Hello, and welcome back to another episode of Smart Consulting Sourcing, the podcast where we dig deep into everything consulting-related—how to find the right consultants, manage them effectively, and, most importantly, get the best value out of your consulting spend! I’m Helene Laffitte, CEO of Consulting Quest, and today, we’re diving into one of the most debated topics in the world of procurement: Centralised vs. Decentralised Procurement Structures—and how to organize your consulting procurement to get the absolute best results.
Now, this might sound like a topic reserved for the procurement nerds out there—no offense, I count myself among them—but trust me, this is a conversation that can make or break how you leverage consulting across your organisation.
So, should you centralize your consulting procurement? Or is a decentralised approach more suited to your organisation? Or is there a sweet spot somewhere in between? Today, we’re going to unpack that and help you figure out which structure makes the most sense for your company.
But before we jump in—here comes the shameless plug—don’t forget to hit that subscribe button wherever you listen to podcasts, and check out our YouTube channel for even more tips and insights. We’re constantly dropping nuggets of wisdom on all things consulting procurement, and trust me, you don’t want to miss it!
Alright, let’s get started. Centralised versus decentralised procurement structures. It might seem like a dry topic on the surface, but I promise you, the implications are huge. Getting this decision right can mean the difference between making your consulting spend work for you—or letting it run wild like a toddler on too much sugar.
Why Getting the Right Procurement Structure Matters? The reality is that consulting procurement is a strategic function. It’s not just about finding someone to do the job; it’s about making sure the job is done in a way that creates value for your organisation.
So, how do you manage that? Well, it all comes down to the structure you choose: centralised or decentralised procurement—or maybe a hybrid of the two. Let’s dig into what these structures look like and how they can impact your organisation’s ability to get the most out of consulting. Spoiler alert: There’s no one-size-fits-all answer here, but by the end of this episode, you’ll have a clearer idea of which approach makes the most sense for you.
Centralised vs. Decentralised Procurement: What’s the Difference?
Alright, let’s break down the basics: centralised versus decentralised procurement. These are two very different approaches, but both can have a big impact on how effectively you manage your consulting spend.
Centralised Procurement
Let’s start with centralised procurement where you basically have a single team or department that handles all the decisions around hiring consultants. They’re in charge of negotiating contracts, managing relationships with consulting firms, and making sure the right consultants are brought in at the right time.
The biggest advantage here is control. When you centralize your consulting procurement, you get a bird’s-eye view of all consulting activity across the organisation. This helps you consolidate spend, negotiate better rates, and ensure that consulting projects align with your company’s overall strategy. It’s hard to overstate how important it is to have a clear, comprehensive view of what’s happening across departments, especially when consulting costs can run into millions.
A centralised model also means consistency. There’s a common process for vetting and selecting consultants, which ensures that you’re applying the same standards across the board. No more surprise consultants showing up because someone in marketing had a ‘great idea’ without checking with procurement first.
And let’s be honest, if you’ve ever had to untangle a web of consulting contracts across multiple departments, you know how much time and money can be wasted without central coordination. Having one team in charge reduces the risk of duplication and gives you more negotiating power with consulting firms.
Now, the downside of centralisation is that it can be, well, slow. Decision-making gets bottlenecked at the top, and business units might feel frustrated if they have to wait for approvals to bring in the consultants they need.
There’s also the risk that the centralised team might not fully understand the specific needs of each department. Consulting isn’t one-size-fits-all, and when you centralize the procurement process, there’s a chance that some of the nuance gets lost. Your finance team might have very different needs than, say, your marketing team, and a one-size-fits-all approach can miss those details.
Decentralised Procurement
Now decentralised procurement means individual business units or departments are in control of their own consulting needs. Each team can make their own decisions about which consultants to hire, when to bring them in, and how to manage the relationship.
The biggest advantage here is flexibility. Departments can hire consultants quickly without waiting for central approvals, and they can choose the firms that are the best fit for their specific projects.
Decentralisation also brings speed. Business units can react more quickly to their unique challenges and bring in expertise as needed. There’s no waiting for someone at headquarters to sign off on the budget or approve the contract.
This flexibility is particularly important in industries that move fast, like tech or consumer goods, where delays in decision-making can mean missed opportunities.
But of course, there are downsides too. Without central oversight, you risk inconsistencies. One department might be getting a great deal on consulting, while another is overpaying for the same service. And don’t even get me started on the lack of visibility. It’s hard to know how much your company is really spending on consultants if each department is managing things independently.
