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Within this report I will be discussing the current procurement strategy of the N.G. Bailey organisation, a large UK wide M&E building services company. I will also look at ways in which the strategy can be developed and changed in line with industry thinking to give the company best value, to maximise profit and to build relationships with its` supply chain. The company currently spends £300 million of it's` turnover on sub-contractors and suppliers for all of our projects. It is therefore an area where a large amount of money could potentially be saved if utilising an appropriate strategy. Any strategy that is implemented must fit in with the overall company strategy, must also be fit for purpose and be easy to implement and roll out to all members of the company. I will discuss current industry thinking and recommendations and present a list of appropriate changes that could be implemented to keep the company competitive and at the forefront of the M&E industry.
1.2 N.G. Bailey & Company background information.
The NG Bailey Company started as the Bailey-Billington Partnership back in 1921 with an equal capital share of £50. After a year, Noel Bailey Snr. bought his partner out for £100 and formed a non-limited company, NG Bailey & Co (hereto referred to as NGB). At around this time Noel Bailey engaged five apprentices (aged 14-15). Mr Bailey was, in effect, pioneering what later became the company's apprenticeship training scheme.
The company opened offices in Manchester in the early 1930's, and in 1938, the company became a PLC with an authorised capital of £10,000 and a workforce of 25. At this time NGB were actively involved in Government work for the war effort, including airfield lighting and aircraft factories.
By the late 1950's the business had outgrown its rented accommodation in Leeds and had to relocate to Ilkley. The company expanded with new branches in Sheffield, Birmingham and Bristol, followed in the early 1960's by an office in Dundee.
During the 1980's further expansion continued, opening offices in Southampton and London, with offices in Aberdeen, Edinburgh and Glasgow replacing the original Scottish office in Dundee. In 1990, following demand from long-standing clients, the organisation entered the HVAC market, to provide the full M&E services package.
The Bailey group is made up of six independent companies:-
Bailey Building Services - M&E services
Bailey Teswaine - Specialist telecoms
Bailey Rail - Specialist rail division
4) Bailey Systems - Building control (BMS)
5) Bailey maintenance - Facilities maintenance (FM)
6) Bailey off-site - Pre-fabrication
The NG Bailey current vision is to give clients a "one stop shop" for M&E services, and a cradle to grave service for all the buildings that we provide M&E services to. In the future, the full project management of projects could be an option to give clients a truly integrated service.
In the financial year finishing April 2010 the company had a turnover of £464 million with a gross profit of £13.5 million (See Appendix 5.2). NG Bailey currently employs around 4000 people based at 23 locations throughout the UK (See Appendix 5.3). It is the largest privately owned M&E company in the UK.
The main areas of NGB`s work are as below:-
Power and industrial
1.3 Company aims and objectives
The NGB organisation aims to be at the forefront of the M&E services industry as it has been for many years. To do this it must react to the market forces and both internal and external influences. The company mission statement has been the same since 1965 and is still as relevant today as it was then. "To be the best in every aspect of our business, to the benefit of our customers, members and shareholders" - Noel Bailey, 1965 (NGB Intranet 2010). The company must use its position in the marketplace to get best value from its supply chain at all levels both up and downstream to the benefit of both the company and its clients. This must be done in a sustainable way through partnering and framework agreements, I will be looking at these and other options for a new procurement strategy for the company, coming up with some recommendations to take the procurement function through these difficult financial times.
Current position of the industry
The construction industry has been seen for many years as adversarial and contractual with companies trying to protect profit in any way possible, with client, main contractor and sub-contractors being wary of each other at best and distrustful at worst. The Latham report (1999) commented that ************ and this made the industry step back and think what could be done to achieve a more harmonic approach in the construction industry as a whole. Egan (1996) also commented that ************ and this
The country's current economic climate and that of the construction industry makes it even more important to have a procurement strategy that gives clients and main contractors the comfort that they are getting best value and sustainable solutions, and a reason to choose NGB over another contractor. The website "teachmefinance.com" defines a credit crunch as, "A sudden reduction in the availability of loans and other types of credit from banks and capital markets at given interest rates. The reduced availability of credit can result from many factors, including an increased perception of risk on the part of lenders, an imposition of credit controls, or a sharp restriction of the money supply." (2010). The credit crunch is another reason why a company's procurement strategy needs to be revised and aligned to the current economic climate, to maximise turnover and protect the company in hard times.
