RACI Charts have been around for years, yet are often discounted. RACI stands for Responsible, Accountable, Consulted, and Informed – which refers to the relative governance structure that exists in an organizational relationship. Although RACI “charts” are often viewed as irrelevant and bureaucratic, they can provide an important clue regarding the “decision-rights” for procurement and contracting decisions. This is particularly true for sales people.
An important foundational issue for sales personnel to understand is the relative level of procurement maturity within the organization, and the extent to which the organization has developed a category management structure. This involves developing deep insights into the target account’s internal organizational structure. In less mature organizations, the sourcing decision will be more ad hoc, will be typically led by decision-makers in the business unit, and the textbook approach of working through business stakeholders at a local level makes sense. However, more and more organizations are going through procurement transformation initiatives, and are seeking to progress towards a more centralized, structured procurement organization. If the company has a strong centralized category structure, it is important to understand the role of procurement in the organization throughout the contracting cycle, and how much influence they have in the supplier selection decision.
- What is the organizational hierarchy in procurement – category manager for the category, director of sourcing (transportation and related services), buyers, and CPO?
- Who are the members/roles of the cross-functional team responsible for implementing strategic sourcing for that target area of spend?
- Do they have a formal strategic sourcing program?
- Are they organized around spend categories?
- How much do they spend on the category?
- Is the spend category fragmented or consolidated?
Understanding the governance structure and the procurement relationship with business unit stakeholders can provide important insights that can lead to more successful sales strategies. First, the RACI chart can lead to appropriate discussions with the right people in the procurement organization structure beyond the immediate stakeholder, to help educate and inform others in the organization about the supplier’s capabilities. Second, it can lead to improved understanding of the governance structure for upcoming contractual negotiations, and the size of the “prize” that exists across the network. Third, it can lead to important insights on business priorities and critical success factors, that can lead to the right operational metrics that become important during the contracting cycle.
Generally speaking, RACI charts will show that procurement has a category team that is very engaged in the early stages of setting up stakeholder requirements, writing a statement of work, and establishing the suppliers to receive the RFQ/RFP, as well as operating the RFP. Sales needs to understand details on who is running it, as well as the criteria for “winning” the bid. This is not always clearly stated, or if it is, there is an “official” and an “unofficial” set of requirements. By building relationships with procurement ahead of a bid, greater market intelligence can yield a lot of dividends in preparing a winning proposal.