Friday Rant: CPOs as Transactional (i.e., Deal-Based) Leaders

I've given quiet a bit of thought of late to the concept of the CPO as a transactional leader rather than just an executive focused on overall executive management, team leadership and internal relationship development. Think about it for a minute. Isn't what much of the CPO does, at least when it comes to the 80% of the impact they have in an already humming organization, transactional in nature? Now, please don't confuse this use of the word "transactional" with the same phrase we might use to describe back-office accounting or eProcurement systems. No, in this case, I'm using the phrase as it pertains to financial transactions, often of the very large sort.

In my view, there's a place for the best CPOs to become more transactional in nature versus just serving as functional leaders. Like top heads of sales that manage strategic relationships and senior investment bankers at the top financial firms who remain actively involved in deals, procurement leaders should get more involved in the operational aspects of larger transactions, potentially even leading the most important deals. What forms or examples might these take? Consider how in the case of the largest and most strategic commodities for a company (e.g., steel, energy, transportation), a procurement executive with particular knowledge or deal savvy in an area might want to involve themselves in the actual strategy, negotiations and supplier relationship.

It's extremely curious that at some point during the 20th Century, many corporate executive suites became insulated and isolated from the business at hand (i.e., the life blood day to day activities that produced the products, that produced the revenue, that produced the profit to cover their pay checks). Division of Labor was the supreme catalyst that launched the Industrial Revolution. Perhaps the concept was so powerful and inspiring that it subliminally leached over to the executive side of industrial enterprise.

Wikipedia defines Division of Labor as "the specialization of cooperative labor in specific, circumscribed tasks and roles, intended to increase the productivity of labor. Historically the growth of a more and more complex division of labor is closely associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialization processes." If we look at this through the lens of a traditional manufacturing hierarchy, the most successful shops -- while they practice division of labor and tasks in the interest of routine efficiency -- have also incorporated extensive cross training and it has not been uncommon for line managers and plant managers on up the ladder to have had extensive cross training and be able to jump into the process at just about any point to trouble shoot, resolve problems and foster innovation.

Somewhere along the line it came to pass that executive management must only manage people and processes from a detached perch rather than actually grabbing the life blood pump handle to foster the very best process outcome. This was, and is, a mistake at all levels of modern corporate structure where it exists. The best leaders teach by example and procurement leaders in particular are ideally suited to lead the efforts around truly strategic decisions for companies such as make vs. buy in manufacturing.

The decision to close a facility, invest in a new one and/or transition parts, components or assembly to a supplier should always be a top level one. So in the most strategic cases, why shouldn't the CPO be involved on an active, front line level? In a similar vein, CPOs and top procurement executives should also get actively involved in the largest outsourcing negotiations and relationships (just as CIOs have done in the past).

All of these examples point to the growing need of CPOs to more actively get involved in day-to-day decisions when the potential returns and value to the business are worth the time invested. Moreover, by staying close to the transactional and deal level in select cases, CPOs are more likely to get themselves closer to the actual business environment, rather than just relying on their lieutenants for input on what's actually transpiring in the Spend and Supply Management trenches. Time to get your hands dirty, gentlemen (and ladies). We'll all be the better for it. Incidentally, I'm eating my own dog food here as well, once again getting closer to certain transactions. I'll explain how/why sometime later this year.

Jason Busch

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