In this episode of Contract Heroes, we have the pleasure of speaking with David Cho. David has had a long career in procurement and strategic planning, holding key positions at BlackRock, KPMG, and Deloitt. Now, he is a C-Level Managing Director & Chief Procurement Officer for the University of Massachusetts system where he and his team have worked to build their procurement processes from the ground up.
During our conversation, David shared valuable insights about everything from the role of technology in procurement and the importance of measuring ROI to the significance of change management, communication, and training. Read on or tune in to discover the remarkable story of David’s team, who revolutionized their procurement processes by accomplishing a level of work that typically takes organizations three decades to attain.
Q: How did you build procurement processes from scratch?
David expressed gratitude for the presence of knowledgeable experts on the campuses, brought on board for this initiative. While the overall goal of procurement was the same for every campus, the approach and execution varied across the six locations.
The primary focus was on establishing a unified vision, summarized as providing procurement services and working with partners more effectively, efficiently, and affordably. This involved forging stronger strategic relationships, utilizing technology-enabled catalogs to streamline purchasing, and incorporating data-driven decision-making for competitive pricing and alignment with important values such as quality, diversity, and sustainability.
The vision was translated into updated policy documents to modernize and standardize the process, followed by the creation of operational procedures reflecting these policies. Technology played a vital role in operationalizing these procedures.
David also emphasized the significance of a positive organizational culture and highlighted the team’s commitment to embracing change and taking calculated risks. He acknowledged the challenges of implementing such changes in a large institution but expressed confidence in the progress made so far. While the team has already observed benefits, the journey toward full implementation is ongoing.
Q: How did you get everyone on board with the change?
David explained that the team works separately from operations and strategic sourcing divisions and includes a contact center for handling calls and emails, generating cases for accountability. Analytics play a crucial role in providing evidence-based recommendations. Training and communication efforts are extensive, with weekly team meetings, virtual and physical town halls, office hours, newsletters, and videos.
The goal is to facilitate change management and provide outreach and training to stakeholders. Job aids have been developed to document procedural changes and address the “why” behind them. David acknowledged the challenges faced during the significant transition and highlighted the importance of providing tools and support to the campuses, considering their diverse learning styles. He emphasized the team’s patience, learning process, and ability to respond to feedback constructively.
The maturity of the function has been evaluated using a self-assessment maturity model, allowing them to identify areas for improvement and set aspirational targets. The communication efforts have helped stakeholders understand the ongoing progress and intentions for continuous improvement. David concluded that, while the function is not perfect, the intent to evolve and cultivate change has been well-received and impactful.
Q: How did you implement the technology?
To start off, David’s team identified inconsistent contract procedures and an excessive number of contract templates, causing friction between stakeholders and a lack of visibility throughout the review and approval process. To address these issues, they developed a logic tree that would help determine the involvement of different parties based on contract risk factors and requirements, streamlining the review process.
They also implemented a combination of technologies, including a questionnaire-triggered risk formula and systems integration, to track contract progress and improve transparency. As a result, the organization experienced better contract analytics, decreased cycle time, and empowered team members to negotiate fallback positions and concessions without relying on attorneys.
The technology facilitated better collaboration and communication among teams, leading to stronger relationships and improved behaviors. David highlighted the significant progress achieved while acknowledging that there is still more work to be done. Overall, the organization has seen substantial benefits from the contract process transformation, but they remain committed to further optimization.
Q: What KPIs can you measure now that you have the technology?
David spoke about the improvements made in the contract cycle time and visibility within the organization. One of the coolest changes they made in their workflows was to introduce parallel approvals in certain areas of the workflow, allowing different parties to work on a contract simultaneously based on their department. This change has resulted in faster contract cycle times and increased visibility into the status of contracts with counterparties.
The organization now tracks the percentage of contracts that have been improved, particularly focusing on cases where the same terms and conditions have been extended but with added value or concessions from the provider. David emphasized the importance of tracking cost savings whether they are hard dollar savings or benefits such as reduced per-unit costs. This data allows departments and campuses to demonstrate their value to the organization and mitigate risks effectively.
The increased self-service capability and access to contract analytics have enabled a better understanding of privacy concerns and due diligence requirements. Through data analysis, the organization identified contracts that do not add significant value and upgraded their policies to raise the contract ceiling and replace contracts with purchase orders where appropriate. This has resulted in faster cycle times and empirical evidence of increased efficiencies in the system.
Q: What did the implementation process look like?
David described the implementation initiatives as a series of sprints rather than one big transformative event. They focused on specific areas and gradually modernized policies and processes over time. While some changes may take a couple of years to complete, he emphasized the importance of collecting data and conducting thorough planning before executing these changes quickly. In fact, the team is already thinking about future activities and the next steps after establishing a solid foundation for their projects.
He also highlighted the involvement of key stakeholders, particularly the CFO and campus CFOs or vice-chancellors of administration and finance, who provide leadership sponsorship and support. The top-down endorsement and encouragement to operationalize changes are crucial in driving progress and overcoming the challenges of change management.
David acknowledged that there may be pain and difficulties associated with implementing changes, but he views it as part of a continuous improvement culture.
Q: What is the percentage of contracts that have been improved?
David began by highlighting the traditional online shooting approach, where they analyze the budget and calculate the savings generated through collaboration. He mentioned that initially, the return on investment (ROI) might be around 6x, which is attractive, but over time it can decrease due to market conditions and capital defense strategies.
However, he emphasized the importance of robust dashboards that showcase not only quantitative benefits but also qualitative improvements. For example, the team noticed improvements in contracts and supplier diversity percentages. Initially, contract improvements were around 5%, and supplier diversity was at 3.5%, but with time and focused efforts, they have seen progress.
The team created targets and aspirations based on the trending data and upcoming programs, aiming for a 10% supplier diversity target over the next five years. David stressed the importance of launching metrics and illustrating the drive towards these targets, creating tangible evidence to strive for.
David also explained that, while savings numbers are easily calculable and important, there are other impactful areas beyond pure financials that require behavior change and collective effort.
Q: If you could go back in time, is there anything different you would have done while building out these processes?
David expressed that he would have focused more on change management. He recognized the importance of having team members who are willing to take calculated risks and put themselves out there for transformation. He also acknowledged the challenges of managing numerous transactions, processes, and policies within a short timeframe, which limited the opportunity for extensive socialization in advance.
David highlighted the need to maximize every dollar and push team members to reinvent themselves even despite resource constraints. Looking back, he admitted that his expectations may have been different, but given his current knowledge and understanding, he has come to accept and let go of those expectations.