Worse yet, you might end up working with the same consultants across different departments without realizing it. And trust me, that doesn’t make for an efficient use of resources—or good negotiations for that matter. Consulting firms are very happy when you don’t realize they’re double-dipping, shall we say.
How to Choose Between Centralised and Decentralised Procurement: The Congruence Model Approach
So, choosing between centralised and decentralised procurement—sounds simple, right? Yet, anyone who’s been through this decision-making process knows that it’s anything but straightforward. This choice impacts everything from organisational efficiency to cost control to employee satisfaction. To make this decision a little easier, let’s make a quick stop at what we call a “methodology checkpoint”—the Congruence Model by Nadler and Tushman. This model gives us a structured way to evaluate how well a procurement structure aligns with an organisation’s needs.
The Congruence Model looks at how four key components—Work, People, Culture, and Structure—interact and impact performance. Think of it as an organisational health check. By looking at each of these elements, we can assess which procurement structure might be the best fit.
1. Input Stage: Setting the Context
Before diving into Work, People, Culture, and Structure, the Congruence Model starts with the Input stage. Here, we assess the environment, resources, and legacy of the organisation.
- Environment: Are you in a heavily regulated industry like finance or healthcare? Centralised procurement is ideal here because it enforces compliance and maintains oversight across the board. In contrast, if you’re in a fast-moving industry where agility is key, decentralisation might allow departments to hire specialised consultants quickly without waiting for approval.
- Resources: If procurement expertise is limited across departments, centralizing the procurement function can pool these resources for stronger negotiations and better oversight. However, if departments already have strong procurement teams, decentralisation might let them work directly with consultants to meet their unique needs.
- Legacy: This is the organisational history or “how things have always been done.” If your company has a tradition of centralised control, then centralizing procurement aligns well with that culture. In contrast, organisations with a history of autonomy and decentralised decision-making might find it challenging to centralize without resistance.
Let’s take this understanding of input and move on to the core components of the Congruence Model.
2. Work: Aligning Tasks with Structure
“Work” here refers to the tasks that need to be done. In the context of consulting procurement, this includes activities like negotiating contracts, managing vendor relationships, and ensuring alignment with organisational goals.
- Centralised Approach: A centralised team can standardize processes across the organisation, ensuring that every department follows the same protocol for hiring consultants. This reduces duplication and helps negotiate better rates by consolidating spend.
- Decentralised Approach: In a decentralised model, individual departments or business units manage their own consulting procurement, allowing them to tailor engagements to their specific needs. This approach works well when departments require flexibility and speed, as it eliminates the bottleneck of waiting for centralised approvals.
3. People: Skills and Roles
The “People” component of the Congruence Model examines the skills, roles, and expertise of the employees involved in the procurement process.
- Centralised Procurement: In a centralised structure, the procurement team is specialised and dedicated solely to managing consulting contracts across the organisation. This team typically has a high level of expertise in procurement, which translates into stronger negotiations and better vendor management. However, centralised teams may lack the nuanced understanding of each department’s unique requirements.
- Decentralised Procurement: Here, each department manages its own procurement, drawing on team members who understand the specific needs of that area. This approach works particularly well in organisations with strong procurement capabilities within departments, where local teams can make more informed and relevant choices.
4. Culture: Organisational Norms and Values
Culture is a subtle but powerful factor in determining which structure fits best. Are you working within a culture that values control and uniformity, or one that prioritizes flexibility and speed?
- Centralised Procurement: Centralisation aligns well with cultures that emphasize control, consistency, and compliance. Organisations with a culture of hierarchy and top-down decision-making are typically better suited to centralised procurement, where policies and procedures are uniform across the board.
- Decentralised Procurement: Decentralisation fits with cultures that value autonomy and flexibility. In these environments, business units are trusted to make independent decisions, and there is often an emphasis on innovation and responsiveness. This approach can foster a sense of ownership over consulting engagements and spending decisions, which can improve buy-in and accountability.
5. Referential: Structure, Processes, and Systems
In the Congruence Model, the “Referential” component, or the structural system, encompasses how processes and systems are set up to support work.
- Centralised Structure: With a centralised procurement structure, there are standardised processes, often automated and formalised, to ensure compliance and visibility. This structure provides a single point of oversight and clear, uniform guidelines across the organisation, making it easier to monitor spending and identify areas for improvement.
