The procurement maturity level reflects how well a company or a system inside a company is doing, as well as its potential to improve through time. As a consultant, you may deal with businesses having several divisions at varying stages of development.
Many clients have difficulty articulating exactly what is wrong and what they want done. They frequently discuss symptoms rather than fundamental problems, such as flat sales, declining margins, or rising receivables. As a result, the consultant generally bears the brunt of the project scoping responsibility.
Consulting Procurement Organizations should strive to achieve a high degree of maturity, where the team uses best-in-class techniques and results in considerable efficiency advantages for the Procurement group and the firm as a whole. However, before an organization can chart its course to greatness, it must first assess its current position on the Consulting Procurement Maturity Grid.
Understanding where you started on your Consulting Procurement Journey is almost as critical as figuring out where you want to go.
What is a capability maturity grid?
A maturity grid, also known as a maturity model, is a tool used to measure an organization’s progress toward a goal.
The left-hand column of the grid, which is a matrix with rows and columns, usually includes the criteria that will be examined. The columns in each column’s corresponding row define, in a few words, the usual behavior of an organization at each phase of development. A maturity model typically includes 10 or fewer rows, with the first row indicating the entry-level and the last row defining fully evolved best practices.
Maturity grids can be used to offer an initial benchmark for how near an organization is to be “completely evolved” in terms of the criteria being examined. They can also be used to facilitate talks and provide a path for management to follow.
The criteria that will be examined are usually listed in the left-hand column of the grid, which is a matrix with rows and columns.
Perhaps you’ve come across the term ‘maturity assessment score’ in the sales and marketing departments… But you’re uncertain what it is.
Let’s get it straight!
A maturity assessment is simply a resource for the user that helps suggest whether a particular solution or strategy is suited for them depending on the responses they supply.
It’s a discovery tool for the company that helps better qualify prospects based on their replies in the assessment — to check whether they’re “ready.”
Another example: The US Department of Defense financed the development of the Capability Maturity Model. It resulted from an investigation of the business practices and performance of a large number of private enterprises that contract with the military in various ways.
- Level 1 – Initial
- Level 2 – Repeatable
- Level 3 – Defined
- Level 4 – Managed (Capable)
- Level 5 – Optimizing (Efficient)
What is The Consulting Procurement Maturity Grid?
The Consulting Procurement Maturity Grid was created to help businesses in determining where they are now, where they should go in the future, the value of doing so, and how to get there.
The maturity grid touches upon four key areas that are essential to Consulting Procurement:
⇒ Strategy, Governance & Organization:
Strategy refers to the overall plan for how the organization will achieve its goals. Governance is the set of formal rules and structures that guide decision-making within the organization. Organization describes the way that teams are structured and managed within the company.
Each of these areas is essential for achieving consulting excellence. The maturity grid explores how the decisions are made when buying consulting services, who is involved and how consulting supports the strategy.
For example, at the highest level of maturity, you will find a collaborative approach to consulting sourcing and systematic make-or-buy assessments.
In order to reach the highest level of consulting procurement maturity, organizations must have a clear and well-executed strategy, strong governance structures in place, and a well-organized workforce.
⇒ Sourcing Process:
The sourcing process describes how goods and services are purchased from scoping to contracting. This dimension explores not only the adequacy of the process to the volume of consulting projects handled, but also the different steps within the process.
Scoping is the first step in the sourcing process, and it entails establishing the project’s scope and identifying important stakeholders.
The second stage is sourcing, which entails choosing the consulting company that best meets the project’s requirements.
Contracting is the third stage, which entails negotiating contract terms with the consulting business.
Transferring is the fourth and last step, which entails handing over the project to the consulting firm and ensuring that they have all of the resources necessary to execute the project effectively.
Internal stakeholders may have difficulty articulating their objectives, or they may be unclear about the process. As a result, the consulting process can be inefficient and frustrating for both parties. By having a well-designed process in place, consultants can improve communication and ensure that everyone is on the same page.
This can lead to more efficient projects and happier clients. In addition, a well-designed process can also help to improve satisfaction levels among internal stakeholders. For example, at a high-level of maturity, companies will have a sourcing process differentiated by the nature of projects that could be strategic or non-strategic. Most suppliers will be selected through competitive bidding and their references will be checked systematically.
Enablers are essential for success in every sector, including consulting. The enablers are those little things that must be in place for an organization to move up the consulting procurement maturity grid. Without these enablers, an organization will either not be able to take advantage of opportunities or be at a disadvantage compared to its competitors.
The enablers can be manuals, guidelines, and systems from taxonomy to digital solutions, there is a range of enablers that may assist make consulting more efficient and productive.
