We had a chance to speak with Mark Spencer, Senior Manager of Global Procurement and Logistics at Mercy Corps, a global humanitarian organization, to learn a little bit about the role of procurement in the nonprofit world. We hope you learn as much as we did about the role of stakeholders, the importance of optimizing tail spend, the challenge of decentralized models and the need for flexibility in nonprofit procurement.
Harnessing tail spend is incredibly motivating and impactful when procuring in the not for profit space. Reductions in operational expenditures (opex) directly correlate to an increase in the size of available spend for field projects. It is very powerful to know that a successfully price negotiated procurement category, free of rogue spend, can allow an organization to give greater levels of assistance in a natural disaster or provide additional funding for long term programs that enable families to receive help with basic needs such as food and shelter.
But, nonprofits struggle with showing stakeholders, and the employee base, the impact of optimizing low level spend. It’s like the old classic “acorns make oak trees.” Yes, you may only be saving a couple of dollars on each purchase but depending on the frequency and popularity of the item, it can scale up to a sizeable amount of money for the organization.
The struggle is often greater for a decentralized procurement (shared) service rather than a centralized or hybrid structure. It’s a constant challenge to get the message across when there can be thousands of people that are spending the company’s opex dollars. Sometimes an individual or team’s priorities take precedent over what is best for the organization as a whole. Another problem with decentralized spending is that can you lose the leverage of combined spend when a number of teams purchase independently from an individual supplier. Tools such as Fairmarkit offer pivotal, thought provoking and easy to understand granular data which provides some incredible heft to the effectiveness and communication of procurement team.
Change and process management is an excellent exercise in the level of required patience and organizational collaboration, especially for the nonprofit sector. There is an overall sentiment of justified conservatism in the nonprofit space that can spill over and make process updates and change a challenge. If you can bring about change in the public or nonprofit sector it is an excellent springboard for any potential career return to the corporate space, it makes corporate change seem easy!
Speed, transparency and agility are some of the most striking differences in public and private sector procurement. In the public sector, by virtue of the obligation of legislation and accountability to local, national and international government entities, transparency is much higher. In turn, it can also be less agile and run at a slower organizational pace than the private space. On the other hand, in the private space an obligation to shareholders or owners is highly dollar driven above all else. Whereas in the public sector space, particularly not-for-profit, decisions are influenced and motivated more by other conditions such as social values and change.
Nonprofit and public procurement can learn from the private sector to be more flexible and still meet the higher standards of transparency and compliance rich obligations. And vice versa, private sector procurement and their business owners can learn from the not-for-profit space and treat the company’s capital more like it is their own personal finances. When people go hungry or do not have shelter because of wasted tail spend it really sharpens the focus; but there’s no reason why this type of fiscal prudence and ownership should not carry over to the public sector in some fashion.
There are at least three leadership traits that are necessary for successful procurement, the ability to listen, listen and listen! When meeting with business owners it is important to show empathy and compassion. Put yourself in their shoes and figure out a solution that unites the needs of procurement and other areas of the business such as compliance and audit with the needs of the stakeholders.
Empower your team to create their own path and make decisions, also try to have some fun in the midst of the day to day. Procurement has a vast amount of data flow....be an enabler not the bottleneck, a role model leader and always lead by example. For a team to feel comfortable, know that mistakes and setbacks happen and are opportunities to learn and grow.