with Millennials?  It made my ears perk up, because if people are using the word "deal", it is usually not a good situation.  Granted, I am considered one of those people that is being dealt with, but maybe, just maybe, we are looking at the situation incorrectly.

All of us within Procurement are looking for great talent.  Hopefully, talent that can help Procurement get unstuck.  More and more, this talent includes Millennials.   In fact, some companies at this point might have Millennials hiring talent.

But, we should also be looking for ideas, perspectives, challenging inquiries, various experiences, different strengths in that talent.  We should be, and hopefully are, looking for diverse talent.  And, if we seek diversity of thought and backgrounds, then we will be inclusive.

So, why, if we are seeking this diversity and we are being inclusive, should we be questioning how to deal with Millennials?   Yes, as a group, we are unique.  We are challenging norms, bringing different perspectives, and bringing a lot of strengths to the table.   We are different, but shouldn't in that difference, even more greatness be created?

We are always taught that your employees should reflect your customers.  For your employees should be thinking and acting like your customers, to build a stronger connection.

Therefore, this week, let's go in with eyes wide open.  Understand whether your talent is reflecting your customer.  Seek differences.  Seek strengths.  Seek to be taught by someone who has a different point of view.  Let's welcome with open arms because that is what creates greatness.  And within Procurement, we need greatness.

Is Asking How Do We Get a Seat at the Table the Wrong Question?

Let's start off today with a fun little exercise.  Not the kind of exercise that I hate doing every morning of a physical nature, but one of the mind. (Sigh of relief.)  All you need is a blank piece of paper and a writing utensil.  First, draw a a vessel that holds flowers.  Now, flip over the page and draw how flowers can add beauty to your home.

What is the difference between your two pictures?  The first one might be a vase holding some flowers.  It might be beautiful, but it what purpose is it serving?  What value is it adding?  In the second picture, you might look at it and actually get a sense of joy.  You might think of people in your past who loved flowers.  You might want to go to the farmer's market today and buy some flowers.

If you think of the questions above, they are very similar to how we tend to ask questions.  Most of the time, we are focused, and at times stuck, on the solving the immediate need - providing the product or service.  This happens in design sessions, as an example, for Procurement technology implementations where there is a focus on delivering the technology, but might not be focused on the experience or adding value to the customer.  We are, at times, focused on the vase.

So, you might be thinking, what does this have to do with getting a seat at the table.  If you do the exercise above again asking two questions - "how go I get a seat at the table?" being the first and "how can I provide business solutions to my company?" - you get two very different pictures, don't you?

Think about how framing a question correctly can drastically change your outcomes.  For, none of your customers care if you have a seat at the table.  That seat does not change their world, help them solve their problems, does not add to their strategies.  They care about the business solutions you are providing or aren't providing in some cases.

Framing questions differently can not only change outcomes, but it will change what skill sets you, and your teams, need to be successful.  It will  change the role of Procurement in the company - as long as you act on your newly framed questions.

For those unicorns how are really interested in learning more about this topic, I highly suggest reading, "Think Like a Freak", by Stephen J. Duber and Steven Levitt.  It is not a Procurement book (again, sign of relief), but the third book in a series with a mind blowing amount of examples about asking the right questions and getting transformative, break through results.

So, this week, let's be awkward.  Let's stick out from the crowd of lemmings who are following the the mantras.  Let's think of the toughest issues we are trying to solve and challenge ourselves to ask the questions through a different lens. Get out of the normal and challenge what has not been challenged.

We Love Not Having a Seat at the Table

Given this is my first post, it needs to be said that I have no idea what I am doing.  I have never created a webpage before, don't know HTML to make this look pretty, but I am doing this anyway. The reason - is that I am tired of being stuck and seeing a whole profession in the same position.

For decades, we have been asking the same questions within the Procurement profession.

"Why can't we get a seat at the table?"
"How do we get more spend under management?"
"How do I get access to better data and insights?"
"How do we deal with the millennials?"

Every conference, most every blog and article - it is like we are on a constant rinse and repeat cycle.

Now, there are those rare unicorns.  Those who are unthinking Procurement, forging their own path and creating success.  But, when those unicorns are regarded as myths or legends, it is proving that most of the profession is stuck.

Therefore, on these Saturday morning posts, I will be exploring how to get Procurement Unstuck.

As being stuck is not where we want to be - or is it?  My challenge to you is that I think the vast majority of us like being stuck.  We like the comfort in the regular routine, what is known.  We like the comfort in asking the same questions just to know we have a common connection.  In fact, at a recent conference, something strange occurred.  There was an outsider.  Someone who was new to the profession, but not to his career; He was not educated in the way "we" do things.  Believe it or not, he was challenging the line of questioning and the solutions being provided by the speakers in an effort to learn and discuss.  AND HE WAS REVILED.  There were darting looks, eye rolls, murmurs.

So, which person are you?  For the ideas shared here will need to be actioned by eager, unicorns.  Those who are willing to shout from the mountain tops that enough is enough.  Those who are willing to think differently, frame the questions differently, teach and mentor others to do the same.  Someone who for awhile might be the only voice speaking up that will need to take the murmurs as another stripe on their way to something revolutionary.