The CFO and CPO Conundrum: Solving for Closer Collaboration

Spend Matters welcomes a new guest post from Marie Meliksetian, Managing Director of Procurement Outsourcing Services, North America at Xchanging.

“Whether in operations or corporate activity, whether you’re looking at the procurement of materials or logistics or services, the collaboration with finance can make or break a relationship.” – Les Ball of Eaton Corporation

It is common knowledge that CFOs and CPOs share similar goals within the company. They are both tasked with responsibilities around increasing cash, cutting cost, and enforcing compliance and business control to reduce risk. The two titles have a laser focus on achieving savings, monitoring, and controlling risk while leveraging technologies and processes for greater transparency and value. Working hand in hand, procurement and finance can garner more meaningful results at a higher level that still encompass effectively cutting expenses, streamlining transaction costs, and mitigating potential liabilities.

So why do CFO and CPO relationships continue to take a back seat? Communication and engagement gaps are the top two roadblocks that I’ve observed over the years of working with various corporations.

Communication – Speaking the other’s language is essential. For those in procurement, having metrics, precision, and general financial acumen in preparation for meetings will improve the results and general working relationship. When skill shortages are identified, finance may also be willing to help build those skills – improving capabilities and learning to work together at the same time.

Engagement – Depending on the company’s maturity, CFOs often work more closely with other business units. To their detriment, too many companies continue to see procurement as a simple purchasing organization that places orders and negotiates the price instead of a strategic sourcing organization with industry knowledge and commercial capabilities. As such, the business units continue to fill the role of the sourcing and procurement organization, especially in the area of indirect procurement, under the pretext that procurement is not qualified or lack the industry experience to handle business category strategies. Accordingly, this type of business model encourages the CFO to work more intimately with other business units (i.e., CIO, CMO, HR, etc.).

Not all is lost, however, and there are steps that the executive suite can take for closer collaboration between CFOs and CPOs.

  1. Consider having CPOs report to the CFOs. There is finally a shift taking place where more companies are bringing both departments together. This positions the CFOs to have necessary orientation and responsibility to the procurement targets, related savings, and compliance management.
  2. Engage in regular reviews. Reporting is not sufficient to creating a closer relationship between CFO and CPO. Dedicated and regular interaction around common objectives and metrics should be part of the calendar throughout the year for performance success. Part of this includes engaging the other business units to get buy in across the board and assign focal points from each to review and approve outcomes.
  3. Assign procurement focal points that can speak the finance language. This will allow a better and stronger benefit interlock for a common objective—higher rate of earnings, improving working capital, etc.
  4. Develop and agree on common savings measurements. Having a pre-agreement on savings definition and measurement model is half the battle fought in regards to communication, collaboration, and consistency.
  5. Work together to develop company policies. Manage and measure compliance across business units and target offenders. Set up a rating system that compares company processes as they are against the goal policies and work towards improving ratings to meet policies for clearly defined success.


A collaborative CFO and CPO relationship amounts to many gains and overall, a stronger company that is more prepared to thrive in today’s marketplace.

Voices (4)

  1. Ron Larimer:

    Marie, I am going to assume that you frequently sell through the Finance organization and that is biasing your view.

    I agree that many of the goals finance and procurement are related, however procurement focus is broader.

    Procurement is the face of the company to the supply base, they should be a focal point for collaboration and they have an internal customer base that they must serve. Finance’s position permits them to be strictly analytical and can lead to management by the numbers (ignoring the relationship components of procurement).

    Going further I agree that communication and engagement are a great start to improving the collaboration. I even agree that it is important for procurement to work with finance to determine the savings methodologies that finance will count, understand the strategic goals of finance to include them in negotiated deals and to collaborate on company policies… However I couldn’t disagree more on the methods you suggest.

    First the CPO position is not a default position in an company. If one exists it was a conscious thought because the leadership sees the value of the separation. If the CPO reports to the CFO, they would be an EVP or VP. Suggesting that procurement should be subservient to Finance reinforces the historical belief you mention that procurement is a buying organization and the value is purely cost based.

    Secondly the entire C-suite should work together to drive a collective strategy. Procurement should work with the CMO to forecast demand, the COO to discuss service levels and efficiency, the CFO to discuss working capital, the CIO to discuss systems and data visibility. Of course you can see where more than 1 silo needs to be included in large projects as well, in those cases procurement should play a project management role aligning all of their customers.

    As for speaking the language of finance, that is a requirement. But for procurement you also need to speak sales/marketing, manufacturing (lean/6 sigma) and IT.

    Lastly company policies based managing “target offenders” and purely financial metrics can create a number of issues, some of which I discussed in my post “Can spend analytics identify when your policies have been gamed” ( Strict fiance based controls don’t account for the reality of business and “loopholes” need to be created or they are found.

    A good CPO needs to have a close relationship with all members of the C suite… not just the CFO. They should be a strong voice in the company… not subservient to the CFO. And the value of procurement needs to be felt in the organization in more areas than dollar cost savings.

    But ultimately I agree that a collaborative relationship CPO and the rest of the suite amounts to many gains and overall, a stronger company that is more prepared to thrive in today’s marketplace.

    1. Marie:

      Thank you for your feedback Ron. In our business we sell through various C levels. CFO is one of many. The most successful procurement transformation comes through the top down approach from CEO and head of organizations. CPOs are often challenged in demonstrating their impact and CFOs relationship helps drive the bottom line financial value. Critical to this, by all means, remains the procurement’s strong engagement, relationship, communication, language communication and trust with its stakeholders (CMOs, CIOs, amongst others).

  2. Harrison Tull:

    CPO’s certainly need to speak the language of Finance, but perhaps merging the two would only further erode Procurement’s credibility with Marketing, thinking back on Tyler Adam’s article The goal for Procurement should not solely focus on hitting savings targets, but rather maximizing marketing value creation. One could argue Procurement would better relate to Marketing if the CPO reported to the CMO.
    Today’s CPOs have to relate with a myriad of stakeholders to keep their seat at the table. It reminds me of Patrice Maheo and Dr. Rob Handfield’s “FutureBuy Man” from Coupa Inspire. Part lawyer, consultant, financial expert, negotiator, etc. CPOs have to speak the language of all departments, else Procurement runs the risk of being collapsed under Finance.

    1. Marie:

      Thank you for your response Harrison. Absolutely. It is critical for CPOs and the procurement team to have a strong relationship across all stakeholders and agree that the focus will not be solely to hitting savings targets. Quality, turnaround time and other key factors remain a very critical part of the success factor of an organization. No argument. The collaboration with finance further strengthens the procurement transformation within an organization

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