When UK wholesale fiber network provider CityFibre was looking for ways to boost productivity through automation of its business systems, its management asked financial systems analyst Peter Murray to review their processes to find out where investment would bring the best returns. His answer surprised them. And yet the business case proved so overwhelming, Murray had to tone down the numbers he presented to executives for fear they would judge his projections too good to be true.
His proposal was disarmingly simple — replace a paper-based procurement process with an automated, cloud-based system. Having spoken to employees throughout the business to understand where automation could make the most impact, he felt the answer was clear:
The most extreme pain points for most employees were all about paper. Paper in the organization particularly that was surrounding the procurement side of the business and staff expenses.
The AIM-listed company has followed a startup growth trajectory in recent years, with revenues in 2016 expected to exceed £15 million ($19m). As so often happens when businesses grow in this way, its back-office processes have evolved piecemeal, with few business systems beyond Salesforce for sales and Xero for accounting.
Procurement was entirely paper-based, and to buy anything, employees had to get a purchase requisition (PR) approved by three separate signatories before a purchase order (PO) would be issued. But because there was no way of tracking the progress of these documents other than following up with the people concerned, the process was cumbersome and fraught with problems, as Murray explains:
On average, I reckoned that from the bit of paper being churned out, or the Excel spreadsheet that someone had written out, right the way through to the invoice being paid, there were on average over 20 touches of paper or other interactions within the organization. That led me to conclude, conservatively, that there was at least 80 minutes of person time per PR/invoice process.
In addition, the time it took to get an approved PO — typically weeks and sometimes months — meant that most buying bypassed the proper process. Sometimes the item would arrive before the PO, which would end up being raised simply to be able to pay the supplier’s invoice. Urgent purchases were made on expenses. Even if a PO did get raised in advance, it might never reach the supplier.
Even more insidious was the effect of these broken processes on employee morale, says Murray:
People accept it because they’re all good people and they’re trying to do a good job, but morale is being sapped. And you can’t quantify this. No one is going to leave their job because the PR process is a bit stupid, but you find that it’s really, really important.
There’s a human cost to that in terms of their levels of engagement and the attitudes that they have to each other when they’re perpetually chasing each other for things that really should have been done in five seconds.
In most organizations, moreover, management has little idea how much pain and disruption is caused by these everyday inconveniences — which they are largely insulated from because other people take care of the process. Murray says:
In my experience executives have no idea the impact automation will have on their people.
So when he totted up the potential impact of eliminating all this hidden overhead — and then factored in CityFibre’s projected growth over the next two years — he realized he was going to end up with numbers that no one would ever believe.
I was looking at numbers that were shocking. When I multiplied up the growth plans for the business, times the time taken to process a PR, times an average cost of someone handling it, the numbers were huge. And I thought, ‘I must be wrong, I’ve got to be wrong.’
I was trying to present a business case the management would buy into. I felt I had to go in with numbers that were unquestionably valid. So I actually discounted my business case metrics by 90%. And it still stacked up.
Once the decision had been made to go ahead, it took three months to evaluate vendors and sign contracts with cloud-based spend management platform Coupa as the preferred solution. Ten weeks later, the project went live in time for a January 1st deadline, rolled out to 150 users nationwide.
From that moment, paper was no longer accepted and all procurement and staff expenses had to go through the Coupa system: “On December 31st you could put a bit of paper in, on January 1st you couldn’t.”
Instead of being overwhelmed by complaints and help requests — despite having prepared virtually no user training beyond emailing some instructions along with four screenshots — Murray says he had people coming up to thank him.
The Coupa interface is just so easy for people to get their heads around. And the liberation it gave our people because we removed the paper overnight — the liberation was tangible. It’s been a revelation.
I’m still expecting to wake up and find 500 emails going, ‘What the heck have you done to our company?’ And it doesn’t happen. There are some friction points because we haven’t fully configured it, but generally speaking, it gets great feedback …
Nobody is sitting at their desk in the paper world wanting to break the process. They did it with a heavy heart. But they had to do it because it was the only way to get things done.
When you offer them a much easier alternative and they can see that their approval is sitting with their boss for five hours and then the guy approves it, that’s massively different to people constantly having to chase things. And so the buy-in that we’ve got for this was dead easy. I didn’t have to sell it. Automating this sells itself.
Simplifying the approval process has been the biggest win, not only speeding it up but also adding visibility. The old system merely gave the “illusion of control,” says Murray.
We really had no governance in place. We had a lot of senior people signing bits of paper, but you have this classic chain where the person at the bottom didn’t take a lot of care because they expect the person in the middle to check it. The person in the middle didn’t take a lot of care because they expected the person beneath him to have got it right, and anyway his boss is going to check it. Then the boss doesn’t pay a lot of attention because he presumes everyone downstream has done their jobs properly.
Now what Coupa gives you is an absolutely transparent, clear chain as to who is ordering what, who’s approving it, what it is, and whether it’s in budget or out of budget. Overnight, our governance ability and our risk assurance levels went through the ceiling.
That’s what I think automating procurement does for you — it takes the smoke and mirrors away.
Now that CityFibre is getting more insight into what’s happening, the business can start looking at what savings it can make on its spend. That hadn’t been considered as a goal previously, says Murray.
The concept of saving procurement cash just didn’t enter our thinking at this stage. We had really just focused on how painful it was for our people, the type of time that was being lost doing this, and of course the opportunity cost when they could have been doing more value-adding work.
So when, as part of the vendor’s customer success process, Coupa had asked him in the run-up to implementation to define three key metrics as its primary goals, he admits that he “made two up” on the spot.
At the point that we were talking about it, I had no idea whether I could eliminate budget overrun. I had no idea whether I could channel more spend to preferred contracts to save 2%. What I did know is that I could capture 100% of my spend because they’ve got no alternative …
For us, the basic success was very simple. It’s seven words — we got rid of all the paper.
We don’t have paper anymore in terms of procurement, we don’t have files of staff expenses and receipts. Everything is in the tool, everything is available, everything is accessible.
Sometimes you can overthink a business case. I like Murray’s approach — just get rid of all the paper. So much time and effort is wasted chasing it around, and in today’s digitally connected business environment, it adds no value.
As CityFibre’s story shows, you don’t need to think ahead to the further cost savings and improved performance that will come once you’ve got all the data in a single system. Just replace paper processes with a simple automated system and you’ll see the impact straight away.
Image credit - Man with papers © Tom Wang - Fotolia.com
Disclosure - Coupa and Salesforce are diginomica premier partners at time of writing.