We recently spoke with David Wilson, Ex-Procurement Head of Mattel, about his talk at the New Business Conference.

MIRREN: What are the biggest myths about procurement? In other words, what are the preconceived notions about procurement that are completely off-base?
WILSON: Procurement is not always about cost savings. In fact, in my experience and especially for services such as agency services, cost is one of the less important factors. A good procurement process should be taking into account quality and service, as well as cost. In many instances, innovation and technology will also be factors. The other "biggest myth" is that Procurement is the devil incarnate; most of us are decent, honorable people!!

MIRREN: But in the end, doesn't it come down to cost?
WILSON: In the normal course, cost is certainly one factor, but, in my experience and especially for services such as agency services, one of the less important factors; a good procurement process weights quality and service as being important criteria in agency selection. However, the economy of the last couple of years has driven a change in emphasis. Companies have focused very heavily on cost savings, looking at any & every opportunity. Procurement priorities are driven by corporate/departmental priorities. Consequently, Procurement is under pressure to help deliver those savings. The pressure from Procurement that agencies are experiencing is felt by many providers, including consultants, I might add. Forward-thinking Procurement departments will recognize this as short term. I am confident that the return of top line growth will allow the pendulum will swing back towards a more balanced assessment of cost, quality & service.

MIRREN: What did you find most challenging as a procurement executive?
WILSON: Two things. First, convincing executives who had not worked with us that we would provide value and not ruin relationships with existing suppliers and service providers. Almost without exception, executives appreciated what we did once they had seen the process in action. Second, finding the right people to fill open positions.

MIRREN: Is there a typical career path for a procurement executive now? Typically, what are their backgrounds?
WILSON: I'm not sure there is, particularly for those who work on the indirect/overhead side of the business (as opposed to the raw materials/manufacturing side). We consciously recruited people with many different backgrounds; key for us was style, smarts and temperament. For the more senior procurement executive, many will have had a number of years in procurement, but I don't see that as essential. I may be biased - my background is finance.

MIRREN: What are the biggest mistakes that agencies make when engaging with procurement?
WILSON: So often, Procurement is viewed as "the enemy." Yes, Procurement should, during a review, protect the client's interests & help the client reach the optimal agency selection decision and, yes, some procurement groups treat reviews/RFPs as hand-to-hand combat. On the other hand, a sound, ethical procurement process can work to an agency's benefit too, as I will explain at the Conference.  A forward-thinking Procurement group understands that the agency needs to make a reasonable profit and will want the relationship with the client to be a success. Outside the review, in particular, Procurement can be of enormous help to the agencies; it would be a missed opportunity not to build and leverage relationships with Procurement.

MIRREN: We've heard about agencies sending in their CFO and attorney to deal with procurement. There is a similar negotiation mindset, and it can better intimidate the procurement team. Any thoughts on this strategy?
WILSON: There are advantages to having people separate from client service handle the negotiations. Indeed, one benefit of Procurement conducting the negotiation is that they are separate from the day-to-day relationship. However, the keys to successful negotiation are; 1. be prepared and 2. be objective.  The functional roles of the negotiators are less important. That said, an attorney at the table is helpful when specific contract language is being negotiated. Procurement may try to intimidate, as part of their negotiation strategy; the agency needs to prepare for how to react. One reaction might be: intimidation is not the route to a fair contract that will form the basis of a solid, long-term relationship.

Dave Wilson was a Guest Speaker at the 2010 Mirren New Business Conference. www.NewBusinessConference.com

Dave can be contacted at the Stirling Consulting Group
dwilson@stirlingconsult.com
Tel: 602.952.8451
www.stirlingconsult.com