With the voting in of the coalition government came the immediate and devastating cuts in public spending on projects such as hospitals and schools, NGB`s "bread and butter". The company was instantly affected and took a "big hit" when projects that were either imminently to be secured or pipeline work for the coming years were instantly taken out of our business plan. There has since been a review on public spending which has seen some projects given the green light where others have been put back out to tender. However, the full list of cancelled projects has really had an effect on the construction industry as a whole.
Before the company can decide on the type and structure of a strategy it must first look at it's upstream supply chain i.e. main contractors and clients and also forecast its requirements and spend in the coming months and years to come. With the economy currently in a state of flux this is no mean feat, but time, money and resources must be allocated to do this at the outset to establish the companies' requirements going forward, otherwise there is nothing to base the strategy on!
The production of a procurement strategy change could be outsourced to an independent company to deal with, in conjunction with company management team. Whether done internally or externally a facilitator should be appointed to organise the holding of meetings, workshops, development of the strategy team, the review of past and future projects and most importantly to collate all the information. The role of the facilitator as discussed by Thomas et al (2005) includes the following:-
"1. Building the integrated team
2. Helping the team to come to decisions
3. Aligning the teams effort towards a common set of objectives
4. Developing a project culture from the separate cultures of the various organisations
5. Adapting workshop and facilitation styles to suit team dynamics
6. Valuing and encouraging the contribution of all team members
7. Maintaining the momentum of the workshop and delivering the stated objectives on time
8. Acting as a catalyst, challenging the teams thinking
9. Recording decisions and actions, writing and circulating clear reports promptly"
Thomas goes on to talk about the use of an external facilitator having both advantages and disadvantages some of which are listed below:-
Independence and lack of bias
Less likely to be hindered by political considerations
Greater ability or freedom to challenge the status quo
The ability of the group to hire a specific skill at a specific time
Experience from other sectors / relationships
The fee may have to be paid out of the project [Or strategy] budget. Whilst the inhouse facilitators costs may not be charged to the project there will, nevertheless, be a recourse cost that should be considered.
Perceived lack of knowledge of specific organisations."
Masterman (2002) discusses the work of Harrison (1975) from his book "The managerial decision making process" it details seven steps to the decision making process for procurement systems, these are:-
"1. Set organisational objectives
2. Search for alternatives
3. Compare and evaluate alternatives
4. Choose among the alternatives
5. Implement the decision
6 Follow up and control by taking corrective action if necessary
7. Revise and update objectives"
The above points are as relevant today as in 1975 and simplify the process of choosing the relevant strategy for any company.
With the voting in of the coalition government came the immediate and devastating cuts in public spending on projects such as hospitals and schools, NGB`s "bread and butter". The company was instantly affected and took a "big hit" when projects that were either imminently to be secured or pipeline work for the coming years were instantly taken out of our business plan. There has since been a review on public spending which has seen some projects given the green light where others have been put back out to tender. However, the full list of cancelled projects has really had an effect on the construction industry as a whole, country wide.
NGB wants to maintain and strengthen its position in the M&E marketplace and it must
Proposed changes / strategy
Up and down the supply chain
Current state of the industry
Walker et al (2008) lists the main benefits of framework agreements as:-
Less waste and duplication
Greater certainty of cost
Better whole life-cycle costing
Building of trusting relationships
Bringing of all "project knowledge" together at the inception of a project.
Procurement dictionary definitionâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.
The functional Procurement team have three key roles, which are:
1) To provide local business support;
This can typically involve managing the sourcing and selection process of third party suppliers which NG Bailey require in the delivery of its operations.
2) Co-ordinate National Activities;
This could involve managing national agreements, suppliers or product categories and providing strategic link between NG Bailey and its supply base.
3) Act as a business control;
As a large business we need to separate the responsibility for managing a budget and the ability to commit to contract. Procurement will manage the Sourcing process which provides risk mitigation, validate agreements and will also provide the transactional and systems support such as order placement.
