Achieving optimal savings can be quite challenging in procurement.
For procurement teams, one key piece to making this challenge easier is talking to the right people—aka stakeholder engagement.
With the right communication and collaboration strategies, leveling up your stakeholder engagement game becomes effortless.
That’s why, in this blog, we’ll cover strategies you can use to improve your procurement stakeholder engagement and hit your company savings target, boost your procurement efficiency, and help cut costs overall.
What Is Procurement Stakeholder Engagement?
Procurement stakeholder engagement refers to building and managing relationships with individuals, groups, or departments who have an interest or stake in the procurement activities of your organization.
To keep things simple- it’s about connecting and collaborating with people inside and outside your organization who play an important role in your buying process.
Stakeholder procurement can include:
- Internal teams (finance and operations)
- End-users
- External entities (suppliers and regulatory bodies)
The ultimate goal of procurement stakeholder engagement is to create a positive and cooperative environment that leads to better decision-making, streamlined processes, and ultimately successful procurement outcomes.
Why Is Procurement Stakeholder Engagement Important?
Procurement stakeholder engagement contributes to your procurement process’s overall success and efficiency.
Here are the key reasons why it’s important:
- Aligns your organizational goals: Effective stakeholder engagement ensures that your procurement process aligns with your organization’s broader goals and objectives.
- Informed decision-making: Engaging with stakeholders provides valuable insights to help you make well-informed decisions during procurement.
- Mitigates risks: Engaging with stakeholders helps your organization identify potential risks early in the procurement process to avoid potential pitfalls.
- Transparency and Accountability: Stakeholder engagement fosters transparency, which builds trust among the stakeholders to hold the procurement team accountable for their actions.
- Efficiency and streamlined process: When you collaborate with stakeholders, it becomes easier to streamline your procurement workflow.
- Cost savings: Engaging with stakeholders can lead to more favorable terms and conditions and enhance your negotiation capabilities.
- Enhanced Communication: Stakeholder engagement promotes clear and open communication channels to prevent misunderstandings, reduce conflict, and ensure all parties are on the same page throughout the procurement process.
10 Ways To Increase Procurement Stakeholder Engagement
Now, let’s look at ways to improve engagement with your stakeholders.
Start Building Relationships
It is evident that Procurement’s role in the organization is to reduce cost and deliver savings, but is this the only thing you want your internal customers to remember?
It is a sure-shot way to create a purely transactional engagement.
Most new procurement professionals focus a lot on savings, making the relationship transactional.
Instead, focus on building the relationship first with your internal customers.
Before you meet with your stakeholders, please Do your homework on the department’s function, how it sits in the hierarchy, etc.
It would be best to do this irrespective of whether you are starting with a new category or job.
Focus on understanding their function and how they impact the business—some questions to ask.
Note that your questions might change based on whom you meet, but the following is a basic guideline.
- How is the department organized? Essentially, who is who in the department?
- What are 2-3 achievements that the department is most proud of (assuming you are meeting the head of the department)?
- What are their operational pain points, and how are they addressing them today?
- What are one or two areas where you can be of more help? Hint: Savings are not always on top of the minds of your stakeholders.
Once you have established the relationship and your stakeholders see value in what you do, they will engage you, and savings follow.
Be An Enabler vs. Policy Enforcer
Procurement policy or corporate spending policy is an essential aspect of the corporate procurement function. However, policy enforcement should not be the core function of the department.
Don’t get me wrong, ensuring purchasing compliance is essential, but Procurement shouldn’t lead with a policy enforcement mindset.
In other words, don’t start a conversation with “As per our procurement policy, you should…”
Instead, ask probing questions about the current business challenges and how Procurement can help enable better decision-making.
Let’s take an example:
Your policy requires that every purchase order be reviewed and approved by purchasing before you can send it to the supplier. Your stakeholder complains that it takes too long to process orders.
If you focus strictly on being a policy enforcer, you will get the approvals done faster.
If you have an enabler mindset, you would consider why they need frequent orders and what can be done to consolidate that.
If it is the case that there is a need for recurring orders, find a way to avoid approvals while keeping purchasing compliance intact.
Understand The Business First
This is the most obvious way to build trust with your stakeholders. If you don’t understand the business you are supporting, there is little hope that your stakeholders will consider you a trusted advisor.