Taxonomy may aid in the organization and classification of data, making it easier to locate and utilize. Digital solutions can aid in the automation of operations and the sharing of data. Both of these enablers can aid in the efficiency and effectiveness of consulting.
But they must work together in synergy; if one enabler is not aligned with the rest of the corpus or not working well, it will drag down the performance of the consulting procurement capability as a whole.
Furthermore, these enablers can aid in improving consultant-client communication. Consultants may improve their services and outcomes by utilizing these enablers.
⇒ Category Management:
Category management is a strategic process-based approach that “focuses on the vast majority of an organization’s spend on goods and services with third-party suppliers”. In application to procurement and supply management (P&SM;), category management refers to organizing the resources of the procurement team to focus on the organization’s supply market (as opposed to internal customers or departmental functions) in order to fully leverage purchasing decisions.
Category management process involves segmenting the main areas of organizational spend into discrete groups of products and services according to their function. Category management has been mostly successful in large product categories. Smaller traders usually do not have the structure and resources to implement it.
For each one of these areas, the grid defines what policies, methodologies or tools a company uses at a given level of procurement maturity described .
Firstly, P&SM could be organized by function; where contract negotiation, upstream sourcing, downstream contract management (i.e. Relationship management); even expediting, inventory and clerical activity could be the specialist functions within a P&SM operation.
Secondly, P&S Managers could analyze their supply market using a Purchasing Positioning overview to identify market sectors: high/low risk; high/low value suppliers and allocate their resources accordingly.
Thirdly, the P&S department could be organized in accordance with the structure of the internal customer base within the organization. This could be fully implemented to where the members of the P&S team were decentralized and dispersed across the individual locations of the organization.
Some departments allocate resource randomly so that no specialism exists and so that no one P&S practitioner becomes stale and over-focused in any one area. Thus the senior people in these departments will do the important, valuable, work and the junior people the less important.
Finally we have a Category Management structure where team members specialize according to the supply markets. Here each member of the P&S team will focus on a particular supply market and become the expert in that Category.
The most advanced consulting procurement groups will implement all the best practices of category management for the consulting category. It could be tail spend management, or bilateral feedback to and from consulting suppliers.
How is the consulting procurement maturity score of a company defined?
The procurement maturity score of a company is defined by its ability to successfully execute complex consulting and procurement projects. The score is based on a maturity grid that takes into account a company’s experience, size, geographical location, and industry sector.
The grid is used to assess a company’s readiness to undertake specific types of projects. A company with a high consulting procurement maturity score is likely to have a successful track record in delivering similar projects and will be able to handle the complexity of a project.
A company with a low consulting procurement maturity score, on the other hand, may be less experienced and may not have the resources or capabilities to successfully complete a project.
The consulting procurement maturity score of a company is an important factor to consider when selecting a provider for a consulting or procurement project. The score on the maturity grid is calculated through an assessment based on a list of questions that offers for each key dimension the different options.
Each option corresponds to a level of consulting procurement maturity. For instance, an option at level Operational will score 1, Standard will score 2, Leading will score 3 and Best-in-Class will score 4.
At the end of the survey, a company will get the average score on all the options and dimensions which will be its consulting procurement maturity score.
What are the various Levels of Consulting Procurement Maturity in organizations?
If we talk about levels of Maturity, we are talking about the organization and what level is that particular organization at
Consulting Services are not covered by defined processes in an operational organization. The majority of the time, consulting spend is dispersed and sourced by operational teams. As a result, the business only has a limited view of Consulting Expenditure and does not employ a dashboard or spend monitoring tool for Consulting.
If at all, the Procurement Group is involved at the end of the process. The teams have a poor understanding of the consulting industry and are frequently focused on local players.
Suppliers are chosen based on personal contacts, and the provider sets the terms and circumstances.
The Consulting Category is poorly handled, and there is a lot of room for savings and development.
A Standard Organization has begun putting protocols in place to handle the large Consulting project. A basic dashboard in a spreadsheet is used to track overall consulting spend on a regular basis.
For initiatives that exceed a specific level, demand management is done. Procurement is engaged in significant acquisitions, and there is a designated Consulting Procurement Leader. Despite their little knowledge of the consulting market, the teams are able to organize competitive bidding in 50% of the projects and demand references throughout the RFP Process.
They implemented a comprehensive NDA throughout the RFP stage and established a baseline Contractual form for Consulting purchases. To manage the relationship, they conduct post-project debriefings with the provider.
The company recognizes the importance of consulting sourcing management.