**GEOGRAPHICAL BONDARIES TO OVERCOME
**TEAM MENTALITY INSTEAD OF ME MENTALITY
**CURRENT MARKET TRENDS / ECONOMIC DOWNTURN USE RICS 2010 CONFERENCE PAPER
**MUST OFFER SOMETHING DIFFERENT
**CAN DIVERSIFY BUT COULD BE RISKY IN CURRENT CLIMATE
**CONSOLIDATE AND DO WHAT YOU DO BEST, DON'T OVERSTRETCH PEOPLE AND RESOURSES, COULD RESULT IN INSOLVENCY
**DO YOU BUY WORK AT A LOSS TO KEEP TURNOVER AND PEOPLE IN WORK??
**COMPANY STRUCTURE, LOOK AT RE-STRUCTURING / DOWNSIZING
**REWARD GOOD WORK, SET TARGETS "SMART"
**COLLABORATIVE PLANNING WITH MC`S / SUBBYS / SUPPLIERS
Approved supplier / subby lists
ORGANAGRAM FOR ROLE OUT OF STRATEGY
NAMES TO FACES ETC. ETC.
**PEST AND SWOT ANALYSIS TO ASSES COMPETITORS AND GIVE US AN EDGE IN THE MARKET.
**POSSIBILITY OF INSOLVENCY
**USE TRUSTED SUPPLIERS AND SUBBYS WITRH PROVEN TRACK RECORD FOR COST, SAFETY, QUALITY, AFTERSALES NOT JUST BEST PRICE. KEEP THEM TO A MIMIMUM AND HAVE A 2 TIER SYSTEM. REGULAR RE-TENDERING TO KEEP THE COMPETION UP AND THEREFORE BEST PRICE AND SERVICE.
USE 4PROJECTS INTEGRATED PROJECT DATABASE
SELL OUR OWN INTERNAL COMPANIES FOR A 1 STOP SHOP TO CLIENTS
Electronic Project Information Exchange ensures:
Accuracy of information.
Faster information exchange.
Increased visibility and traceability of correspondence
GIVE SUBBIES ACCESS SO NO EXCUSES ABOUT NOT GETTING THE INFO
CURRENT ECONOMIC CLIMATE FORCES CHANGE AND USE OF BEST PRATICE TO GET VALUE FOR MONEY
LOOK AT ALTERNATIVE METHODS OF INSTALLATIUON TO SAVE TIME AND MONEY EG. PREFAB ETC
Top down and bottom up strategy
What is our strategy for getting sub-contractors on board??
What is our strategy going upstream??
Old skool views need changing to suit current climate and the way forward (quote the ways)
Strengths and weaknesses of current strategy
Form a new strategy for the BBS procurement role.
USE OF SOFTWARE AND COMPUTER PROGRAMMES TO MAKE INVOICING AND THE WHOLE PROCESS EASIER.
PROCUREMENT SCHEDULES AND PROGRAMMES TO LINK TOGETHER DIFFERENT PROJECTS
Performance reviews of subbys / suppliers after each project to ensure underperforming companies are not used again.
Regular engagement sessions to make the subbies feel like part of the team
CHOOSE 3 OF EACH TO MAINTAIN AN ELEMENT OF COMPETITION BETWEEN EACH AND CHANGE ON AN AGREED CYCLE TO GIVE OTHER COMPANIES A CHANCE.
2.0 MAIN FINDINGS
Current types of procurement routes used within the construction industry. Advise which one is used for bailey by their main contractors.
- KAIZEN THEORY AND PRACTICE
- USE NGB PROCUREMENT POWERPOINT AS A GUIDE
- LOOK FOR PREVIOUS STRATEGY DETAILS
- SUPPLIER / SUBBY ASSESMENTS AND PRE-QUALIFICATIONS TO PREVENT WASTED TIME / RESOURSE AND MONEY.
- EARLY INVOLVEMENT IN PROJECTS
- FRONT END WORK A MUST
- SAP ALLIANCE / DISCUSS
- BBS PRELIMS QUITE HEAVY
- CUT YOUR CLOTH TO SUIT ETC ETC
- REGIONAL STRATEGIES AT THE MOMENT NEED TO BE NATIONAL
- NATIONAL AGREEMENTS ON BREAD AND BUTTER ITEMS
- LUMP TOGETHER PROJECTS FOR MAXIMUM DISCOUNT ACROSS THE COMPANY
- REGULAR LIASON WITH REGIONAL HEADS OF PROCUREMENT
- SECTOR LEADERS FOR LARGE KIT WITH EXPERIENCE IN THAT FIELD AND WITH BACKGROUND KNOWLEDGE
- USE THE ENGINEERS TO VET QUOTATIONS AND SPECIFICATIONS, THE PEOPLE WITH THE CORRECT KNOWLEDGE OF THE PROJECT AND THE CLIENTS REQUIREMENTS.
