Expanding procurement’s scope and influence is critical for CPO’s, if procurement is to develop its value contribution beyond cost savings. Here we discuss some mechanisms to help procurement leaders achieve this goal:
The ability to expand the depth and breadth of procurement’s playing field, to take on greater spend under management and to move beyond cost savings are on the agenda of CPO’s globally. The ability of the procurement function to achieve this objective depends upon its ability to influence the organisation.
Proactive leadership is central to gaining influence and requires CPO’s to both create the conditions for success for their staff and to create opportunities that will facilitate influence (Figure 1).
At the strategic level this means creating the conditions for influence:
- Executive leadership must believe that procurement can improve their organisations competitive advantage and support capability development.
- Aligning procurement strategies to the overall business strategy and integrating both
- Organisational structure, resources and incentives must support procurement initiatives
- CPO’s must take advantage of changes in the organizations competitive environment to formulate and implementing proactive strategies
- Invest in the personal development of procurement staff to build capability to take procurement to the next level
- Train staff to gain a thorough understanding of business strategy
- Train staff to gain a thorough understanding of the firms products and services
At the tactical level it means examining business needs and developing sophisticated stakeholder strategies. By assessing current performance and practices Brave CPO’s can define the current issues, prioritise them and develop a plan of action. By fielding customer and stakeholder surveys and interviews it is possible to develop a complete understanding of issues and future requirements against which CPO’s can plan targeted initiatives and stakeholder engagement to build closer relationships.
At the core of any business strategy is the objective to improve the top and bottom line and doing so sustainably. A core skill for CPO’s therefore is the ability to make the necessary linkages to these objectives. See Figure 2.
Making such links requires procurement to develop its unique value proposition in each area together with a detailed strategy and the capabilities to execute on it.
Dimensions of Procurement Influence
Purchasing Practice has developed a framework (Figure 3) for mapping increased procurement influence in five separate dimensions, which include:
- Business Strategy
- Internal Stakeholders
- External Stakeholders
Each dimension in turn has five levels of maturity signifying procurement’s influence progression. Progress in each dimension is in turn influenced by issues which take us full circle back to creating the conditions and opportunities for success. . These include:
- Executive support
- Strategic alignment
- Procurement Maturity
The dynamics of modern markets and businesses means that the competitive environment is constantly changing. Consequently, whatever stage of procurement capability you are at, the Brave CPO who builds capability, ensures alignment with business strategy, monitors events internally and externally and responds to these events, will build the respect that will open doors to closer business involvement. This will increase visibility, vastly improved influence, and gain the ear of the CEO.
Nuff said …