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Home / Management / Hemas Holdings Plc: Challenging the norm : A study in change management
Hemas Holdings Plc: Challenging the norm : A
study in change management
Hemas Holdings PLC is a company listed on the Colombo Stock Exchange (CSE) and is the holding
company of the Hemas Group (HEMAS), a leading conglomerate in Sri Lanka with a portfolio of
diversified interests.
A multi-faceted organisation, Hemas vision is in tandem with facilitating Sri Lanka in its capacity as an
emerging economy. As such, Hemas portfolio of interests predominantly focuses on the Fast Moving
Consumer Goods (FMCG), healthcare, leisure, transportation and power sectors.

The Business Case
Introduction
The broad-based nature and scale of Hemass business functions demand a gamut of sourcing
requirements, ranging from raw materials and packaging for FMCG, medical equipment for hospitals
and machinery for power plants to routine administrative services such as security, staff facilities,
insurance etc. The process of determining and fulfilling these highly specific needs included each
strategic business unit (SBU) sourcing of suppliers manually.


The need for change
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Despite conventional wisdom of the acclaimed diligence of the Manual Procurement Process (MPP), it
was a time-consuming and labour-intensive approach. Much effort and expense went into ensuring the
quality and integrity of the materials sourced through the MPP. As our corporate sourcing requirements
escalated, the cumbersome MPP weighed us down, culminating in the decision by the management to
seek a redress.
This prompted the management to move decisively away from the conventional decentralised MPP in
favour of an automated alternative. It was a foray into unchartered territory, but the management
remained steadfast in their resolve that change was imminent. The new software platform would
primarily need to serve the complex sourcing requirements of a multi-dimensional conglomerate like
Hemas. However, it should not merely be a replacement for the current MPP but also be a key value
creator.
To justify the investment, the new system should be equipped to facilitate as far as possible a
seamless transition from the MPP with minimal disruptions. This was by no means an easy task given
the parameters that we had set. Many options to improve the sourcing processes were evaluated. Due
to the substantial financial and non-financial benefits offered, a decision was made in favour of the
Ariba Sourcing Module offered by Consus Consulting Group of India (CCG).


Methodology
The road map for change
The monumental task of the changeover process needed to be determined. A road map for change
was developed.
The changeover process was driven with the support of the Board of Management (BOM), representing
the Managing Directors of Hemas. It was their exemplary leadership, strengthened by the steadfast
belief in the virtues of change that became the key drivers of the process.
As a first step, the strategic focus of the entire group was realigned to embrace the new sourcing
module. The changeover process acted as the catalyst in redefining the overall group procurement
policy. It was vital that the new system be successfully integrated, not only to maximise savings but
also to ensure compliance, transparency and visibility in the procurement process of the group.
The BOM assigned a team of Champions across the group, responsible for a smooth transition, as
change agents to ensure clarity and precision of project deliverables. The selection of Champions was
done carefully, including representatives from each SBU across the group, hailing from multi-
disciplinary backgrounds such as finance, engineering and marketing. In addition to their inherent
expertise, it was vital that Champions possess the following skills and attributes:



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CIMA Business Insights

CIMA Business Insights strives
to enhance the communitys
awareness of successful
application of core business
knowledge in the local context,
showcasing next practices
through case studies of actual
business scenarios.
Readiness Assessment Study
To supplement our business case, the Champions were commissioned to conduct a Readiness
Assessment. This study would not only determine the groups sensitivity to change but also act as a
primary tool in the subsequent implementation of the change management process.
Core elements
Determining the underlying human impact: Change usually triggers a multitude of human
behavioural elements that strain the boundaries of established culture by challenging the norm. It is
natural for some to whole heartedly embrace the forces of change while others to completely reject
it. We found that the change from our MPP to ASM was no different. However, we remained
steadfast in our belief that effective change management would help in overcoming these challenges.

Determining the type of change: We proceeded to delve deep in order to determine the scale of the
changeover process. A study was done to determine the quantum of spend requirements that would
be routed through ASM by analysing spend details for the FY 2010/11.The study revealed that
approximately 75% of spend could be channelled through ASM leading to an estimated annual saving
of Rs. 30 million. This necessitated an immediate and total revamp of organisational attitudes toward
sourcing, resulting in fundamental changes to the existing procurement process

Identifying the restraining forces: We found that proponents of the MPP had developed a unique
mindset which was difficult to penetrate. Their cognitive skills had been conditioned by years of
working with the MPP. Face-to-face negotiations were a key component of the MPP resulting in long
established business relationships with suppliers. It was argued that since ASM was done on a
software platform it could not effectively facilitate a like-with-like product comparison. They believed
that this would compromise the quality of the raw materials sourced and ultimately impact the quality
of the final output. It was believed that raw materials sourced through ASM would not conform to
accepted quality norms. E.g.: raw materials used for toothpaste would have an impact on its taste.
Despite the obvious competitive edge, the buyers were reluctant to move away from their comfort
zones to consider an alternative supplier. Furthermore, advocates of the MPP stubbornly maintained
their view that in certain areas, our volumes were insufficient to realise any significant savings by
way of competitive price bidding in comparison to global multinational organisations. Under these
circumstances, resistance to change was the unwillingness to deviate from manual process to the
Ariba platform. They were reluctant to accept the subsequent paradigm shift with the implementation
of ASM. Majority held the opinion that e-sourcing module could not be used as a practical solution for
all types of procurement. ASM demanded a planned approach to sourcing, with the requirement to
submit supplier details in well-structured forms enabling the buyer to clearly evaluate strengths and
weaknesses of each supplier. Our staff was hesitant to follow this process of obtaining supplier
information as they were more familiar with a procurement process led by face-to-face negotiations.
The key deterrent at this point was the perception of the existing suppliers for initial preparation and
the training required for the online auction process.

