Good Governance Shouldn't Slow Procurement Down

Organisations are under increasing pressure to move faster, respond to changing market conditions and make better commercial decisions while maintaining appropriate governance and managing risk.

Yet procurement can sometimes feel like the opposite.

Multiple approvals, unclear accountabilities, lengthy processes and uncertainty around who has authority to make decisions can slow procurement down without necessarily providing better governance.

The issue is often not too much governance, it's unclear governance.

Good procurement governance should provide the clarity and decision-making framework that allows an organisation to move quickly, while applying greater oversight where the risk warrants it.

1. Put governance where the risk is

Not every procurement carries the same level of risk.

A routine purchase from an established supplier shouldn't necessarily face the same governance requirements as a critical technology implementation, major outsourced service or contract involving sensitive data.

Increasingly, organisations are moving beyond procurement pathways based primarily on dollar thresholds and considering value, risk and complexity together.

This allows lower-risk procurement to move efficiently while directing greater scrutiny towards decisions that genuinely expose the organisation.

2. Make decision rights clear

One of the biggest causes of delay is uncertainty around accountability.

Who owns the procurement? Who recommends the preferred supplier? Who approves the expenditure? Who can sign the contract? Who can accept commercial risk? When should Procurement, Finance or Legal become involved?

When these responsibilities aren't clear, organisations often compensate by adding more approvals.

But if five people approve something and nobody is clearly accountable for the decision, you don't necessarily have stronger governance, you may simply have more process.

Clear decision rights help people understand what they can decide, when they need approval and when specialist support is required.

3. Bring Procurement in earlier, where it matters

Procurement is still too often engaged after the business has identified a preferred solution or supplier and is then asked to “run the process”.

For strategic, complex or higher-risk expenditure, earlier procurement involvement can actually accelerate the process.

Commercial strategy, market approach, risk, stakeholder requirements and approvals can be considered upfront, rather than issues emerging towards the end when they are harder and slower to resolve.

The key is determining where Procurement's involvement adds value, rather than requiring Procurement to manage every purchasing activity.

4. Empower the business to procure within clear guardrails

Not every procurement needs to be led by Procurement.

A mature procurement operating model enables business teams to manage routine and lower-risk procurement themselves, while Procurement focuses its expertise where it can add the greatest value: strategic, complex, high-value or higher-risk activity.

The key is giving the business the right framework and support to do this confidently.

This might include:

• clear procurement pathways and decision rights

• practical templates and guidance

• preferred supplier arrangements and catalogues

• appropriate training for business users

• defined points at which Procurement, Legal or other specialists need to become involved

Procurement's role then shifts from being the gatekeeper for every transaction to providing the frameworks, capability and commercial expertise that enable the organisation to procure well.

A useful question for leaders is:

Are we using Procurement's expertise where it adds the most value, or requiring the team to touch activities the business could confidently manage itself?

5. Let systems support the governance

Technology can make good governance easier.

Where possible, delegations, approval workflows, procurement thresholds and risk triggers should be embedded into systems rather than relying on employees to interpret policies and determine the correct pathway themselves.

Well-designed workflows can guide users through the appropriate process, identify who needs to approve expenditure, trigger Procurement involvement where required and escalate higher-risk activities for additional review.

The result can be stronger compliance with less administration.

How agile is your procurement governance?

Five questions worth asking:

• Can people clearly explain who owns and approves a procurement decision?

• Can the business manage routine, lower-risk procurement confidently without Procurement needing to lead it?

• Are higher-risk procurements identified early and given appropriate oversight?

• Is Procurement engaged early enough in the decisions where its commercial expertise can add real value?

• Do your systems and workflows reflect your actual delegations, decision rights and governance requirements?

  
  

If the answers aren't clear, adding another approval probably isn't the solution.

The opportunity may instead be to simplify decision rights, clarify accountability, empower the business and focus Procurement's expertise where it can have the greatest impact.

Good procurement governance isn't about slowing decisions down. It's about giving people the clarity, capability and authority to make good commercial decisions at the pace the business requires.