- PROCUREMENT STAFF SOMETIMES INTERFERE AND THINK THAT BEST PRICE IS THE BEST OPTION, THIS IS NOT ALWAYS THE CASE BECAUSE OF PREVIOUS PROJECTS, RELATIONBSHIPS ET ETC
- AGREE / NEGOTIATE DISCOUNTS AND RE-BATES FOR DIFFERENT LEVELS OF EXPENDITURE
- DRIVERS FOR CHANGE
becoming more demanding.
Financial Drivers - industry repositioning to seek more sustainable returns.
Industrywide changes - consolidation, vertical integration and foreign players entering UK market.
Legislation - the impact of the Energy Performance of Builidings Directive (EPBD).
Sustainability - UK Plc's looking for answers.
Technological change - IP convergence.
Customer focused organisation
Develop and leverage strategic relationships
Develop strong 'managed services' proposition
Enhanced Construction Proposition
One NG Bailey
Leading the way by working together
Leading the way by being focused on our customers
Leading the way by always improving
Leading the way by being committed to the long term
Leading the way by delivering sustainable solutions
Leading the way by maximising the potential of our people
Staff need to be made aware of the new company's vision at the early stages of the acquisition and this needs to be re-iterated regularly to ensure that no-one loses focus of where the company is heading. Once staff morale is affected, profitability and efficiency start to decrease dramatically, this needs to be avoided at all costs. Larkin (1996) recommended four principles of communicating change in an article published in the Harvard business Review these are as follow:-
"When communicating major change to employees, keep it simple and avoid mission statements and management proclamations - most important, give them the facts; be straight.
Introduce the planned change face to face, not through videos, publications or vast, impersonal public meetings.
Target supervisors: get senior managers who are involved in the change to brief small groups of supervisors face to face.
Do the briefings in two rounds - first, to explain the change and get supervisors` reactions and recommendations, second, to explain any modifications of the planned change based on supervisors` feedback."
In Fig. 2 below, a typical cultural web can be seen; this shows the way that the symbolic, behavioural and physical manifestations of a company culture are interlinked with the paradigm or "taken-for-granted" assumptions that staff hold. As can be seen from the model, all areas are interlinked. It is therefore easy to see how small changes in one area can affect all the other areas of the web. If you change peoples` thinking about processes and systems of a company original "learned" behaviour can be overwritten and replaced with new ideas and beliefs.
Fig 2 - The cultural web of an organisation. - Johnson et.al. (2008)
Higher management need to be visible and must be seen to be actively promoting the new strategy, staff chosen to lead the acquisition should have good people and leadership skills, staff need inspirational people to look up to, and need to know that the management support the acquisition and are not just paying lip service to the companies goals and objectives. This again can affect morale and productivity if people are not buying in to the company strategy. Nicky Hayes (1997) comments in his Successful Team Management book that, "People are quick to detect the difference between real respect and lip-service and they will respond appropriately. Trying to engage in successful team management without respect for the people who make up the teams is as pointless as trying to ski in flippers"
USE OF E-AUCTIONS AND `E` TENDERING TO GET BEST PRICE / VALUE FOR MONEY AND SERVICE
e-business is an opportunity, not a threat.
technology is not a barrier.
develop an e-business strategy based on your business strategy.
e-Trading leads to:
Simpler sourcing of products.
The electronic exchange of these documents offers three key benefits:
Printing and posting costs can be reduced.
Information can be circulated and returned in less time.
Standard formats allows applications to use the data without manual re-keying.
Accuracy from project outset.
Reduced volume of project documentation ? Reduced costs.
A better controlled process.
DTI REPORT (QUOTE)
The Construction Industry Computing Association (CICA)
The Construction Industry Trading Electronically (CITE)
Information Technology Construction Best Practice programme (ITCBP)
Need to develop SMART PEST SWOT ETEC ETC procurement strategy to move with the times
KPI`s and measureable / simple not complex methods.
