Near the end of October, Zycus held its first user conference in New Orleans. In my estimation, the event, billed as “Horizon,” was as advertised – “a three-day rendezvous of forward-looking procurement executives, industry experts and analysts.” There was also some fun as Zycus arranged for a Mardi Gras-style parade and a night out in the New Orleans’ famed “French Quarter.”
Day One of the event had a strong showing on the main stage including a presentation by Bruce G. Schneider, VP and Sr. Director of Performance and Risk Management, Global Sourcing and Procurement Services AIG, Inc. entitled “Game-Changing Procurement That Drives Business Performance.” Today, we share some highlight’s from Part One of Bruce’s keynote presentation.
“Have you heard of AIG?” So began Bruce Schneider in his day one Keynote at Horizon, Zycus’ user conference. The question generated a big laugh since AIG (also known as American International Group, Inc.) was one of the large (and notorious) financial institutions that was caught on the “wrong side” of the credit-default swap trades in 2008 and required a bailout from the Federal Reserve [it is possible that a few Manchester United fans were chuckling for another reason]. At its highest point, the total US government exposure to AIG more than $180 billion.
For those American taxpayers who have not been tracking the AIG bailout, the US government’s ownership in AIG which was once 92%, according to Bruce, is now down to 15.9%. AIG has turned the corner and Bruce believes that AIG is on the right path and that it will ultimately emerge as a “financially strong company that can operate independent of any government support.” In 2009, when Bruce rejoined AIG for his second tour of duty, AIG’s future was not as clear.
While the original post-bailout plan was to sell off the company piece by piece, Bruce credits his CEO for changing course and challenging the employees to “make it better” and transform the company. According to Bruce, one core strategy that AIG used to drive its turnaround was to leverage its Global Sourcing and Procurement Services team to the hilt and transform procurement operations using game-changing technology. This was to be no easy task.
For, as recently as 2010, AIG operated as a silo’d and decentralized procurement department that created significant P&L management challenges, large inefficiencies, and resource constraints. Bruce also noted that the organization had a limited focus on supplier diversity. Beyond the organizational structure problems, procurement was viewed by most stakeholders as a problem that should be avoided at all cost. What the stakeholders wanted was a group of “order takers” not “strategic partners.”
The procurement function was certainly aware of the stakeholder view and its own shortcomings as a tactical and reactive group that needed to change its people, processes, technology, and brand if it would ever have a chance to succeed.
Next time, we’ll review how AIG made those changes and their main results.
