This week on the Vizibl blog we’ve taken a look at the role and responsibility of the leader of the procurement team, along with taking a deep dive into how any incoming CPO can leverage their first 100 days most effectively using the idea of value consumed and value created.
As the leader of the procurement team, the Chief Procurement Officer (CPO) is responsible for enabling the entire procurement function as they execute their role; sourcing the goods and services the organisation needs to operate, managing spend, negotiating contract terms, and managing and developing the relationships with incumbent suppliers to create value for the wider organisation.
Sitting in C-Suite, the CPO’s job is to ensure that this work aligns with the overall strategic objectives of the organisation and supports its work satisfying all stakeholders including customers (both internal and external), regulators, and suppliers.
The CPO is chiefly responsible for implementing procurement strategies that align with the overall aims and objectives of the organisation in the short, medium, and longer term. This overarching strategy should cascade down into all smaller-scale procurement strategies including sourcing strategies, sustainable procurement strategies, supplier management programmes, and contract lifecycle management processes.
Through the work of the procurement team, the CPO is responsible for driving cost savings year on year on the products and services the organisation procures, in addition to streamlining procurement processes to ensure greater efficiency of the function (frequently through technology investments). In recent decades and particularly in the past few years, the role of the CPO has also extended beyond saving money to creating new value for the company at large. This may involve key performance indicators beyond the traditional cost, quality, and compliance metrics, such as sourcing innovation from the supply base to uncover new revenue streams or enabling the organisation to deliver on its sustainability targets through reduction of scope 3 “value chain” emissions.
Compliance concerns will always be a key consideration with all procurement activities. The CPO is responsible for ensuring that the procurement team’s work is carried out in compliance with all relevant regulations, laws, and ethical standards. Processes should be standardised, documented, and audible, and the procurement organisation must adhere to anti-corruption legislation.
In addition to orchestrating the work that the team undertakes, the CPO is also responsible for building the highest-performing procurement team they can with the resources they are given. Not only does this include implementing strategies to recruit top talent, but also by committing to retaining and upskilling them. This may involve providing ongoing opportunities for professional development, keeping them abreast of new developments in procurement strategies at other organisations, clearly communicating organisation-wide objectives and how the team’s work will make an impact, creating a positive working environment, equipping them with the processes and technology they need to most effectively complete their role, and properly incentivising them according to their performance against key procurement function metrics. Importantly, this incentivisation system’s KPIs should be closely aligned to the procurement strategy; what gets measured gets done, and what gets rewarded gets done better.
In addition to coordinating and enabling the pre-contract work of the procurement team, it’s also the responsibility of the CPO to establish mechanisms and strategies for managing post-contract, incumbent suppliers. This includes processes for re-negotiating contracts and resolving any issues or disputes, in addition to getting the most out of the relationship through the disciplines of supplier relationship management, supplier performance management, supplier collaboration, supplier innovation, and supplier sustainability management. This combination allows the procurement team to most effectively tap into the value potential of the existing supply base, and the CPO should include all of these considerations in their strategy for managing suppliers.
This combination of responsibilities adds up to providing the procurement function with the people capabilities, robust processes, and enabling technology that the team needs in order to deliver most effectively on the goals the CPO has laid out, and ultimately support the broader objectives of the business.
Yet it’s important to remember that very few of the above responsibilities will see considerable progress within the first 100 days.
In any new role, there is typically a period after joining the organisation where the new hire consumes more value than they give to the organisation. This time is spent with onboarding procedures, learning the ins and outs of the role, meeting new colleagues and stakeholders, and getting up to speed with the general culture and processes of the organisation. Even for a role as senior as CPO, this time to observe and digest is key; any rapid changes in expectations will likely upset the BAU work of the procurement team.
During this time, the value that the new hire is actively creating for the organisation is relatively low. Yet this is not necessarily a negative; it allows breathing room for the individual to begin identifying areas for improvement, and begin formulating ideas for how more value can be achieved through their role. As familiarity with the organisation grows, and trust is established between the new hire and other stakeholders, the individual will be able to make more effective decisions on how to proceed, and the value will shift towards creating more value than is being consumed:
This balance is important to strike. Consuming too much value or taking too long to begin creating value can lead to dissatisfaction from other stakeholders, while not taking enough time to consume value from others can result in under-informed decision-making. This is especially dangerous with the seniority level of the CPO.