SEEING STRATEGIES THOUGH TO THE END
ENGAGE EVERYONE INVOLVED SO PEOPLE DON`T JUST PAY LIP SERVICE, MANY STRATEGIES COME AND GO, THE KEY IS TO MAKE THINGS SIMPLE AND EMPOWER PEOPLE BY GIVING THEM SOMNE KIND OF RESPONSIBILITY AND OWBERSHIP OF THE PROCESS
REGULAR REVIEWS AND BENCHMARKING / KPI`S
SAFETY PLAYS A LARGE PART, REGULAR REVIEWS OF SAFETY
MUST DO IN DEPTH ANALYSIS OF EACH SUPPLIER AND SUBBY AND COME UP WITH A REDUCED LIST. AN "APPROVED LIST"
REDUCE THE NUMBER OF SUPPLIERS AND SUBBYS USED.
REGULAR REVIEWS TO ENSURE BEST PRICES AND TOO KEEP SUPPLIERS / SUBBYS ON THEIR TOES
SIGN UP TO 1 CONTRACT AND USE THROUGHOUT THE COMPANY TO SAVE ON PAPERWORK
AGREED SCHEDULE OF RATES FOR COMPANY / BRANCH WORK
BRING REGIONS TOGETHER INSTEAD OF RUNNING INDEPENDANTLY, USE OF VC CONFERENCING AND REGULAR GET TOGETHERS, TO PUT NAMES TO FACES.
GET RID OF ABORTIVE WORKING BY EARLY INVOLVEMENT WITH THE SUBBY AND SUPPLIERS.
ENGAGING WITH OUR SUPPLIERS AND SUBBYS ON A REGULAR BASIS
USE THEIR RESOURSES TO OUR ADVANTAGE, EG TAKE OFFS ETC.
MOVE WITH THE TIMES GET AWAY FROM THE OLD BOY NETWORK.
REGULAR TRAINING SESSIONS ON NEW METHODS AND PROCESSES.
BE AT THE FRONT TO PREVENT GETTING LEFT BEHIND UR COMPETITORS.
CULTURE SHIFT FOR PEOPLE AND PROCESSES
NATIONAL AGREEMENTS WITH SUPPLIERS FOR BEST PRICES.
AGREED DISCOUNT LEVELS AS MORE MONEY IS SPENT
GET AWAY FROM "FAVORITES", BOTH SUPPLIERS AND SUBBYS.
MUST GATE BEST PRICE / VALUE AND KEEP THE QUALITY / SAFETY
REGULAR REVIEWS AND FEEDBACK SESSIONS / KPI`S ETC ETC
CLEAR AND CONSISE STRATEGY GOING FORWARD WITH OWNERSHIP BY DRFINED PEOPLE
REVIEW AND CHANGE IF THINGS ARE NOT WORKING
CATEGORY MANAGERS FOR DIFFERENT SUPPLIERS / SUBBYS
LOOK AT USING SUBBYS / SUPPLIERS THAT HAVE NOT BEEN USED FOR A WHILE, OPPORTUNITY FOR ALL.
COLLABORATIVE WORKING WITH SUPPLIERS AND SUBBYS/ STRATEGIC ALLIANCES
CURRENT CLIMATE MEANS PEOPLE ARE FOCUSING ON PRICE RATHER THAN QUALITY AND AFTERSALES
EARLY INVOLVEMENT WITH CLIENT AND MC TO OFFER VE SAVINGS THAT ARE ACHEIVABLE GIVEN EARLY INVOLVEMENT
OPEN BOOK TENDERING / BUILD UP RELATIONSHIPS WITH CLIENTS AND M/C`S
USE OF IN HOUSE CAPABILITY INSTEAD OF OUTSOURCING
USE OF SUBBYS INSTEAD OF OWN LABOUR FOR COST CERTANTY
LATHAM AND EGAN REPORTS MUST BE MENTIONED AS WELL AS OGC
Integration of all processes company wide
Sort journals use latest issues
Talk about recession and the effect slashing of government spending on schools hospitals etc Look at supply chain websites
Mention SAP alliance and how it worked with upstream main contractors and our own supply chain
Mention Latham and Egan
MUST RICS 2010 (use)
use supply chain books
Look at through subby & supplier views
One strategy, clear and concise Logos, strap lines clear goals / objectives
Power point in appendices??
