Unraveling the Reasons Behind Stakeholders’ Reluctance. This is the second (of three) blogpost about Compliance and Non-Compliance in Procurement (see links below).
In the procurement landscape, stakeholders’ reluctance to comply with established policies and procedures can pose significant challenges. This reluctance often stems from a variety of factors, including a lack of understanding of the policies, perceived complexity and inflexibility, or a belief that the procedures are overly bureaucratic and time-consuming. Additionally, stakeholders may feel that these policies do not align with their immediate needs or priorities, leading to resistance.
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Understanding Non-Compliance. Stakeholders’ Reluctance
Despite the critical importance of compliance in procurement management, organizations may encounter instances where stakeholders choose not to follow established processes. Unraveling the reasons behind such lack of compliance are essential for procurement professionals to address the root causes effectively. In this section, we explore some common factors that might lead stakeholders to deviate from prescribed processes and shed light on how procurement professionals can overcome these challenges.
Here are five examples of stakeholder non-compliance in procurement, along with potential underlying reasons:
1. Bypassing Procurement Procedures
Example: A department head makes a direct purchase from a supplier without going through the procurement department or following the established procurement process.
Reason: This might occur due to a perceived urgency or belief that the procurement process is too slow and bureaucratic. Stakeholders might feel they can expedite the process by taking direct action.
2. Unauthorized Contract Modifications
Example: A project manager agrees to changes in contract terms or scope with a supplier without consulting or obtaining approval from the procurement or legal departments.
Reason: Stakeholders might lack awareness of the implications of contract modifications or believe that the changes are minor and do not require formal approval.
3. Engaging Non-Approved Suppliers
Example: A team leader selects a supplier who is not on the approved vendor list, either because they have worked with them previously or due to personal preferences.
Reason: Personal relationships or previous positive experiences with certain suppliers can lead stakeholders to bypass established supplier selection processes.
4. Ignoring Supplier Performance Reviews
Example: Stakeholders continue to use a supplier despite poor performance reviews and failure to meet agreed-upon standards.
Reason: Inertia or reluctance to change suppliers, especially if the stakeholders have developed a comfortable working relationship, can lead to ignoring performance metrics and compliance issues.
5. Inadequate Documentation and Record-Keeping
Example: A department fails to maintain proper records of procurement transactions, such as purchase orders, invoices, and delivery receipts.
Reason: Stakeholders might perceive documentation as a low-priority administrative task, especially in busy operational environments, leading to lapses in maintaining necessary records.
Time Constraints and Pressure
One of the primary reasons stakeholders may opt for non-compliance is the pressure to meet tight deadlines or organizational targets. Procurement processes, especially those related to supplier selection and sourcing, can be time-consuming. In urgent situations, stakeholders might feel compelled to take shortcuts or bypass certain steps to expedite the procurement process. This rush to achieve immediate results may inadvertently lead to non-compliance with established policies and ethical considerations.
Lack of Awareness or Understanding
Inability to be compliant can also stem from a lack of awareness or a clear understanding of the importance of following procurement processes. Stakeholders who are not well-versed in procurement principles may not grasp the potential consequences of non-compliance, both from a regulatory and ethical standpoint. Without proper education and communication, they might fail to recognize the significance of adhering to prescribed procedures.
Perceived Process Inefficiencies
Stakeholders may choose not to follow certain processes if they perceive them as inefficient, bureaucratic, or redundant. If they believe that specific steps do not add value to the final outcome, they might feel tempted to skip or modify them to streamline the procurement process. In such cases, lack of compliance may arise as a result of a disconnect between the intended purpose of certain procedures and their perceived practicality.
Favoritism and Personal Bias
Unfortunately, favoritism and personal bias can influence stakeholders’ decisions during procurement processes. These biases may manifest in preferences for specific suppliers, regardless of their compliance history or ethical standing. When personal preferences take precedence over objective evaluation criteria, it can lead to non-compliant actions and compromise the organization’s commitment to fair and transparent procurement practices.
Conflict of interests
A Conflict of Interest occurs when an individual’s personal interests or obligations outside their professional responsibilities have the potential to influence their decision-making process or actions within their job. In procurement, this typically involves situations where a buyer’s personal gain, whether direct or indirect, could compromise their objectivity, fairness, or the fulfillment of their duties to their employer. Learn more in the blogpost: Conflict of Interest Explained.
Lack of Accountability
Non-compliance in procurement can often stem from environments where there is a noticeable lack of accountability for deviations from established processes. In such settings, when deviations occur without any repercussions, stakeholders may feel increasingly confident in bypassing prescribed procedures without fear of consequence. This unchecked behavior can gradually become the norm, as stakeholders realize that there are no immediate penalties or corrective actions for non-compliance.
Over time, this absence of accountability can severely undermine the integrity of the organization’s procurement function. Without enforced standards and clear consequences for non-compliance, the procurement process becomes vulnerable to inefficiencies, increased risks, and potential misconduct. Stakeholders may prioritize personal convenience or expedience over organizational policies, leading to inconsistent practices and decisions that could jeopardize financial and operational stability.
Moreover, this lack of accountability can foster a culture where ethical standards are compromised, and transparency is diminished. Trust in the procurement process can erode, both internally and externally, as suppliers and other partners may perceive the organization as lax in its commitment to fair and consistent practices. This perception can lead to difficulties in negotiations, a decline in supplier quality, and even legal complications if regulatory compliance is breached.
Conclusion – understanding Non-Compliance.
Understanding why stakeholders choose not to follow established procurement processes is vital for driving positive change and fostering a culture of compliance within an organization. By recognizing the underlying factors that contribute to lack of compliance, procurement professionals can implement targeted strategies to overcome these challenges. Through effective communication, education, and a commitment to transparency and accountability, organizations can significantly reduce instances of non-compliance and uphold the integrity of their procurement practices.
Learn about the agenda of a CPO (Chief Procurement Officer) and key management processes in a Procurement department. How to convert the company strategy to a procurement strategy, content of a procurement strategy, category management and more. Try our Procurement management program.
This blogpost is the second in a serie of three on Compliance:
- The Pillars of Procurement Compliance.
- Understanding Non-Compliance. Stakeholders’ Reluctance
- Fostering a Compliance-Driven Culture
Note: Illustration to blogpost “Understanding Non-Compliance. Stakeholders’ Reluctance” was created by Chat-GPT on July 22, 2023.
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