As Consulting Procurement Capabilities improve, the strategic value gap begins to close. Teams get an awareness of the Consulting Market’s unique characteristics.
The Leading Organization has established a strong Consulting Services Category Management. Stakeholders are assembled for complicated projects to guarantee alignment and buy-in. A professional Consulting Procurement Team supports sourcing and negotiating with fundamental market knowledge. The majority of purchases involve procurement.
The majority of suppliers are chosen through competitive bidding, which includes a methodical presentation of the most attractive bids as well as reference checks. For the primary suppliers, the Consulting Procurement team employs frame contracts.
The company has implemented project-specific sourcing processes as well as systematic demand management. For the key Capabilities, a Preferred Supplier List is offered.
The Procurement team has created a Performance Management System that includes intermediate project check-ins to assure alignment, contractual change management, and advanced post-assignment performance evaluations (expertise, posture, ROI, etc.).
The company has implemented automated procedures for approval and performance evaluation, as well as an automated dashboard and cost tracking.
The company is one step away from having a fully developed Consulting Sourcing Capability. The strategy framework for achieving this has been completed, and the company is ready to move on to the next step.
A completely mature Consulting Procurement Capability has been built by a Best-in-Class Organization. The Consulting Spend and Consulting Sourcing Strategy are in line with the organization’s strategic aims. The Consulting Category recognizes procurement as a complete business partner.
To guarantee alignment with the plan and keep spending under control, the teams conduct systematic make or buy assessments and staffing. Consulting sourcing is done in a collaborative manner.
The teams now have a comprehensive grasp of the market, including alternatives, benchmark fees, and new entrants. They’re using a complex fee structure (with incentives and flexibility) and frame contracts.
They manage their suppliers’ performance with long-term partners through rigorous performance assessments and on-going improvement strategies.
To promote objectivity and exploit benchmarking, they use a third-party performance measure and reference checking.
With its long-term partners, they have implemented continual improvement programs.
They are in charge of Tail Spend and manage a dynamic Preferred Supplier List that anticipates the organization’s future demands.
They’ve implemented Category Specific Solutions and created sourcing standards based on the nature of the projects’ innovation models. Micro-projects are handled through the Experts Network and Consulting Marketplaces.
The Consulting Sourcing Capability has reached the pinnacle of consulting procurement maturity. The most important benefits of managing the Consulting Category are now apparent to the company. The project’s return on investment and internal satisfaction have both improved. The procurement team is now seen as a key partner for the category, and consulting costs are under control.
How to use the consulting procurement maturity grid?
“The road to develop a mature Sourcing Capability begins with the mobilization of the company, as it does with every transformative endeavor.”
The best-in-class consulting procurement maturity level should be the final goal for major firms on their transformation path.
Strategic Sourcing, Demand Management, and Category Management are all terms they’re already acquainted with. They spend hundreds of millions of dollars on consulting projects each year and could save a lot of money and enhance quality by using best-in-class consulting procurement processes.
Mid-market companies with annual consulting budgets of $5 million to $30 million should aim for a consulting procurement Maturity Level between Leading and Best-in-Class, or rely on third-party services to go the additional mile.
The Leading consulting procurement Maturity level is a good place to start for smaller businesses with annual revenues of less than $5 million. The Consulting Category can be included as part of a larger effort on the complete Procurement Scope if the organization has not yet implemented Category Management.
The Consulting Procurement Maturity must be seen in the context of the broader Procurement Organization Maturity, which takes into account people and processes in particular.
The Consulting Category is a subset of indirect procurement, and all enhancements to the Procurement Capability as a whole can only benefit the Consulting Category.
Consulting is frequently one of the most important indirect procurement categories, but its unique characteristics, which are tied to the Consulting Market’s diversity and complexity, as well as the intangibility of the services offered, have made it the most under-managed as well.
Building a mature Consulting Procurement may not only assist your Procurement Organization by optimizing expenditure and bringing in significant OPEX savings, but it can also help business leaders create more value via consulting, which will boost your position at the C-level table.
What’s next for you?
The goal of the grid is to define where you stand and set up your goal. But what’s on you is to build the path for your transformation.
Consulting can add a great deal of value to your firm, but using and procuring consulting services requires maturity. In order for consulting to be effective, five organizational variables must be in sync, according to our opinion.
1. Convince your management that Consulting is a key accelerator
Consultants are often despised by executives. The majority of the time, it is because they do not recognize the value that consultants provide to their company. When working with consultants, you must assist your management comprehend what they get from consulting and how to apply it to the benefit of your company. Let’s focus on the most common reasons.
