How To Maintain Ethical Standards When Starting A Cross-Functional Commodity

Author(s):

Joseph A. Leister, C.P.M.
Joseph A. Leister, C.P.M., NAPM Ethical Standards Committee, Southwest Bell, St. Louis, MO 63101.

79th Annual International Conference Proceedings - 1994 - Atlanta, GA

Today's business environment is complex with the introduction of new products and technology at a rapid pace, the proliferation of information and the ever changing market place. Thus the sourcing decision is very critical to the company's future. More of the company dollars are being spent on materials and services and not on labor as in the past. So the decisions we make need to be in the best interest of our company and involve all those impacted departments. This is one of the reasons for adopting the Cross-Functional Commodity Team approach.

As we form cross-functional commodity teams we face the situation that individuals in the cross-functional departments may not have the same standards that purchasing has been asked to uphold. So, when a group is formed, we need to establish the norms of the group. This can be done by reviewing company policy and the need to maintain the standards of impartiality in our relationships with suppliers. During this period of forming and norming the group, one of our contributions is to help educate our peers.

However, this process should not be done in a dictatorial manner. We need to build trust and make certain the appropriate functions participate in the decision making process. Management or purchasing can mandate a policy and they may get compliance. But when we get the participation of others in the development of the standards and the reasons for the standards, then we are able to influence commitment.

Planning how to handle the situation before hand and establishing the framework goes a long way in addressing ethical standards with the team model of making soucring decisions. We need to be up front and address the situation and the problems that could occur if we don't maintain high ethical standards. We need to educate and lead rather than demand.

The best way to lead is by example. Thus we should ensure purchasing is following the guidelines set forth in their company policy. If your company doesn't have a policy or code of conduct, purchasing should take the lead to establish one. Part of the process should be that every employee review the policy each year and sign a statement they have read and understood the policy. We should also look to and follow NAPM's "Principles & Standards of Purchasing Practice." Such standards cover critical issues such as:

I. NAPM CODE OF CONDUCT - PREface TO GUIDELINES

  1. Perception
    Avoid the intent and appearance of unethical or compromising practice in relationships, actions, and communications.

  2. Responsibilities of The Employer
    Demonstrate loyalty to the employer by diligently following the lawful instructions of the employer, using reasonable care and only authority granted.

  3. Conflict of Interest
    Refrain from any private business or professional activity that would create a conflict between personal interest and the interests of the employer.

  4. Gratuities.
    Refrain from soliciting or accepting money, loans, credits, or prejudicial discounts, and the acceptance of gifts, entertainment, favors, or services from present or potential suppliers that might influence, or appear to influence, purchasing decisions.

  5. Confidential Information
    Handle confidential or proprietary information belonging to employers or suppliers with due care and proper consideration of ethical and legal ramifications and governmental regulations.

  6. Treatment Of Suppliers
    Promote positive suppler relationships through courtesy and impartiality in all phases of the purchasing cycle.

  7. Reciprocity
    Refrain from reciprocal agreements that restrain competition.

  8. Federal And State Laws
    Know and obey the letter and spirit of laws governing the purchasing function and remain alert to the legal ramifications of purchasing decisions.

  9. Small, Disadvantaged, And Minority-Owned Businesses
    Encourage all segments of society to participate by demonstrating support for small, disadvantaged, and minority-owned businesses.

  10. Personal Purchases For Employees
    Discourage purchasing's involvement in employer-sponsored programs of personal purchases that are not business related.

  11. Responsibilities To The Profession
    Enhance the proficiency and stature of the Purchasing Profession by acquiring and maintaining current technical knowledge and the highest standards of ethical behavior.

  12. International Purchasing
    Conduct international purchasing in accordance with the laws, customs, and practices of foreign countries, consistent with United States laws, your organization policies, and these ethical standards and guidelines.

There are also different ways to inform or educate the members of the team. As we do this we need to build their trust. The team needs to know we support the process and that everyone on the team has something to contribute. Part of our contribution is to ensure supplier relationships are maintained at the highest level and being treated or evaluated fairly.

Part of training could be a seminar or workshop on supplier relationships which includes ethics standards. Training packages are available through many different sources including NAPM. Or you may wish to develop an in house program based on your company policy. Another good training package is one NAPM has called "Supplier Evaluation/Partnership Development". In this training the team approach is stressed as well as the need for input from other departments in making soucring decisions.

Another area that needs to be addressed is global or international issues. Here again it is best to discuss and set guidelines ahead of time. With agreements like the North American Fair Trade Agreement (NAFTA) and others that may be formed, we need to make certain everyone is aware of the cultural and ethical differences between nations. If this is an issue, some training should be provided on these differences and appropriate supplemental guidelines developed.

Lastly for this discussion, we need to monitor interdepartment relationships to ensure we are in a compliance situation. misunderstandings could develop between purchasing "standards" and what other departments view as their way of dealing with suppliers. We need to provide leadership in working those issues. Anytime we are dealing with change, especially behavioral change, we need to involve participation of those affected in the process.

In summary, what we need to do as we start up cross-functional commodity teams to maintain ethical standards are:

  1. Realize the team approach is critical to making decisions in today's environment.
  2. Realize that others may not have the same standards.
  3. Contribute information to the group on the need for standards.
  4. Provide training on the importance of ethical standards.
  5. Monitor process to ensure sound supplier relationships are being developed and maintained.

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