CEOs and CPOs – Not Aligned On Key Objectives, Suggests Ayming Report

We featured the Procurement 2020 report from consulting firm Ayming here and the findings from their survey that suggested many CEOs were dissatisfied with their procurement functions, as evidenced by the CEO’s desire to “re-organise” procurement.

We questioned whether that was more a reflection of a general level of CEO unhappiness at the performance of their CPOs rather than a real desire to move the chess pieces around the board, and if that is the case, a clue as to why CEOs might feel that way might come from another finding in the report. Ayming report it like this.

There is a “disconnect between the objectives of procurement departments and their wider businesses … with 58% of CPOs believing that delivering savings is a key concern for their teams over the next two-to-three years, but only 42% cent of CEOs agree. There is also disagreement on the best way to achieve those goals. While two-thirds of CPOs feel they need increased budgets to deliver more value in the long-term, fewer than half of CEOs agree with the need to invest”.

So – generalising wildly – CPOs want more money for their departments so they can then go and chase more savings, which they believe is a key objective. Meanwhile, CEOs are suggesting that they aren’t so sure about the additional resources, and by the way, it’s not all about savings.

For most organisations, this is undoubtedly true. If you are a manufacturer of unbranded commodity or own label goods, the cost reduction absolutely is the number one priority. But for most other organisations – for WPP, Shell, Ford, Mars, the Ministry of Defence, Surrey County Council – the “savings” objective should only apply to a small sub-section of the category picture.

We’re not saying that CEOs don’t care about savings -  of course they do. But just maybe CPOs are over-estimating the relative priority of that goal in the CEO’s eyes. That may be because in most spend areas, procurement is truly about value – or should be, anyway. It is about the contribution that procurement makes to the objectives of the organisation, to competitive advantage, to meeting organisational goals. If procurement leaders don’t realise that, then the gap between their hopes and expectations and those of their bosses will only grow.

Anyway, there is more in the Ayming report, with some interesting findings and thoughts on technology for instance. And we can’t argue with this statement from, Alejandro Alvarez, Director of Operations Performance at the firm, and the man who led the study:

“As the business environment changes, procurement models need to adapt to focus on delivering the best possible service and supporting firms in meeting their objectives. This means making sure communications between internal and external stakeholders are as seamless as possible and that there is enough flexibility built into the system to accommodate new technologies, such as blockchain.”

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