CASE Forum

Microsoft: How to Procure a New Way of Working?

In moving from a fragmented, country-focused approach to a more centralized one, what actions should be taken to ensure that the transition is successful, without fueling anxiety among procurement managers?

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THE CASE

In 2007, Victor Garcia was promoted to a new position: head of international procurement for the Europe, Middle East and Africa (EMEA) region. While he welcomed the challenge, he also wondered if he was in over his head.

At the time, Microsoft was seeking to boost efficiency, lower costs and enhance overall performance. A critical part of the game plan was to align procurement with the company's overall business strategy.

Microsoft had hired a consultancy firm to carry out a study and provide recommendations. The firm pinpointed a number of problems with how the company was purchasing goods and services.

With more than 128,000 employees in 120 countries, Microsoft had always employed a highly decentralized procurement model. Decisions were made on a country level according to local criteria. The global role of procurement was unclear. There was scant expenditure control, inconsistent global processes and a lack of strategic alignment with corporate leadership.

Strategic Realignment
To address these issues, the company made two major changes to its organizational structure. First, it was decided that procurement would now depend on corporate finance at a global level, rather than on the business finance for each country, as before. Second, new regional procurement directors were appointed for Asia, Latin America and EMEA. These directors would report to the global Chief Procurement Officer in the United States.

In order to shore up expertise and therefore efficiency, the procurement function was separated from the finance function. In this way, finance managers could focus on competencies central to their area, such as control of the different businesses. Procurement, meanwhile, could become a more specialized function. To achieve this, new profiles were created.

New "category specialists" would advise procurement managers in areas such as technology, telecommunications, marketing and professional services. A new operations function was also established to manage metrics and maintain relationships with a subcontracted buy center, which would be responsible for processing all orders.

Purchasing managers for each country would continue to handle all procurement initiatives, but with greater freedom in their relationships with suppliers. This meant a much different professional profile was needed. The company would require managers who could design strategies and make decisions, rather than focus on operational tasks.

The changes were aimed at increasing effectiveness on an international scale, exercising greater control over suppliers and improving the strategic alignment between the procurement function and corporate objectives. They also sought to improve performance and professional development related to procurement.

From Face-to-Face to Remote Control
Against this backdrop, Victor Garcia was charged with spearheading the fresh mandate in the EMEA region. Prior to his promotion, he had been finance director for Spain. He had a number of reservations about his new role. For starters, while he had a good grasp of finance, procurement was something completely new for him.

He knew that implementing the changes would not be easy. He would have to get people to take on roles where they would be asked to show more initiative and become more involved in decision-making. The new strategy also required managers to become more specialized in different industries or categories.

In many cases, people would now be unable to work face-to-face with their bosses, with all of the consequences that entailed. For example, the procurement managers of each country would now report to the regional managers; similarly, the managers of each category would now report to the region's category managers.

"We are moving toward a remote operation," Garcia reflected. "The main change is that our professionals have to get used to reporting to bosses who are in other places. They don't see each other face-to-face, whereas they were used to having them in the office next door and getting a lot of input."

What first steps should he take to launch the new organization, which involved creating completely new roles with people already working in the organization? Whom could he turn to for help in this process?

Garcia was also concerned with the uncertainty that might be caused by the new organization and its possible impact on day-to-day matters. What could he do to assure people that the change was for the best?

Finally, how could he make sure that this new strategic direction in procurement would ultimately be a success?