Programme for change implementation see Chico
Regular meetings with suppliers to gauge feedback
Benchmarking of all subs / supp Kpi's for all aspects to ensure things are progressing Timelines for achieving set objectives / programme
Ownership of all aspects by individuals
Regular reviews of policy / objectives in line with industry thinking and market conditions Use of outside company to form strategy impartial and have industry knowledge, good overview
Development of logos / strap lines
Must all buy in to strategy Top down bottom up policy
Regular reviews of policy and subbys/ suppliers
It is now a buyers market, value for money without a reduction in quality
Proven track records of all
Contract reviews to determine satisfaction
Use subbys / suppliers to do take-offs / design etc etc
Pest / swot analysis
Procurement schedules sub & supp
Cross company procurement strategy
Field supply chain leaders
Use peoples strengths in the industry to the strategy advantage
Use of VC to bring people together across the company
Get people thinking nationally not regionally
E auctions for materials
Bulk buy discounts
Use of sub / sup warehousing / logistics
Agreed profit margins
Open book policy???
Ring fence profit margins use con. Exc. Paper
Get rid of risk share between risk register talk about it
Have risk pot for unknown items
Prov sums for known items
Transparent costs across chain
Profit margins kept
Less time wasted tendering by subs / suppliers
Build relationships social capital!!
Must keep competitive
May need to bring in expertise
Use of internal companies, eg prefab to keep money in house
Mentoring of staff
Regular training of staff
Reinforcement of policy regularly
National agreements for suppliers
Email through turn it in website
Historical data for approved suppliers / subbys
Need to be solvent and good track records, capable of doing the job, enough staff / engineering capability.
Currently regional, needs to be national agreements between suppliers / subbys although not always possible with more regional firms like ductworkers
More interaction between regional heads of department
Fit for purpose strategy
Regular reviews of strategy
Check word count!!!!!!!!
Diversification is risky in a recession but can pay off if done correctly
Less duplication and blackholes of responsibility
6000 word count
Silos currently, need holistic view
Blame culture, get rid of it
Use of BIM in procurement question whether this will work people are adverse to change, who pays for it?? MC or contractors???
Must b an industry wide shift in culture and attitude otherwise it will not work.
Short term attitudes need to change to long term goals
Mass amount of waste in construction
Various strategy depending on the Market or type of goods/ services
Download accelerating change!!!!
Some companies may not be able to work in the new model but may still need to be used as they are important to the delivery if projects and services.
Feedback to companies not selected, and reasons why not selected, give feedback as the rover model
3 tier approach to approved suppliers / list out the types
Describe our upstream relationships before talking about downstream and how it is affected Look at the turnitin website!!
Dr. Deming mention the cycle
3.0 CONCLUSION AND COMPANY RECCOMENDATIONS
-MUST MOVE WITH THE TIMES AND CURRENT INDUSTRY TRENDS
-MUST BE ABLE TO ADAPT QUICKLY
-CLEAR STRATEGY GOING FORWARD AND REGULAR REVIEWS / BENCHMARKING & KPI`S
-MUST BE WILLING TO CHANGE THE STRATEGY IF IT IS NOT WORKING CORRECTLY, DON'T BE AFRAID TO SAY WE DID SOMETHING WRONG
- BRING IN THE CORRECT PEOPLE TO IMPLEMENT STRATEGY
- PEOPLE WHO ARE UNWILLING TO CHANGE CREATE BARRIERS, THESE PEOPLE NEED EDUCATING.
- DON`T TALK AT PEOPLE, ENGAGE THEM IN THE PROCESS
- CREATE INITIATIVES AND REWARDS FOR THE MEMBERS OF THE TEAM
- SOCIAL EVENTS AND GET TOGETHERS TO PROMOTE COLLABORATIVE WORKING /
- CULTURE SHIFT FOR ALL PARTIED INVOLVED
- PROTECTION OF PROFIT MARGINS AND REPEAT BUSINESS
- DO WHAT YOU DO BEST, DIVERSIFICATION CAN BE REISKY ESPECIALLY IN MARKETS WE KNOW LITTLE ABOUT, A LITTLE KNOWLEDSE CAN BE DANGEROUS.
