Summer, February 2013

Values based decision making

“As a supplier, I’m tired of hearing procurement talk about value, when the truth is, all they are really focused on is compressing margins and taking out dollars,” says Mark Collins, CEO Urban Maintenance Systems (UMS).

“That’s in no way a reflection of the value procurement could be delivering, but in my experience, the talk about looking for value beyond cost is, in for the time being at least, just that - talk.”

In a candid conversation with The Faculty’s Commercial Director, Andrew Hooke, Collins offers a fresh take on the value he expects procurement to deliver, the challenges he’s faces dealing with procurement from the supply side and the role he sees for procurement in creating a unique employee value proposition.  

On the experiences that have typified the best and worst interactions with procurement… 

As a supplier, the worst interactions are invariably those where there is no opportunity to engage face to face with procurement.  I appreciate the growing use of automated RFX platforms is driven by the need to increase efficiencies, but it’s misguided.  It not only leaves value on the table, but can do real harm to the quality of outcomes.  

Take for example something as simple as bathroom cleaning – it’s considered such a basic service that most businesses are only concerned about achieving the lowest possible margin and won’t, for efficiencies’ sake, entertain any engagement with stakeholders, let alone suppliers. 

At its best, procurement invites end users and potential suppliers to work together from the outset to consider KPIs, allowing for a discussion about KPIs, inputs, service standards, alternative supply model.  Once dollars are on the table, it’s near on impossible to consider this without some pre-conceived notion about the budget.  

On the decision-making process used by procurement…

At UMS, our people are at the core of every decision we make.  From a procurement perspective, this means that when a category gets closer to actually touching employees, that’s where price needs to drop down the scale.  To maximise the output of the business, we need to optimise the output of our employees and this means valuing the same things they do. 

In the end it all comes back to making values based decisions – procurement like every other part of the business should be guided first and foremost by organisational values.  It’s important to draw the distinction between ‘espoused values’ and our ‘values in action’ which guide our behaviours.  If the organisation values health & safety or people, the decision making criteria for something even as seemingly straightforward as bathroom cleaning is going to change because every decision needs to reflect those values. 

On the macro-level challenges facing Australian businesses today…

Remuneration - In Australia, our wage expectations are completely off-kilter.  It’s not just executive salaries that are excessive or unsustainable, it happening at every level of the business and across practically every industry. Australians have fallen in love with a lifestyle that is unsustainable - we have to remember that there was a time when even buying two coffees in a day was a luxury, not the norm.

Beyond the boom -  Western Australia continues to ride on the consumption of our mineral resources, and tempting as it is to count on a few years left in the boom, weaker demand for coal, iron ore and other resources has already flattened commodities prices and it will only take only a blip in China’s economy to destabilise our own. Structural readjustment is already occurring but government and businesses need strategies that will enable us to improve living standards beyond the boom. 

Productivity constraints -  It’s no wonder that we have a productivity challenge in this country – the number of hoops that businesses need to jump through these days means that we need three FTE just working to meet Government compliance requirements.  The focus should be on enabling businesses to make decisions more quickly, embrace new technologies and focus on innovation. In my view, compliance is old world behaviour, accountability should be the new world behaviour.   

On his leadership philosophy…

The higher you climb the corporate ladder, the more the job becomes about people. You can have the best strategy or business plan in the world, but if your people are unhappy and the culture is fractured, it will always fail to deliver.  

Too often we get confused between being a good manager, and being a good leader - leadership is about doing the right things, whereas management is about doing things right. In my experience, executives often come to role of CEO with very little people management experience. It’s true that there is a degree of inherent ability in being a good people leader, but I do think much of it can be learned.  

A CEO’s life is one consumed by meetings and yet it can be very lonely at the top. The best CEOs will surround themselves with great coaches and mentors and seek out both internal and external perspectives.