Professionals holding procurement jobs have to juggle multiple balls (cost reduction, tail spend management, supply relationship management – this list goes on). However, a new article in the business leader’s journal Raconteur has suggested that preventing conflicts of interest is becoming increasingly central.
Slipping into a conflict of interest, often unwittingly, is all too easy. Buyers need to be especially vigilant about these arrangements to protect their firms from serious reputational damage, the article argues.
Businesses depend for their success upon mutually beneficial relationships that add value. But what happens when those relationships have grown so close and cosy that hard-headed judgement softens? Procurement staff have a special responsibility to prevent an unintentional misstep from escalating into a PR catastrophe.
Conflicts of interest have been pragmatically categorised into four areas by procurement veteran Kurt Warren (currently associate director, New York University Abu Dhabi). These include giving and receiving gifts, personal and family relationships, the use of company resources and investments. In addition to this, the definition of conflict of interest has been succinctly formulated by supply chain management professor Rob Handfield at the University of North Carolina: “when you take care of your needs as an individual above those of the organisation.”
If you’ve been influenced to take a course of action you wouldn’t have usually made, the chances are that a conflict of influence lies behind it.
For procurement staff in larger organisations, the solution lies in building multiple safeguards and governance processes throughout the organisation, involving several levels of sign-off as well as sourcing councils and contracts committees. No single individual should be in a position to plough on regardless.
At a smaller scale, the personal touch becomes more important. A CEO who favours a buddy from the golf course might tactfully be asked, “If that decision got published in The Times, would you be comfortable?” If not, maybe it isn’t such a wise move.
What unites the two levels is the willingness to be transparent and inform others of purchasing preferences before acting.