- REGULAR REVIEWS TO ENSURE STRATEGY IS WORKING
- ADAPT TO CURRENT MARKET TRENDS
- TRADING ON OLD RELATIONSHIPS
- KEENER PRICING DUE TO CURRENT ECONOMIC CLIMATE
- LATHAM AND EGAN
- RECENT INDUSTRY THINKING
- STREAMLINING OF PROCESSES AND PAPERWORK (E-AUCTIONS ETC)
- POST MORTEM OF PROJECTS AND PROCESS ON A REGULAR BASIS SO THAT THE STRATEGY CAN BE RE-ALIGNED AND REVISED IF REQUIRED
- EVALUATE RISK AND IDENTIFY SECTORS OF THE BUSINESS AND RE-ALIGN THE STRATEGY TO SUIT
(RISK MATRIX / SCHEDULE. ALWAYS A WINNER!!!)
When restructuring or formulating a change management plan there are a number of tools which can be used to give an indicator of where the company is at a moment in time and give indications of its strengths and weaknesses in the marketplace due to both internal and external factors. Two of the most popular methods used are the S.W.O.T analysis and the P.E.S.T.L.E analysis. The output from these analyses can then be used to see where the company needs to improve; these can then be used as drivers within the change management proposals. Details of what S.W.O.T and P.E.S.T.L.E represent are described below.
Strengths - Identifies areas where the company is strong and leads the respective market.
Weaknesses - Identifies where the company is lacking in some areas and has room for improvement.
Opportunities - Identifies future markets / projects that the company may be able to take advantage of.
Threats. - Identifies competitors and possible changes to market trends
An example of a S.W.O.T analysis template can be found in Appendix 5.5.
Political - Identifies outward forces such as government, tax, environmental law and trade restrictions.
Economic - Identifies forces such as economic growth, interest rates, inflation etc.
Social - Identifies cultural aspects, labour availability, trends in social development etc
Technological - Identifies ecological and environmental changes and innovation.
Legal - Identifies forces such as consumer law, discrimination law, employment law and health and safety laws.
Environmental - Identifies factors such as weather, climate change, tourism and changing markets.
An example of a P.E.S.T.L.E. analysis template can be found in Appendix 5.6.
Another acronym that is used when deciding on new strategy is S.M.A.R.T, this is a method that has been used for many years now but is still relevant in business life as well as for setting personal goals. Details of what S.M.A.R.T. stands for can be seen below.
Specific - Means that the objective is a defined or fixed goal.
Measurable - If an objective is measurable, it means that the measurement source can be identified and results can be tracked.
Achievable - Objectives need to be achievable, i.e. in the near future. if it is too far in the future getting motivated may be difficult.
Realistic - Objectives that are achievable may not be realistic, a change in habit or working may be required.
Time-Bound - Time-bound means setting distinct deadlines for the achievement of the objective.
Staff morale, perception and motivation should be a key factor when dealing with a new strategy, the use of Herzberg's Motivation-Hygiene theory can be considered when deciding how to motivate staff, the model looks at aspects of the work environment that motivate workers. From his findings Herzberg concluded that "there were two different categories of factors that affect how employees feel about their jobs." (CEM Motivation at Work Paper 6002, p.6). The first category is hygiene or maintenance and the second category is termed motivators. An illustration of Herzberg's theory can be seen below in Fig. 5.
Fig. 5 - Herzberg's Two Factor Theory - (CEM Motivation at Work Paper 6002, p.7).
Herzberg further discusses that "by maintaining the job environment at an acceptable level, feelings of dissatisfaction can be avoided." (Motivation at work). His theory also suggests that it is important to look at factors termed motivators "because they effectively motivate people to superior job performance." Herzberg goes on to explain that "employers should concentrate on the motivators in order to increase productivity and efficiency." (CEM Motivation at Work Paper 6002, p.7).
Contrasting to Herzberg's theory is McGregor's X and Y theory; this examines the way workers are managed in relation to their motivation. The theory describes "people inside the organisation can be managed in two ways." The first is negative, known as category X and the second way is positive, known as category Y. McGregor concludes that "a manager's view of the nature of human beings is based on a certain grouping of assumptions and that he or she tends to mould his or her behaviour towards subordinates according to these assumptions." (CEM Motivation at Work Paper 6002, p.8). An illustration of McGregor's theory can be seen below in Fig. 6.
Fig. 6 - McGregor's X and Y theory - (CEM Motivation at Work Paper 6002, p.7).