Procurement professionals who understand the business very well are great at understanding their stakeholder needs and adding value to the conversation.
But if you don’t fully yet understand the business, here are some tips:
Engage Sales
Talk to your sales colleagues, they can provide you with details about the company’s products, competition as well as how your customers view your company.
Engage Marketing
Marketing should be able to give you an overview of the company’s competition, brand, and positioning. The work they do is primarily dependent upon the positioning of the company.
Engage Operations
Once you are done talking to sales and marketing, talk to different operation teams. These are different departments that support the operations. For example, if you are a software company, the various operations departments are engineering, customer support, infrastructure management, etc.
Once the procurement teams understand the business, there are different approaches a CPO(Chief procurement officer) can take to ensure that Procurement is working closely with the business to gather requirements.
As per a survey conducted by Deloitte, the following are some of the techniques
- 76% of procurement teams are embedded in cross-functional teams to understand the requirements better. There are pros and cons to this approach, we will cover this in a separate blog post.
- It is interesting that 62% of teams jointly own the savings targets with the departments they support.
Both of these are very good approaches for Procurement to understand business better.
- Approaches to increase stakeholder engagement
Add Value To The Conversation
Procurement always complains that they don’t have a seat on the table and things would be much better if they did. I don’t disagree, but Procurement needs to earn that seat.
If Procurement can find a way to add value to the conversation, it would significantly elevate procurement’s role in supporting the business.
There are multiple ways you can do this in your day-to-day interaction
Tell them something valuable:
Not every budget owner reviews their spending every day to understand whether they are over their budget or if there are anomalies in the spending.
You might say that is the role of finance, and you are absolutely correct.
I am not saying that you go out of your way to review budgets and spend daily on this, but this could be an observation.
For example, you are conducting a spend analysis and realize that vendor monthly spending is trending up.
This could be that the vendor is overcharging or the department is doing more business with that vendor. Your stakeholders would appreciate the heads-up.
Educate them about the market:
Procurement teams could be structured differently; some are category-based, and some are department-based.
If your team is structured around categories, then procurement managers are in a better position to educate their stakeholders about the category.
Let say you are about to run an RFP for marketing automation software, so rather than asking your stakeholders if they have identified the vendors, add value by providing the following information
- What other marketing organizations are doing in your space?
- Who are some innovative players in the market?
- Probably some case studies around market automation and learnings from them.
Understand Personalities
We are wired very differently; the same is true for procurement stakeholders. So, to be effective, Procurement needs to learn how to work with different personalities and adapt based on different situations. Following are some examples of what different personalities your stakeholders might have
a) Introvert vs Extrovert
Some stakeholders are introverts, and some are extroverts, and understanding individuals can help a lot in day-to-day conversations.
I am not asking you to be a psychologist, but when you meet your stakeholders for the first time, know them.
Your first question should not be, “What Can I help you with?”! But get you to know them first.
Acquiring this trait itself can help build a strong relationship with your stakeholders.
Now, you must be saying all this makes sense, but I am an introvert, so how do I approach this?
It is pretty simple: ask a very open-ended question. For example – “Are you born and brought up in “City Name” “? Once you ask this question, observe how your stakeholders respond.
Here is a simple traits comparison between introverts and extroverts
b) Understanding stakeholders’ Learning style
“Learning style is an individual’s unique approach to learning based on strengths, weaknesses, and preferences.”
Why should you care about learning styles?
Much of the work involved in a sourcing event is gathering data or presenting information obtained from suppliers. If you are working with a stakeholder and they have one primary learning style (say listening), then it doesn’t help if you go prepared with an elaborate slide deck.
I am not saying you customize your presentation style based on each stakeholder but be aware of the learning preferences and try to accommodate wherever possible.
A good framework for understanding individual learning preferences is VARK. Per the VARK framework, an individual learning style can be categorized into one or more models.
V- Visual
A – Auditory
R – Read/Write
K – Kinesthetics
- VARK Framework
If you want to know your learning style, you can take a quick test here.
Have Empathy
I am sure you are not hearing this for the first time!
Having empathy towards your internal and external stakeholders is key to procurement success.
But how do you go about developing empathy towards your stakeholders?
