by Bill Huber, Partner & Director - CPO Services, TPI
Multi-tasking can be fatal in procurement…
Sourcing and procurement organizations routinely work extensive overtime to juggle multiple priorities. Among many procurement organizations that we work with, a “can do” attitude morphs into a tendency to resist crying “uncle” when the opportunity for additional involvement comes along.
An ingrained presumption exists among many procurement leaders that expanding their level of influence requires never “giving up ground,” always striving for a seat at the table in any area that touches spend. This mindset results in procurement organizations tackling resolution of a myriad of resource-intensive administrative issues while simultaneously trying to shape strategic behavior around spend.
Many CPO’s reputations have been damaged by over-committing to more activities than can be effectively staffed. In trying to be many things to many people, some procurement organizations talk “strategic” but act “bureaucratic,” are ill-prepared to address an impractical scope of work, become a bottleneck within their organizations, and — ironically — lose the credibility that they have worked so hard to gain. In today’s environment of diminishing corporate staffs, a CPO’s budget to build a large enough organization to effectively manage all of the potential volume of procurement-related activity can be severely constrained, so throwing more people at the problem is not an option.
Here are the TPI Top 5 ways that the strategic CPO can prioritize team imperatives and modify behaviors to drive procurement credibility at the C-suite:
1. Choose your field of engagement strategically. Realistically assess your resources and identify which projects you can execute flawlessly within your available resources. Utilize a prioritization tool to identify what projects will have the greatest impact with the highest probability of a successful outcome in a reasonable amount of time. Focus on these first. If new critical projects come in from the businesses, identify the probable risks and benefits associated with the projects and the resources that would be required to execute them well. Present a pro-forma business case and justification for additional temporary, consulting or outsourced resources to either support the project, or — if you wish to shift internal resources to the new project — to backfill a current project.
2. Never do anything that you can automate or get can someone else to do well for you. The role of the CPO is to aggregate resources. Identify competency centers and set a realistic set of processes that everyone can live with and monitor the degree to which the processes are being achieved. Examples of efficient alternatives to current processes are using Cloud-based procurement applications and outsourcing service providers that allow your procurement organization to focus on higher-order work that includes project management, strategic trading agreements and critical vendor management activities.
3. Focus on data, insight and strategy. Strategic procurement management should be focused on driving outcomes through establishing an environment that will provide enablement, visibility and control. Procurement processes and tools that are easy for the end user will maximize adoption, and with higher adoption will come more complete and timely data. The effective procurement executive will focus resources on continually reviewing data, analyzing exceptions and determining how insights gained can improve strategy.
4. Hold every member of your staff accountable to do their homework. First impressions are powerful and all-important. Strategic sourcing staff should understand the business drivers of each client organization by formulating a targeted set of questions and clarifications when preparing for an initial meeting. When possible, complete a preliminary market analysis (competitors, other customers, common transaction structure, historical spend, potential leverage points) for the product or service that the business seeks to procure. Consistent preparation will quickly gain the respect and confidence from business leadership.
5. Take accountability to drive decisioning. This is a frequent weak point in procurement. Procurement traditionally is beholden to corporate and business leadership to approve decisions and internal organizations such as finance or legal to provide key inputs to the process. Thus we frequently announce slips in schedules for completing agreements and other projects. Stronger project management can improve this situation. By clarifying stakeholders early in the process, obtaining reasonable turnaround commitments from each and building these into a realistic project plan that is well-managed, procurement can significantly improve the on-time realization of its projects.
The credibility of the procurement organization hinges on adding value from the initial point of contact forward. CPOs who practice these five tips will quickly notice a change in how they are perceived and the degree to which they are included in key strategic spend decisions for the enterprise.
Contact me for details on each of these points plus more best practices that can help you make a significant difference in driving procurement credibility among senior leaders of your company.