I read a sobering statistic from McKinsey Consulting that 70% of change management programs fail to meet their goals, largely due to employee resistance and lack of management support.¹ I assume that the risk of failure for public sector organizations is likely to be higher, given the highly regulated, budget constrained, and risk averse environment in which they operate. It leaves me endlessly inspired and in awe of public sector procurement leaders — from Chief Procurement Officers (CPOs) at universities to CPOs at States — who have overcome long-standing, deeply entrenched challenges to buck the odds and drive successful change management efforts for their organizations. Most of the time it’s with little fanfare or accolades.
During my career in government, I had my share of moments when I felt like I was taking one step forward and two steps back. Yet with every step, whether backwards or forwards, I learned valuable lessons. No reform effort I’ve been part of has been flawless in its execution, yet I’ve learned tons. Drawing from my effort launching category management across the U.S. Federal government, I offer lessons about what worked in driving change management and the biggest areas for improvement now that I have a few years behind me.
LAUNCHING CATEGORY MANAGEMENT ACROSS THE U.S. FEDERAL GOVERNMENT
In December 2014, when I served as Administrator of the Office of Federal Procurement Policy (OFPP) within the Office of Management and Budget (OMB), we launched category management across the U.S. Federal government. Working hand-in-hand with the General Services Administration (GSA) and procurement leadership teams in various agencies, we sought to move from managing purchases and price individually across thousands of procurement units to managing entire categories of common spend and total cost through category management. Our mantra at the time was let’s start “Buying as One,” or better managing our common spend, for the 3,200 separate procurement teams spending $665B annually on goods and services annually.²
WHAT WE DID RIGHT
1. Making the Case: Before launching into the mechanics and details of a massive transformation, we knew it was important to motivate people to move in the right direction. We launched category management by laying out the vision in an OMB Memorandum, “Transforming the Marketplace: Simplifying Federal Procurement to Improve Performance, Drive Innovation and Increase Savings.” ³ The memorandum, developed collaboratively with long-serving career procurement professionals in the Federal government, sought to motivate the workforce by conveying a clear picture of the future state and why and how it could benefit them. Focusing on the long-term vision and goals meant we didn’t have to be overly prescriptive at the start, giving us flexibility.
We followed with blogs, media engagement, town-halls, and industry events, often citing the success of others who had forged this path before us, such as the U.S. Navy and the United Kingdom’s Crown Commercial Service, who launched their own category management efforts. We sought to keep the message as simple as possible, using the phrase “Buying as One,” to communicate the new paradigm of managing entire categories of spend across the U.S. Federal government, rather than piecemeal.
2. Creating a team to guide the effort. No single agency can drive transformation alone. We created the Category Management Leadership Council, comprised of representatives from the largest spending agencies to help lead the charge: Defense, Energy, Health & Human Services, Homeland Security, Veterans Affairs, GSA, and NASA. Our Council leaders were respected, seasoned procurement professionals representing a diversity of perspectives, and many of them had led change management efforts within their own organizations.
We drew on the Council’s knowledge and experience to make decisions about how to categorize our spend, who would lead each category on behalf of the Federal government, what goals we would set to measure our progress. They were by no means there to “rubber stamp” our ideas. Constructive debate around key issues, grounded with a strong commitment from each Council member was critical to our success. GSA, responsible for establishing government-wide contracts for the U.S. Federal government, established a Category Management Program Management Office to support the category managers and drive the operational components day-to-day.
3. Tracking and measuring success. To operationalize the policy, OMB designated category management as one of its cross-agency priority (CAP) goals, ensuring a robust quarterly progress measurement regime across all government-wide categories. At a high level, the goals are to deliver more savings, value, and efficiency for federal agencies, eliminate unnecessary contract redundancies, and meet the federal government’s small business goals. In addition to other responsibilities, a Senior Accountable Official (SAO) at each agency was accountable for approving an annual category management plan for the agency and ensuring execution and performance in relation to goals.
These three focus areas, 1) making the case by laying out the vision; 2) establishing an experienced, respected team to guide the effort, and 3) tracking and measuring success, laid a strong foundation for the long-term success of the initiative, which is still moving forward eight years and three Presidents later.
AREAS FOR IMPROVEMENT
1. Helping Small Businesses: Ensuring small business participation through category management was a top priority and one of our key goals. Yet the General Accountability Office (GAO) reported that while obligations to small businesses had increased under category management, fewer business were winning contracts, spurring concerns.⁴
In 2020, OMB concluded that this trend was most likely a reflection of agencies having generally sought credit for their use of large, high-dollar government-wide and agency-wide contracts under category management, but “small firms face challenges in accessing these contracts when agencies do not set them aside exclusively for small business participation.”⁵ As a result, the OMB modified the category management policy to strengthen small business participation, including adding the Small Business Administration as a voting member to the Category Management Council and giving agencies credit for awards made to small businesses.
2. Leveraging market solutions for better data. Many procurement teams, whether private or public sector, struggle with gathering detailed spend data, such as prices paid or supplier performance data. While early on GSA undertook an impressive spend analysis to help us define and manage our spend categories, leaders responsible for implementing the category management initiative at the agency level still struggle with outdated reporting tools.
In the Federal government, our procurement reporting tools lack the level of granularity needed for an effective spend analysis. In some cases, the product codes are too general or outdated to truly reflect what was purchased. I wish I had made a bigger push to leverage leading technology solutions for robust spend data analytics. It not only would have helped guide the creation and management of categories, but also supported the overall transformation by revealing the cost of multiple buying organizations buying the same or similar goods and services from the suppliers at different prices, terms, and conditions. This knowledge would have truly set the stage to enable the organization to begin buying as one.
3. Focusing on Input Goals, Not Just Output Goals. We made a strong push to move agencies to best-in-class contracts, with the goal to 1) reduce the administrative costs of managing multiple, duplicative contracts 2) drive savings through lower volume-based pricing and 3) improve performance by purchasing from top-performing suppliers. This was clearly an output metric, or a metric focused on results.After leaving government, I’ve worked for technology companies with an equal focus on input metrics, or the behaviors that will drive great results. The belief is that great inputs, or great behavior, will drive great outputs, or results. Looking back, it would have been incredibly impactful if we had focused equally on establishing and measuring our progress towards quality input metrics for best-in-class contracts, such as fast delivery times, a high percentage of in-stock items, or price competitiveness, with the belief that a truly high-performing contract will drive increased usage. Instead, we drove end users towards best-in-class through a top-down mandate.
While your organization may not have to manage a procurement program as large and complex as the Federal government does, the change management challenges in category management are typically very similar. Clear communication helps you secure buy-in and reduces uncertainty, clearing a path to success. Establishing a team to lead the change creates the sense of ownership needed to maintain momentum needed to fully establish the program. Defined goals help everyone understand the desired outcome and measuring them creates accountability. But, as we learned when I was OFPP, how you measure and monitor them can be greatly improved with the right technology, and you may need to be flexible enough to make adjustments as you learn more.