They don’t always understand what Consulting is:
This isn’t a joke. Some CEOs have never dealt with consultants before. Some businesses do not use consultants on a regular basis. Some parts of the world are less used to consulting. Some departments inside a company are less likely to collaborate with consultants.
They don’t understand how consulting creates value:
They may believe they have the necessary resources in-house to do the task, or that consultants are simply repeating what they told them and lack experience. Only 35% of CEOs feel the consulting companies they’ve worked with have contributed more value than they received in fees, according to Source Global Research. Superior value creation does not always imply high-quality consultancy.
Working with consultants makes them feel like they’re admitting they can’t do their job well.
This is true in certain circumstances. You hire consultants because you lack the necessary skills and knowledge in-house, or your project is moving too slowly. Is this, however, necessarily a sign that you’re not doing your job properly?
You may face significant internal pushback depending on how top management presents the Consulting Team (and how it will engage with internal stakeholders).
However, not taking such activities might be a concern.
2. Define the right processes
You must define the appropriate processes when your teams are ready to accept consulting. When dealing with consultants, there are various procedures to consider: decision-making, sourcing, and project management.
Setting up a performance assessment system and implementing Category Management for the Consulting Category are the best ways to analyze the performance of both your business and your providers.
Make sure your decision-making process is well-defined:
The ability to create value through consulting relies heavily on the decision-making process. When it makes more sense to you, you want to spend your money. Your method must provide the correct value while minimizing labor and irritation.
The key is to fine-tune decision-making procedures in relation to the strategic value and cost of initiatives. That involves, for example, determining the appropriate threshold below which projects undergo a simplified and speedier procedure (fewer stakeholders, lower validation, little or no mandatory competition).
Polish your sourcing process:
Your consulting sourcing method must be consistent with your sourcing procedures. Keep in mind the unique characteristics of the Consulting category, which necessitates strong communication between Procurement and the business lines.
Establish a project management procedure:
You’re in a unique scenario when you outsource projects to external consultants: you have two project managers, one internal and one external. The basic elements, however, remain the same. You must establish governance, establish KPIs, create a timeline, and conduct frequent evaluations. Of course, you may request a governance model from the consulting team.
You most likely have a project leader and a project sponsor on this note. Separating the governing bodies for implementation and steering could be a good approach.
Evaluation of performance:
To maintain the quality of your panel, you must evaluate the performance of your consulting providers. You must implement a simple, user-friendly system that is methodical and, preferably, linked to your vendor management system.
Share the findings with various stakeholders to get their support for the system, and use the information to develop improvement strategies and manage supplier relationships.
3. Build the right organization
You now have the essential building blocks to create value, but the most crucial component of the system is still missing: people. There is no one-size-fits-all solution organization setup that will provide you with all of the benefits; rather, there are many choices to consider and balance in order to discover the optimal compromise for your unique situation.
This is the simplest method for small and medium-sized organizations to implement (but not necessarily to get the best results). For companies with a tight budget, we suggest it. Executives will conduct procurement from start to finish without the assistance of the procurement function.
The senior management team can oversee and decide on a few key projects, while initiatives beneath a particular threshold will be in the hands of the project sponsor. If you want to avoid surprises, your rules must be exceedingly explicit and well-written.
With the assistance of a specialized Consulting Procurement emphasis point (part- or full-time):
If managing Consulting Projects is a strategic goal and the number of projects is significant, you may want to consider hiring a part-time or full-time employee to assist with Consulting Projects.
This option gives you greater control over how projects are evaluated and managed. Additionally, the dedicated focal point will be able to enhance their consulting skills and provide more advanced advise to your employees.
This strategy necessitates extremely well-defined processes and great communication between procurement and business executives. Keep in mind that there is a narrow line between giving Procurement too much control and giving business executives too much influence.
Your procurement may be limited if the projects are too complicated or uncommon. Consider putting together multi-functional teams to go over the RFP and proposal.
Bringing the best of both worlds together:
For companies with a high consulting budget, the ideal solution is to build a consulting team and incorporate some sort of control into the process for selecting critical projects.
Combining previous consultants with procurement experts may provide you with exceptionally solid foundations to build on and help you avoid some typical errors.
A specialized consulting team may also begin measuring performance, negotiating frame contracts, obtaining volume rebates, developing improvement strategies, and identifying synergies. At the same time, decision-making will be centralized, allowing you to concentrate your efforts and resources on the most important tasks.
Some dedicated Consulting Procurement teams follow traditional procurement best practices to the letter. Don’t get us wrong: we think this is great. You will receive the outcomes you deserve if the best methods are applied to the incorrect concepts.