Following is a good map that will guide you to be more empathetic towards your internal customers. This map is designed mostly for understanding your customer’s user persons for product development, but I feel this can be used by procurement teams, too.
I like this map because it is self-explanatory, but here are some ways procurement professionals can use this empathy map
a) Understanding what your customers say and do would help you understand the business better.
b) Gain: What they can gain by leveraging Procurement.
If you think about what they will gain, you are in a better position to quantify and present the Procurement value proposition to your stakeholders.
c) Pain: What are their pain points
I am unsure what other pains procurement can alleviate, but you can certainly understand stakeholder challenges in dealing with vendors.
Procurement involvement generally ends with vendor selection. Procurement should help stakeholders manage the vendor relationship through the vendor life cycle.
d) Hear: This is more from the head of the department’s perspective.
What they hear about procurement engagement from their teams and co-workers. If you have a strong relationship with your internal customers, that would help elevate procurement value in the eyes of senior management.
Align Procurement Goals With Your Stakeholder Department
Procurement always looks at cost savings as its primary goal.
According to a Deloitte survey, 79% of CPOs consider this their top priority.
However, cost reduction is not the only goal for your internal customers.
For example, Procurement can reduce the cost of a widget by sourcing it from a low-cost country.
But, your stakeholder has no experience with the international supply chain and how to mitigate the risks with logistics and planning. This is an example of a clear misalignment of goals.
Another example is assuming you have a supplier deeply integrated into the business. You could RFP it and get better pricing from other vendors, but it is a high risk for your stakeholders.
So, if your approach is that we are going to RFP this, your stakeholders might be apprehensive about it and unwilling to take the risk.
A department’s first and foremost goal is to deliver on its key metrics and not cost savings!
Cost savings may help them to get this done in the allocated budget and that’s where Procurement helps.
So, you have a misalignment of what you want to achieve. Hence, for Procurement to be successful, there has to be a goal alignment between Procurement and stakeholders.
Your procurement/sourcing strategy should align with the goals of your internal customers.
So, how do you go about aligning it?
The key aspect of goal alignment is understanding that not every vendor relationship is equal. Hence, it would be best if you had a different strategy for each category or vendor you support for your stakeholders.
Following is a good framework for considering procurement strategy alignment with your stakeholders.
You divide your suppliers into 4 buckets, each with a different sourcing strategy.
How to use this framework?
a) Create a slide deck with an analysis of key department vendors, including total spend, categories purchased, vendor capability, contracts, and vendor performance information if available.
b) Discuss this information with your internal customers and preferably with senior management for that department. The goal is to identify supplier criticality into the following buckets
- Strategic: Highly critical to your business, but there are limited sources of supply—for example, a supplier of the critical component of the final product.
- Non-Critical: Important for day-to-day operations but alternate suppliers are highly available.
- Bottleneck: Not critical to business, but there are very limited sources of supply.
- Leverage: Highly critical, but the higher availability of alternate suppliers.
This exercise focuses on ensuring that your stakeholders are aligned with the vendor classification.
The next step is to discuss the sourcing strategy for each bucket and align it with your internal customers/stakeholders.
It would be best if you did this exercise at least once a year to get better alignment with your stakeholders. Do this preferably towards the end of the year or the beginning of the new fiscal year when operations activity is low.
Listen First, Prescribe Later
Let’s say you are meeting a marketing manager, and she is describing the issues with the current supplier and looking for recommendations on how to solve this.
If the first response in your mind is let’s put it out for bid, you might be failing to listen effectively.
When a supplier doesn’t work, it is not always the supplier’s fault, which could happen due to different reasons.
For example, the contract is poorly structured, or the stakeholders are not fully engaged.
There could be multiple reasons the engagement is not working; effective listening can help you identify this.
As per Julian Treasure, We spent 60% of the time listening but only retained 25 % of the information.
Here are a couple of ways Procurement can listen better and better engage with stakeholders
a) Suspend Judgement:
It’s hard not to jump to conclusions immediately, so try to suspend judgment on the correct strategy or decision until your stakeholders explain the situation.
b) Keep an open mind:
You might have a preconceived solution to a problem but develop the attitude to understand others’ points of view, too. I am not saying you should drop the solution you have in mind. Still, you need to temporarily put it in the memory cache so that you can fully evaluate an alternate solution proposed by your stakeholder.
c) Ask questions at the right time:
When listening to someone, ask questions when they take a natural pause. That way, you are not interrupting them while they are speaking.