- Decentralised Structure: A decentralised approach allows departments to establish their own systems and processes, which can be more responsive to their specific needs but may result in inconsistencies across the organisation. Decentralisation is great for customisation but can lack the oversight necessary for standardisation and cost efficiency.
6. Output: Organisational Performance
Ultimately, both centralised and decentralised procurement aim to improve organisational performance by enhancing cost control, improving service quality, and aligning consulting projects with business objectives. The choice between centralisation and decentralisation depends on which structure best supports the desired performance outcomes for your organisation.
Centralised procurement drives performance through consistency, control, and visibility, which are essential in highly regulated or cost-sensitive environments. Decentralised procurement, on the other hand, drives performance through speed, flexibility, and tailored decision-making, which are crucial in dynamic, fast-paced industries.
The Hybrid Approach: The Best of Both Worlds
For many organisations, a hybrid model strikes the right balance, combining the strengths of both approaches. Centralisation can handle high-stakes, strategic projects, while decentralisation allows departments the flexibility to meet their unique needs.
Choosing the right procurement structure isn’t just about efficiency—it’s about aligning with your organisation’s goals and culture. The better the alignment, the better the outcomes.
This hybrid model is particularly useful for large, decentralised organisations with business units operating in different countries or markets. It offers the control and cost efficiency of centralisation while allowing individual departments or regions the autonomy to manage their specific consulting needs. Think of it as the Swiss Army knife of procurement structures—it’s flexible, adaptable, and gets the job done.
How the Hybrid Model Works
In a hybrid model, the key is to figure out which projects should be handled centrally and which ones can be left to individual business units. Typically, the central procurement team handles the big-ticket items—company-wide projects, strategic initiatives, or anything that requires significant oversight and alignment across departments.
On the other hand, local teams have the freedom to manage their own consulting needs for smaller, more specialised projects that don’t require a lot of oversight.
This way, you maintain strategic alignment and cost control on high-impact projects while still giving local teams the flexibility to manage smaller, less critical consulting engagements.
The “Hybrid” Advantage
So, why is this hybrid approach so powerful? It allows you to scale your consulting procurement efficiently while still retaining agility at the local level. In a world where business needs are constantly evolving, and markets move at different speeds, having a procurement structure that can flex and adapt to these changes is a massive advantage.
You don’t want to bog down your business units with unnecessary bureaucracy, but you also don’t want to lose control over your consulting spend. The hybrid model lets you have both: central oversight on the big strategic initiatives and local flexibility where it matters.
At Consulting Quest, we generally recommend some form of a hybrid model for most organisations. It’s the most adaptable and scalable approach, whether your company is historically centralised or decentralised. In companies with a centralised structure, the hybrid model typically means allowing local business leaders a discretionary envelope for smaller, more tactical projects, while larger strategic initiatives are handled centrally.
For decentralised companies, the hybrid approach often involves a more elaborate decision-making process based on thresholds, the strategic importance of the project, and who owns it. This ensures that decisions are made at the right level, allowing both local agility and central oversight where necessary.
Conclusion
So, what’s the key takeaway from today’s episode? Whether you opt for a centralised, decentralised, or hybrid procurement structure, the success of your consulting procurement ultimately boils down to alignment. All the elements we’ve discussed—strategy, structure, decision-making processes, project management, and performance measurement—must be aligned with your company’s overall goals.
At Consulting Quest, we typically recommend the hybrid model because it allows for both central oversight and local flexibility, giving you the ability to maximise value without sacrificing agility. For centralised companies, this often means granting local business leaders some discretionary control, while for decentralised companies, it requires a structured decision-making process based on thresholds and strategic importance.
But no matter what model you choose, it’s critical that your consulting spend is driving real value for the organisation. That’s why we use the Congruence Model to assess how well-aligned your strategy, structure, processes, and culture are. The more congruent these elements, the better your consulting procurement will perform.
In the end, it’s not just about how you structure your procurement function—it’s about ensuring that every decision, every project, and every consultant you engage is helping you achieve your broader strategic goals. When your consulting procurement is fully aligned with your business objectives, that’s when you unlock the full potential of consulting as a tool for growth, efficiency, and transformation.
And as always, I’m always game for a chat if you need support aligning your consulting procurement with your strategy. Whether through our traditional consulting services at Consulting Quest or our digital platform Consource.io, we’ve got the tools and expertise to help you make the most of your consulting spend.
Happy Sourcing, and Au Revoir!
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