When this shift should occur will depend on a variety of factors including the new CPO’s experience in the role, the complexity of the organisation, the market it serves, the organisation’s culture, the size of the team, and the expectations of other senior stakeholders. Aligning early on with the board and other C-level executives in terms of their expectations over the first three months, six months, and one year can help to ensure the balance is effectively struck.
While making any sweeping changes the moment you walk through the door is unwise, the first 100 days are critical for setting the tone amongst the procurement leadership team and the wider procurement function, and establishing a clear foundation for future success for all stakeholders.
Some priorities that should be considered during the first 100 days include:
A clear, systematic approach should be taken to understanding the current state of the procurement function. This involves assessing the size of the team, the current technology and other systems in use, standardised processes, and organisational structure. It should involve looking at quantitative performance metrics over the past quarter, year, and previously, in addition to understanding the reasons for any leaps or dips in performance. Qualitative understanding should not take a back seat here; getting a sense from the procurement team of how they feel about the function’s performance, systems, and processes is key, in addition to understanding from both the internal team and from suppliers how supplier relationships are regarded.
A key role of the CPO is to maintain and develop relationships with a broad range of stakeholders, including the executive committee, other business units, internal customers, suppliers, and their own team. Making a concerted effort early on to meet and get to know all of these stakeholders is an essential part of building the foundations for future success. A key part of “getting to know” these stakeholders is understanding their priorities, how their work supports the success of the business, and understanding where they feel procurement could better support their goals (and vice versa!)
While recruiting and retaining top talent is critical to the success of any procurement organisation, sadly procurement doesn’t have an especially “glamorous” reputation. This can make recruitment and retention more difficult than in other functions. It is imperative that the first 100 days inform a coherent talent management plan that describes how the procurement function will attract top talent, retain them over time, incentivise performance against strategic objectives, and provide opportunities for ongoing professional development in both “hard” skills and human skills. It may sound painfully obvious, but speaking to existing team members of varying seniority levels and asking what they feel they need to deliver most effectively on their objectives is a great place to start – where an incoming CPO may have identified issues in supplier relationship management processes, it may be that there is limited time for this activity due to resource being tied up in other, automatable areas for example.
Of particular importance in any talent management plan is the middle 80% of a function’s team in terms of performance. This is where many organisations leave value on the table, focusing instead on enabling top players, or re-deploying or upskilling struggling team members. We wrote about this in more detail in the “resource planning and allocation” section of our guide to choosing digital procurement technology.
Voicing a commitment to transparent processes, honesty, and accountability early on will help to build trust with stakeholders, but talk alone is not enough. Ensuring that procurement team members and stakeholders from further afield feel they can provide honest feedback on the current state of play, and that valid concerns will be heard and incorporated into the plan going forward will not only develop trust in the present, but will lay the foundations for future accountability of both the incoming CPO and their team.
It’s important while “consuming value” to work diligently to identify the greatest areas of untapped value for the organisation that the CPO and procurement can work to deliver. In immature procurement organisations this might be automating manual processes and working to deliver better sourcing efficiencies and cost savings, while an incoming CPO at a mature enterprise organisation is likely to find the most gains in developing existing supplier relationships in pursuit of emissions reductions, improved supply chain resilience, or new product/service introduction through cutting-edge supplier innovation. Identifying these areas for increased value creation will inform the strategic plan.
Based on assessment of the above areas over the first 100 days, the CPO should develop a strategic plan for the procurement organisation over the next X months (depending on the organisation’s goals). This plan should outline strategic objectives, KPI targets, resource needs (in terms of FTEs, technology requirements, and other budget needs), and any new initiative ideas. It should clearly outline the steps required to achieve the goals outlined in this plan, and how success will be measured and in what time frame.
Though the first 100 days is likely to see an incoming CPO consume as much value as they create, pursuing a combination of these priorities across the first 100 days will set any new procurement executive up for the best chance of success in their role.