Spending someone else's money -- a Favourite Corporate Pastime!

Why is it that individuals within corporations are allowed to spend someone else's money (the taxpayer or the shareholders) with total abandon, with limited consequences associated with highly questionable behaviour?

In the Toronto Star today, there is an article which highlights the Natural Resources Department in the Canadian Federal Government, failed an audit with it proliferation of wireless devices. There are over 900 blackberries and 720 cell phones and the audit noted "one in every five of these devices was used by workers who had no clear job-related reason for carrying one."

That is of course if you could find them because the audit also noted "Oversight was so weak that department managers could not provide auditors with even a basic inventory of its wireless devices."

Maverick spending is not new in corporations or government. Its proliferation is the bane of all procurement professionals existence, yet often it is the procurement team that is vilified for suggesting appropriate spending as opposed to the offenders who are throwing the organization's monies around to feed their own egos.

In Business Week an article refers to the Royal Bank of Scotland and MasterCard who have in concert launched a corporate spending card called "inControl" that allows organizations to set strict parameters on which restaurants, bars, hotels etc. that employees can patronize.

This is meant to curb spending and reduce expenses that are constantly eroding the profit margins of firms and the benefits of which are ill-defined. It also enables immediate reporting to an individual's manager regarding the expenses being incurred by an employee.

On the surface this seems like an amazingly sound idea, yet the reality of implementation will be interesting. You see, in most firms the rogues are often in the sales groups and of course no rules seem to apply to the most senior of leadership. There may be sound reasons for this, but in fact it creates second-class citizens within the corporation.

The real impact in reducing expenses and rogue spending in corporations will occur not by implementing another control mechanism but by ensuring that the actions reflect the desired outcome.

• Senior leadership must walk the talk. If the leadership adheres to the rules that they put in place for the organization, then others will follow. If what's good for the goose isn't good for the gander then you will never gain control.

• If an employee, regardless of rank, thumbs their nose at expense control/reduction and continues their rogue spending habits, an example needs to be made. This is not a "oh don't do it again" slap on the wrist. This means terminating the employee for going against corporate policy and demonstrating a lack of fiscal responsibility. You just have to do this once or twice and the rest of the organization will fall in line.

In reality, there will continue to be rogue spending, as well as indefensible spending such as is the case with the Department of Natural Resources, because no one wishes to take that stand.

So credit card companies and others will continue to make money because they indicate that they have the Eureka solution.

The reality is that this is not rocket science -- it's common sense -- something which is sorely lacking in corporations and governments.

Award and Consequences -- The Bejing Olympic Fiasco

The head of the International Olympic Committee (IOC) Jacques Rogge was recently quoted as saying that with hindsight perhaps Bejing wasn't the right choice for the Olympics but clearly they had the best bid and as such he has no regrets regarding the final choice.

Well, Mr. Rogge, I beg to differ, because you see in Procurement, if you awarded bids, just based on who put forward the "best" bid, and ignored all other aspects -- political, environmental, financial, ethical -- you would be putting your organization at tremendous risk.

Just think of the issues that Nike and other clothes manufacturers faced when confronted with the fact that they outsourced to companies that utilized child labour caused them to rethink their awarding of business. Or how about Mattel whose reputation may have been irreparably damaged because of the "best" bidder for the business (in China), putting lead into the paint of toys, so that toddlers could get their non-recommended quota of potentially brain damaging substances!

Mr. Rogge -- China has a deplorable human rights record. They are polluting their own country and thus the world with reckless abandon. Yet they presented the "best bid" and you have no regrets? Shame on you -- the "best bid" should take into account all the external factors noted above -- then, and only then, can you accurately determine the "best bid". You can't approach awarding business (because the Olympics are business) with blinders on.

If a Procurement professional approached awarding contracts with such reckless abandon, they wouldn't have a job for very long!