Another item to consider as part of any change management plan is the establishment of training needs for all staff members. We never stop learning from the day we are born to the day we die, it is important in business to give your staff the tools to enable then to carry out their job as efficiently as they can to maximise productivity and profitability for the company. Training in any company should be an ongoing process, and should be given a high priority along with funds to ensure that the workforce is adequately equipped to carry out their roles.
An organisation with a strong and healthy training programme is sometimes referred to as a "learning organisation", Mayo (1993) gives a number of characteristics that define a learning organisation, and these are:-
1. "People's development assumes a high priority among managers.
2. Consultation of employees at operational level occurs as a matter of course.
3. The methods of learning that are used are decided upon by employees rather than managers.
4. Mistakes or accidents are treated as opportunities to learn rather than being used as a means to blame and punish; remember that some of the greatest inventions that have been discovered occurred as a result of accident rather than design.
5. Information is shared by everyone.
6. Openness and honesty among members is accepted as "normal"
7. Spontaneity and informality are encouraged.
Sadler (1995) was also an advocate of the learning organisation and produced the following "processes and influences" diagram to show the interaction of learning types within an organisation. It is interesting to note that learning is present in many of the day-to-day activities we carry out; we all take in knowledge and learning without sometimes even realising it. Sadler`s "process and influences" diagram can be seen below in Fig. 7.
Fig. 7 - Processes and influences that create a learning organisation - Sadler (1995)
One of the most common strategies or visions used and quoted by companies is that of "continuous improvement". This term comes from the Japanese word "Kaizen" which means change (Kai) and Better (Zen). The Japanese see that life and business are always evolving and improving, they are not fixed and firm but always in a state of flux. Kaizen theory also focuses on the use of teams within organisations but also on individuals within those teams. The engagement of staff in the visions and goals of the company is also recognised in the theory. Kaizen seeks to eliminate waste by empowering people and also looks at making improvement in all aspects of business to make processes more streamlined and efficient. The theory also recognises that small changes can make a big difference in organisations. Kaizen theory was developed after World War Two by the Toyota Corporation. It implemented the continuous improvement of quality, technology, processes and company culture. An off shoot of Kaizen theory was the "just-in-time" methods of working which reduced waste and the need for storage of materials. The term "The Toyota Way" was coined after the new working methods had been so successful, and it is a method that many Western companies have adopted. The ten main principles of Kaizen along with an illustration of the "Kaizen umbrella" can be seen below, and in Fig. 8.
10 Principle of Kaizen
Say "No" to status quo, implement new methods and assume they will work.
If something is wrong. Correct it.
Accept no excuses and make things happen.
Improve everything continuously.
Abolish old, traditional concepts.
Be economical. Save money through small improvements and spend the saved money on further improvements.
Empower everyone to take part in problem solving
Get information and opinions form multiple people
Before making decisions, ask "Why" five times to get to the root cause.
Remember that improvement has no limits. Never stop trying to improve.
Fig. 8 - The Kaizen Theory Umbrella Diagram - Masaaki Imai (1986)
People are the cornerstone of any organisation and without the buy-in of staff for any new merger or vision it is doomed to failure. People must be treated with respect and compassion when one company merges with another. Inevitably, there may be job losses as the new company is formed, and this can affect morale and productivity, however the company must forge ahead with its new vision or strategy for the benefit of the company. The culture of the merged company also needs to be addressed, staff's beliefs, attitudes, work ethics and religious orientation should be considered when formulating the strategy. Staff should be consulted at all stages of the merger, feedback should be sought to assess morale and how the company vision is being delivered.
Management structure and attitude will go a long way to successfully implementing the new procurement strategy of the company. Managers and heads of department should lead by example; this will encourage staff to join in on the journey to achieve the new strategy. The management structure and methods of working will be paramount to the success of the procurement function going forward. Staff must be selected for their strengths and training provided to help out with any weaknesses they may have, and if the capability is not within the company then it should be sourced from outside.
Finally, the company must adapt to changes from both internal and external forces. The current market is constantly changing and we must move and adapt to prevent getting left behind. The procurement management strategy should be seen as ever changing and not a firm and fixed process. It should also be noted that regular reviews and engagement sessions should be carried out to ensure the strategy's momentum does not burn out. This is paramount to the success of any strategy.