If you can’t keep your questions in your mind, write them down as they come up.
Just let the speaker know that you are taking notes.
Provide Clear Communication Channels
Establishing clear and accessible communication channels is essential for effective stakeholder engagement.
Ensure that stakeholders know how to reach out to the procurement team through regular meetings, emails, or a dedicated communication platform.
Encourage open dialogue and allow stakeholders to share their insights, concerns, and feedback.
Continuous Education And Training
Keep stakeholders well-informed about procurement processes, industry trends, and best practices through regular education and training sessions. T
his helps demystify the procurement function and empowers stakeholders to actively participate in discussions, contributing valuable input to decision-making processes.
What Are The 5 Principles Of Stakeholder Engagement?
Here are the 5 principles involved in the stakeholder engagement:
- Inclusivity: Engage diverse stakeholders to ensure that various perspectives, interests, and concerns are considered. Inclusivity helps represent the broader stakeholder community and promotes a more comprehensive decision-making process.
- Transparency: Foster an environment of openness and honesty in communication. Providing stakeholders with clear and accurate information about decisions, processes, and outcomes builds trust and credibility, contributing to a positive engagement experience.
- Consistency: Maintain consistency in communication and engagement practices. Establishing reliable and predictable patterns of interaction helps build trust over time as stakeholders come to understand the organization’s commitment to engagement.
- Relevance: Tailor engagement activities to the needs and interests of the stakeholders. Understanding what matters to each group or individual ensures that the engagement process is meaningful and stakeholders are more likely to participate actively.
- Adaptability: Be flexible and responsive to changes in the stakeholder landscape or external environment. The ability to adapt engagement strategies based on evolving circumstances demonstrates a commitment to ongoing improvement and responsiveness to stakeholder needs.
What Is The Stakeholder Engagement Process?
The stakeholder engagement involves steps designed to identify, communicate with, and involve stakeholders meaningfully.
While the specifics may vary based on the organization and context, a typical stakeholder engagement process generally includes the following key steps:
Step 1: Identification of Stakeholders
Identify all individuals, groups, or entities that may be affected by or have an impact on the project, initiative, or decision.
This includes internal and external stakeholders such as employees, customers, suppliers, regulatory bodies, and the community.
Step 2: Stakeholder Analysis
Conduct a thorough analysis of each stakeholder to understand their interests, needs, expectations, and potential influence on the project.
Categorize stakeholders based on their level of interest and influence, creating a stakeholder matrix to guide engagement strategies.
Step 3: Goal Setting
Define clear and achievable goals for stakeholder engagement.
Determine what the organization aims to achieve through engaging with stakeholders, whether it’s gaining support, obtaining input, managing risks, or building relationships.
Step 4: Planning And Strategy Development:
Develop a comprehensive stakeholder engagement plan outlining the specific strategies and activities.
This plan should address the frequency and mode of communication, methods for obtaining feedback, and mechanisms for addressing concerns.
Step 5: Communication And Outreach
Initiate communication with stakeholders to introduce the project, initiative, or decision.
Communicate the purpose, objectives, and potential impacts, and establish open lines of communication to encourage feedback and questions.
Step 6: Engagement Activities
Implement engagement activities based on the strategies outlined in the plan.
This may include surveys, workshops, town hall meetings, focus groups, or other methods tailored to the preferences and needs of the stakeholders.
Step 7: Feedback Collection And Analysis
Collect feedback from stakeholders and analyze the information received.
Understand stakeholder perspectives, concerns, and suggestions. This step is crucial for making informed decisions and adapting plans based on stakeholder input.
Step 8: Adjustment And Iteration
Adjust the engagement plan and strategies based on the feedback received.
This iterative process allows for continuous improvement and ensures that the organization remains responsive to stakeholder needs throughout the project lifecycle.
Step 9: Closure And Evaluation
Conclude the engagement process by providing stakeholders with a summary of outcomes, decisions made, and any actions taken resulting from their input.
Evaluate the effectiveness of the engagement process to inform future initiatives.
