Do Organizations Really Need a Management System to Achieve Their Financial Goals and Meet Objectives?

By Guest Editor

August 19, 2017 at 7:57 AM

Puzzle Framework.jpgThroughout my consulting career, I have heard endless statements about management systems from directors and presidents, from organizations of different sizes, from all different countries. I am sure these statements will sound familiar if you have worked as a consultant, regardless of the country in which you work or how long you’ve spent doing it. Some of the most common comments I have received include: “A management system? We don’t need that! Our performance is remarkable!” “Our company just went through a definition of core processes. Big player ‘X’ (I’m quite sure you know the company in quotation marks!) did a tremendous job, since we are implementing this high-end ERP,” or “A system?? Oh no, our best-in-class ERP does everything and we don’t need an additional system.”

On the other hand, I have come across several cases in organizations with annual revenues in the range of US$20,000M where some departments, such as Procurement, have achieved their annual financial objectives without even having a formal management system. However, this is not sustainable over time and does not last long.

So, is a management system required? Yes, it is! A management system considers:

 

  • Strategy
  • People and Structure
  • Processes
  • Compensation
  • Measurement
  • Technology

This type of system gives a framework to an organization to configure its resources and people in an efficient layout to better execute its strategy and assess its performance. In other words, it can enhance an organization’s objectives and provide financial benefits to the company’s stakeholders. A management system itself does not deliver results on its own, but is a key element which helps organizations sustain financial benefits over time.

Any organization that has implemented a management system as part of its culture must design, implement and maintain an organizational structure that provides employees with:

  • The right skill sets
  • The correct processes to enable people’s performance
  • A complete and solid compensation model to motivate employees
  • Useful and efficient tools to process and share data
  • The right measures to assess performance and adjust to better achieve goals

I have been able to participate in the delivery of financial results to organizations across regions through the design and implementation of a management system. With the addition of this powerful tool, we have identified savings betweenUS$450M and US$400MM for companies with US$25,000M and US$20,000M in revenue and between US$3.5M and US$8M for organizations between US$30M and US$100M in revenue.   

To better explain how a management system works, here’s a dynamic I like to use when I work in Transformation Projects and is part of the implementation stage:

You may have several teams consisting up to six people per team, with three rounds of one minute each. A page with numbers from one to 50 in random order is provided to each team, which must find the numbers in correct order and count to fifty. However, before starting, they must first name a leader, who calls the numbers while the rest of the team points at them. Nobody can talk except for the leader.

After the first attempt, most of the teams typically do not count beyond 15 before the one-minute time limit expires. Before starting the second round, a random team is taken outside of the room and they are told that the numbers have a sequence and they need to find it. During the second round, this team improves its performance. Before the third round, a different team is taken out and receives a primer about management systems, as well as a different page, where the numbers are ordered in the same exact way but divided by quadrants, which makes it easier to find the pattern.

As you expected, most of the time this third team quickly achieves the goal.

Afterward, I provide the teams with feedback—in the first attempt, all teams are in the same situation; they have set an objective to succeed. However, they don’t possess the structure, processes, technology or KPIs to achieve this or even the required training to work toward that goal. Hence, the exercise involves a great amount of work.

In the second attempt, even though the team has received a process, structure and the required tools, they did not have a proper training to achieve their objective. Teams in these situations showed an improvement in performance but struggled to achieve their objective. Finally, the team in the third attempt could count to fifty because they received a management system, as well as training on how to perform within it to achieve their goals.

So, is a management system required to efficiently achieve business objectives? Tell me your thoughts!

 

Author Bio

 Rodrigo Sanchez.pngGEP’s Rodrigo Sánchez has nine years’ experience as a Consultant in Strategy & Operations Management, delivering business results within operational and commercial environments. He has international experience across Latin America and an MBA from University of Birmingham in the United Kingdom.



Tags: procurement financial objectives Procurement Management System procurement management framework procurement business objectives
Category: Blog Post

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