Make use of outside experts:
Another option for organizations that want to add value through consulting but don’t want to develop particular structures is to hire external consulting firms to help them. Using specialist organizations with distinct expertise dedicated to Consulting Procurement in the same manner that some firms are outsourcing their Organizational Effectiveness Function to external consultants.
These firms may assist with everything from sourcing to specific projects to setting up a whole performance management system. They can work with current procurement teams to assist with sourcing and scoping while the procurement teams manage the relationship and negotiations, depending on the scenario.
4. Hire the right people
If you’ve agreed on an organizational idea, you’ll need to hire the right people and discover the correct incentives to ensure that the strategic priority of value generation is met. Sourcing Consulting is a difficult task. Your teams should have a mix of abilities in sourcing, consulting, project management, and business.
Locate important personnel:
Managing consulting is not a simple task. Executives must be well-versed in procurement and consulting processes.
– Procurement abilities
The individual in charge of Consulting Procurement clearly has some experience with procurement. He or she must have a thorough grasp of strategic sourcing, negotiation, and category management. In addition, he or she must be proficient in typical buying abilities such as scoping, sourcing, negotiating, and supplier relationships.
– Business knowledge
To assist various segments of the company in scoping their needs and determining the priority of their projects, s/he must first grasp the business dynamics and the limits of each function.
– Expertise in consulting
Aside from market expertise, the procurement executive must understand the benefits and limits of consulting as a tool. In what situations might executives benefit from consulting? And what will you not get from consulting?
Furthermore, if the business culture allows, Procurement Executives are well-positioned to confront the project sponsor and project leader on the scope and phasing of projects.
– Project management capabilities
Finally, consulting projects must be managed and controlled in the same way that other projects are. Internal clients of procurement executives are assisted in implementing project management best practices for consulting projects.
Making ensuring the proper stakeholders are included from the outset, establishing project governance, and leading mid-assignment reviews to ensure extended projects stay on track.
Create an appropriate reward system:
Never underestimate the value of rewards in explaining employee behavior. Even if the rationale of focusing your work on 20% of your income may be questioned, it is frequently the driving motivation for many CEOs.
You need the correct incentives to attract and retain the finest right people. Many companies pay their procurement executives based on the amount of money saved. It encourages buyers to go for the lowest price rather than the best bid or to participate in talks only towards the end of the sourcing process.
5. Emphasize collaboration
Collaboration between your teams is critical to the success of any Consulting project from start to finish. A culture that encourages project management and teamwork will help your Consulting projects succeed.
Encourage collaboration between departments:
Intangible services, like consulting, are difficult to manage since the expertise needed to drive the procurement process from strategy to sourcing and vendor management is spread among several people.
The strategy and/or transformation team will be needed to remind everyone of the strategic goals and transformation roadmap, align the various teams, and assist identify the strategic value of a project.
Finance must also be involved in presenting their viewpoint on the budget, monitoring Consulting spending, creating thresholds, tracking benefits, and guaranteeing appropriate accounting categorization.
Of course, procurement must participate in the game by bringing their sourcing and category management best practices, analyzing the market, compiling a list of possible suppliers, and doing background checks.
When sourcing large projects, functions should be involved and contribute unique experience and market knowledge.
Finally, the Business Lines will be responsible for converting the Strategy into projects, defining the scope, managing projects, and providing feedback.
Establish a project culture:
Finally, a project culture is required. Projects outsourced to consultants must be managed in the same way as any other internal project, but you must also ensure that the project’s outcomes will integrate seamlessly into your current company and culture.
If you don’t have similar standards for internal projects, you won’t be able to set up a rigid project management process for outsourced projects, define expectations, set milestones, KPIs, mid-project reviews, and performance measurements.
It’s not going to work. Your teams will be hesitant to use your methods and will either come up with workarounds or avoid dealing with consultants. In both circumstances, you will not receive all of the advantages of working with consultants.
Gearing up your organization to create more value through consulting is an exciting journey. The right set-up will depend on the ambition you have for this transformation.
For sure it will touch on various aspects starting from your Strategy and priorities for using consulting to the decision-making processes while also addressing the key cultural aspects to make it a success.
If you use significant amounts of consulting services, you will probably set up a dedicated team. Besides being of great help for all your sourcing projects, a dedicated team will be the cornerstone to implementing efficient category management and performance management system for your consulting category.
The consulting procurement maturity score of a company is defined by its ability to execute on key dimensions, as assessed through a list of questions.
This score can help businesses track their progress and identify areas for improvement. If you’re looking to improve your business’ consulting procurement maturity score, the journey starts with understanding where you stand now.
Have you tried using the consulting procurement maturity grid? What was your experience? Let us know in the comments below.