Step 10: Documentation
Maintain thorough documentation of the stakeholder engagement process, including stakeholder profiles, communication records, feedback received, and any changes made in response to stakeholder input.
Who Are The Stakeholders Involved In The Procurement Process?
Procurement stakeholders can be divided into two major categories:
Internal Stakeholders
Internal stakeholders include the following:
Department/Budget owners
Budget owners’ engagement is the most important, and hence, they are the most critical stakeholders.
Finance
Engagement with finance is required to understand budgets and close coordination to ensure that negotiated savings are reflected in your income statement (Reduction in expenses leading to increased EBITDA).
Legal
Ensure that all contracts adhere to corporate legal policies and contract risk is mitigated through a proactive review of all critical legal terms across various contracts.
Senior Management
Management is always looking for visibility.
The procurement job is not just negotiating the savings, but it is CPO’s (Chief Procurement Officer) job to ensure that the management understands the value of Procurement.
More importantly, the value needs to be presented in financial terms – for example, how savings negotiated leads to better EBITDA margins.
External Stakeholders
External stakeholders include
- Suppliers
- Other parties
Since this article focuses on internal stakeholders, we will keep vendor management for another blog post.
How Do Procurement Organizations Measure Stakeholder Engagement?
As you all know, you can only improve what you measure, and the same is true with stakeholder engagement. If you ask a CPO, they always mention that engaging stakeholders is challenging. Still, some don’t have a formal way to measure engagement and internal customer satisfaction.
This is pretty evident from a recent survey:
As per Deloitte survey, only 44% of procurement organizations measure internal customer satisfaction – a yardstick for stakeholder engagement.
In other words, 56% of organizations do not measure internal customer satisfaction.
Procurement departments must baseline procurement performance and engagement before taking steps to improve it. Following are some of the ways to measure stakeholder engagement.
If you want a more comprehensive view, you might want to create a balanced scorecard for some of these measures.
a) Internal customer satisfaction survey
One way to measure stakeholder engagement is a quick survey.
Surveys can be challenging becuase response quality depends on how well the survey is structured.
When conducting surveys, you would want feedback from supporters and critics, so ensure that you pick a diverse base of internal customers for your survey.
Surveys should be frequently done so that one can track the trend. A quarterly survey might be an appropriate measure, but it depends from organization to organization.
b) Informal feedback
Another way to gauge stakeholder engagement is through informal feedback. You can do this over coffee, drinks, or lunch.
The challenge with this approach is that it takes time to gather feedback and could be expensive over time.
c) Spend under management and savings delivered
In my view, this is the most objective way of measuring stakeholder engagement.
First, the more engaged your stakeholders, the more they spend under management, which is a direct measure of procurement influence and engagement.
Second, some departments might be more engaged than others.
Look at the savings delivered in the last few months and see where the savings are coming from. That should give you an idea of how engaged Procurement is across all departments.
Wherever possible, use more than one measure to assess how engaged Procurement is with stakeholders.
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Procurement is essentially measured on savings delivered.
Procurement has other performance measurement yardsticks, but the main driver remains cost savings.
Need factual data?
As per Deloitte’s CPO(Chief procurement officer) survey, 76% of the CPOs mentioned cost savings as the primary driver for performance measurement, followed by 57% at risk management.
Source: Deloitte https://www2.deloitte.com/uk/en/pages/operations/articles/cpo-survey.html
For Procurement to deliver savings, there are three main prerequisites
- Have a well-defined process that leads to an objective evaluation of suppliers.
- Engage key stakeholders to increase the Spend under management.
- Consistently deliver value to your stakeholders.
All three need a dedicated focus on engaging stakeholders.
You need to be part of the procurement transaction journey to increase stakeholder engagement.
A purchase order system helps you get better visibility into procurement transactions and engage with stakeholders appropriately.
Click here to see how ProcureDesk can help you implement a procurement process to increase stakeholder engagement.
The Bottomline
Successful procurement teams understand the need for stakeholder engagement and continuously find ways to engage the stakeholders better.
The more engaged the stakeholders, the easier it is for Procurement to meet its organizational objectives.
We have covered a lot of content in the above sections, so don’t get overwhelmed – at the least find a way to measure the current stakeholder engagement level. Once you have done that, you can pick one of these techniques, start incorporating it into your interactions, and start measuring if there is an improvement.
