The 2013 Chief Procurement Officer Study was conducted by the IBM Institute of Business Value (IBV) and highlights the business impact that Chief Procurement Officers (CPOs) can have on a company’s competitive advantage and profitability. By Doug Macdonald December 18, 2013 Supplychain247.com
Like other strategic functions in the enterprise, procurement’s role continues to evolve, and procurement leaders and organizations are now tasked with increasing responsibilities from addressing more complex spend categories to taking a more active role in managing risk and compliance.
These trends have coincided with and have helped the global acceleration of the supply base and the procurement organization. Thus, procurement organizations are facing a new set of challenges, including:
- Managing a growing work load – and more complex tasks
- Managing a diverse and disperse global procurement team
- Recruiting, training and retaining procurement and sourcing professionals
With procurement exerting more influence on everyday business outcomes, procurement talent and talent management is steadily rising as the strategic solution to driving the procurement needle in the right direction.
IBM’s Institute for Business Value (IBV) recently conducted a Chief Procurement Officer Study, one of the largest known evaluations of procurement organizations at global companies. The goal was to understand the links between procurement and business performance to harvest insights on what procurement actions drive positive business results.
The study found that the ability to achieve business objectives was highly correlated to a core set of procurement values or capabilities. Top performing procurement organizations are able to achieve better results specifically because of their ability to; (1) consistently apply and measure the right performance metrics, (2) effectively collaborate and communicate across their organizations about performance and (3) standardize processes and procedures.
In short, achieving one’s procurement priorities requires proficient and efficient talent and program management.
For CPOs the challenge seems to revolve around managing global teams. Many of the procurement leaders talk of this as a relatively new and growing challenge. Of course, most of us have had team members in global markets for as long as we can remember. Yet there seems to be a current and rapid expansion of those teams over the past few years in procurement organizations, particularly in emerging markets.
The catalyst for this globalization seems to be the desire to have procurement teams (a) closer to their markets, (b) closer to the supply base and (c) in markets where operational costs can be kept low. This development, although critical for business reasons, has caused some training and management challenges. As procurement teams are more diverse and disperse, communication and collaboration have become more challenging.
Many of the recurring themes CPOs face center around three main factors in the talent management field – recruitment, development and collaboration.
Recruiting and retention. As procurement organizations succeed in their mission, their organizations are expanding, and there is a need to recruit new talent. All indications point to strong growth and a competitive market for procurement professionals. As a result, procurement organizations are no longer just seeking those with procurement and sourcing backgrounds to fill positions. There just are not enough highly trained and experienced professionals to do so.
Thus, procurement organizations are necessarily reaching out to candidates they haven’t focused on in the past – particularly MBAs and those from outside fields such as technology and operational professionals.
Expanding skill set of professionals and teams. This is particularly important as procurement moves into new and more complex spend categories – and as young professionals and MBAs are brought in to fill new positions.
As an aside to this trend, I have heard many CPOs express their desire to recruit for technology and communications skills. These leaders say that these skills may be even more important as a core set of capabilities than even sourcing, contracting and procurement skills. They say they can teach people these procurement skills, but technology and communications skills tend to me more innate.
As procurement reaches out to Legal, Marketing, IT and other business units, to penetrate new spending categories, these skills are even more important.
Provide collaboration and technology tools. CPOs note this is particularly important from a standpoint of promoting knowledge sharing and training; standardizing and automating processes; and developing and deriving innovation from external partners and suppliers.
The ability of a procurement organization to manage and master these challenges will have a direct impact on its success and the achievement of its overall business objectives.
What can an organization achieve when it masters talent and program management? Companies with high performing procurement organizations have profit margins 15 percent higher than the average company and 22 percent higher than those of companies with lower performing procurement organizations.
To be successful with any procurement objective – whether that’s pushing the envelope on savings, managing risk or enforcing compliance – organizations must have highly effective and collaborative global procurement teams. The study reinforced that point, noting that the top priorities for CPOs in 2014 were:
- Driving best practices adoption by global procurement teams (93 percent reporting)
- Promoting greater collaboration among global team members and internal stakeholders (90 percent reporting)
- Pushing for greater collaboration and innovation from, and development of, suppliers (88 percent reporting)
While globalization of the supply base and procurement organization has brought on new challenges in talent recruitment, management and training, it has also presented tremendous new opportunities.
It is essential to remember that there is the opportunity to adapt your procurement team’s core capabilities to fit the objectives of the modern procurement organization – to build a more effective, collaborative and tech-savvy organization.