Behavioural procurement expert David Loseby explains why understanding emotions and biases could be the key to stakeholder management in procurement for MRO supplies
How we behave and the behaviour of others either makes a project a success or a catalogue of disasters. If you had two identical projects and used broadly the same method of procurement and/or contracting, evaluation and legal framework, their outcomes could be entirely different if the only things they didn’t have in common were the people involved and the circumstances or environment in which the procurement was carried out.
Some time ago, I connected with the parallels established in an area called behavioural economics, which led me to define and establish a new branch of behavioural science called behavioural procurement. Behavioural procurement (BP) studies the effects of psychological, social, cognitive, and emotional factors on the commercial decisions of individuals and institutions and the consequences for competitive advantage, innovation and resource allocation.
This may sound complicated but at its core BP is about understanding the emotional needs and psychology of others and using that knowledge to help bring about change. Complex relationships with multiple stakeholders is common in procurement and particularly for Maintenance, Repair and Operations supplies. This is because you are often dealing with multiple stakeholders from engineers to finance, trying to explain complicated ideas and simultaneously change some potentially entrenched behaviours.
Each of us develop a set of heuristics and biases along with significant ‘neural wiring’ that we are born with, both of which will have a significant impact on the decisions we make and the way we view those decisions. Put simply, heuristics are a combination of the accumulation of knowledge and experience from our lives which allow us to make decisions from simple things like ‘what do I want to order for lunch?’, which take very little time, to complex decisions that take a lot longer to process, such as what to do with our pension plan.
“At its core, behavioural procurement is about understanding the emotional needs and psychology of others and using that knowledge to help bring about change" David Loseby, Group Chief Purchasing Officer, Rolls Royce
My advice for when you are trying to push forward change or big business decisions is to frame these decisions as simply as possible because the more complicated you make the proposition the less likely you are to get a decision there and then.
An MRO example might be a new head of finance who had a bad experience of auditing stock in another organisation because much of it was found to be contingent and had to be written off, which created a hole in the balance sheet. If your organisation hasn’t had a stock check for a long period of time, in your role in procurement you would be pushing for this to be done, but the natural reaction of the financial director would be to want to avoid it.
In this scenario, it would be up to you as the procurement professional to understand where the financial director was coming from and then to frame your proposal in such a way that it would ‘de-risk’ it for them and focus on the positives of a stock check for your organisation. You couldn’t simply spring this on the person at the end of a meeting and expect them to agree with it; you would need to manage the proposal carefully.
“Frame big decisions as simply as possible because the more complicated you make the proposition the less likely you are to get a decision" David Loseby, Director, Aquitaine Strategy
Introducing change is never easy. Before even attempting to make any sort of change, whether that’s introducing a new digital system, consolidating suppliers or just trying to simplify the procurement process slightly, it’s absolutely essential to first get alignment from the stakeholders. This will never be easy, particularly if you work in an organisation that expects results and instant cost savings, but if you can put the work in early with stakeholders, then the benefits will be clear throughout the process.
For example, research shows that we have an in-built need for fairness, so if people feel that they have had their say, even if a decision they don’t like has been reached, then they are more likely to accept it. This can’t be underestimated, so procurement teams need to listen to all points of view and let stakeholders have their say even if the business priorities will never align with what they want.
People are hard-wired to resist change, so you need to take as much uncertainty out of it as possible. In some cases, that might even mean putting them in front of people from other organisations who have successfully achieved that change to show the benefits and make the process less of a leap of faith.
Improving your skills and awareness of behavioural traits is highly valuable. This could be done informally through reading books, articles and academic papers on the subject and then putting some of the principles into practice. Or you could have some training or talk to behavioural procurement experts and practitioners. The important thing is to understand more about how people behave, what impact your actions have on them and then use that knowledge to help you achieve positive change – that is behavioural procurement in action.