Evaluating existing processes: During the course of our study, we evaluated the existing
procurement system of each SBU and identified that there were wide variations in prices and quality
across the group for the same category of product or services. Our process mapping exercise
focused on eliciting as much information as possible not only on the formal documented templates
but also the informal practices in place.

Assessing organisational culture: Hemas, by virtue of its size alone, had accumulated a complex
organisational culture that extended to a great many sub-cultural aspects. We proceeded to conduct
an in-depth study on the organisational culture prevalent at Hemas. It was revealed that there were
many different methods of sourcing adopted, not only within the Group but also within the same SBU,
due to the fact that procurement was solely within the control of the procurement manager of the
respective division. As a result controls were less effective because there was no uniformity in the
procurement process. Lack of information hindered traceability of transactions. Certain staff had
undue power over the negotiating process. Various arguments were made by buyers to justify the
impracticality of changing the existing suppliers or opening the bidding process to new suppliers as
they were reluctant to move to a new process opposed to their routine framework for procurement.


Phase 2 Implementation and management of change
We then felt confident of our readiness to continue with the next
phase of the change process. We re-evaluated our position and set
out our identified philosophy for change. Our goal was to strengthen
the driving forces and weaken the restraining forces so as to
successfully manage change. The management reiterated the
importance of meticulous planning at each progressive stage. It was
vital to identify all possible loopholes and address these so as to
avoid anyone circumventing the new system.
Our communication plan was designed to regulate the flow of
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This issue features the case
study presented by a team
representing Hemas Holdings at
the CIMA Business Case
Awards, for which they were
highly commended. The team
comprised Priyanthi de Silva,
Prasenna Balachandran and
Vathsala Wijekoon.
The CIMA Business Case
Awards is a competition that
awards the best business case
recognising a turnaround or a
success story. The aim of the
competition is to enhance
knowledge on how success is
achieved and sustained in an
organisation, and the ability to
effectively communicate such
cases. It also aims to facilitate
cross-company knowledge
sharing by showcasing
organisational success stories.
Disclaimer: Opinions expressed
represent the authors attempt
to apply business theory to
analyse a Sri Lankan business
case and do not necessarily
represent the views of the
institution or the organisations
by which they are employed.
information and highlight persistent dysfunctional areas that may
exist. All bottlenecks of the changeover process were identified and
ironed out by improving communication among the user groups. It
was the responsibility of the Champions to ensure that all
procurement requirements of the group were routed through the
central sourcing unit (CSU) and auctioned on the online platform to
provide an equal level playing field for the suppliers.
We began the implementation of ASM gradually. Packing materials
were the first to be sourced through this module. Next, we sourced
more complex products such as medical equipment, security
services, raw materials etc. Subsequently, the entire HEMAS
procurement requirements of photocopy paper, computers, and
televisions were auctioned on ASM. Despite being in relative infancy,
ASM is now responsible for procuring more than 80% of the group
spend requirements.
There were a number of challenges faced during the implementation
process. We continued to stress on the importance of our change
philosophy and sought the guidance of the senior management when
necessary. The management adopted a top-down approach to
ensure that the crucial operational aspects of ASM were effectively
filtered down to all stakeholders. The Champions played a pivotal
role towards achieving this goal. Staff education was done through a
series of familiarisation programs conducted by the in-house CCG
representative. The sessions comprehensively covered all features of
the system. In response to cultural issues that surfaced proactive
measures were taken by the champions to inculcate a cultural mind
shift. With the intention of easing the transition process, the
management advocated an open door policy to facilitate greater
communication between staff and the Champions.
Several coaching sessions were conducted to expose our existing
vendors and suppliers to ASM culture in which they were educated
on the drawbacks of the MPP and ensuing benefits of ASM.
Recognising the imperative need for change, the management encouraged the staff through a series of
consultative programs to encourage them to provide extensive support to existing suppliers and
vendors in a bid to facilitate ASM platform.

Phase 3 Reinforcing change
We recognised that an integral part of the change process is to ensure that offline transactions are
minimised. Following a study done by our team of consultants, on photocopy paper bought by our
SBUs, it was evident that major savings could be obtained by grouping the Groups requirements
according to the categories of goods and services purchased, would bring in significant savings. The
analysis further justified ASM and strongly persuaded the BOM to send their spend details to the CSU.
There were many instances where the selection process was intentionally manipulated in favour of
preferred suppliers. These issues not only drew attention to the possible loopholes in the system but
also provided the impetus to initiate corrective action.
We ensured that the fundamental issues were duly targeted by corrective action. Firstly, greater
facilitation in terms of training or ground support was offered to resolve the issues evolved. Should the
issues remain unresolved, intense discussions and negotiations would take place between the
Champion and the respective staff.
We witnessed the frequency in which the ASM is used for procuring has increased, reflecting a
considerable degree of success resulting from strategically managing change. The synergies derived
from combining change management strategies with ASM, resulted in a host of tangible and intangible
benefits that justified the move from the MPP to ASM. Foremost among them is the Rs. 25 million
saving in the first year alone resulting from routing procurements through ASM. The increased
competitiveness supported by the multiple bid platforms was one of the key catalysts of these savings.
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Conclusion
It was indeed a revolutionary move on the part of Hemas, as the first company in corporate Sri Lanka
to foray into the world of online sourcing. We never doubted our ability to successfully manage the
change and challenge the norm and emerge victorious. Our approach would be the yardstick used to
measure the success of change management within an ever changing organisational paradigm. We are
overwhelmed with the outcome of the past year since commencement of this project and have no
doubt that the group would continue to consistently accrue the benefits from the system far
outweighing the initial investment.
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