How to get procurement on your CEO’s agenda
It’s a common complaint among procurement teams that their department is not seen as strategically important and their work is not on the CEO’s agenda. While it’s certainly true that the C suite generally lacks understanding about how procurement impacts on the total performance of the business, you can’t simply wait for senior management to take notice. Procurement teams need to take the initiative and actively work to get their contribution recognised. But what are the best ways to raise your department’s profile?
Understand the currency of success
In order to make sure procurement has influence with the C suite, you need to know exactly what they are looking for and how they measure success. Understanding what currency for success the C suite are using, whether it is finding better products, delivering savings or improving relationships with suppliers, will enable your team to strategically focus on the areas that matter and communicate their value more effectively.
Michael Whitby, former Group Sourcing Director at Lloyds Banking Group, explains “Sometimes it will be cost, and in fact when I was in post, one of the few things that the incoming CEO in 2011 could control was cost – with a major proportion of our cost savings going straight back into the business as investment and so there was a visible benefit. However back in the 90s when I was at NatWest and opening up an IT procurement function in New York, it wasn’t cost savings that mattered to our trading arm – it was knocking a quarter of a percent off brokerage fees to allow them to negotiate better with their clients – until you really understand that currency of success then you can’t ever deliver real strategic value. In my last post, cost was obviously an important measure but so was the size of our supplier base – we shrank that from 18000 to 4000 in 6 years and targeted at least 80% of our spend with our top 100 suppliers.”
Being able to translate what the C suite values into what the procurement team focuses on in this way is essential when you’re working on raising the profile and influence of your function.
Get involved at the start of the process
In order for procurement teams to have a real impact on business performance, and to demonstrate that impact effectively, they need to be involved in the entire purchasing process. If procurement is only brought in to execute a decision that has already been made, their ability to influence the process will be limited. Their capacity for getting a good deal may be valued, but they will not be recognised as a crucial part of business success.
It’s up to procurement leaders to make sure they are included right from the start of the process, so they can contribute to decisions on specifications, suppliers and pricing. This will help the company to deliver both a better product at a better price, and will boost the credibility of the procurement team and the C suite’s understanding of how they can deliver value.
Work with your suppliers to become a customer of choice
Just as you can’t leave raising the profile of procurement to the C suite, so you can’t leave developing strategic partnerships entirely to your suppliers. We expect suppliers to deliver more innovation and value these days, but procurement teams also need to work on becoming a customer of choice to their suppliers. For example, if a supplier brings a new product to you, asking other suppliers to bid on that product will discourage the original supplier from approaching you in the future.
As Michael Whitby says, “If you look at the last 10-15 years there is less and less being spent on R&D by our suppliers so even if you are a big spender – you are not necessarily a customer of choice”. With both sides working at developing relationships and mutually beneficial partnerships, the possibilities to find new and improved ways of working are greatly increased. Delivering these innovations is one of the best ways to get your function on the C suite’s radar.
Getting your place at the table
Getting procurement on the CEO agenda is about delivering true strategic value to the company and having that value recognised. This process requires the procurement team to work with both the C suite and suppliers to develop an understanding of their needs and how procurement can solve them. Ultimately it should be a mutually beneficial process that creates value for all parties involved.