Don’t Limit Your Potential: Be “Opportunity-Centric” Instead of “Budget-Centric” (Part 2)

Spend Matters would like to welcome a guest post from Robert Rudzki.

In my last posting, I stressed the difference between a "budget-centric" approach (which constrains the results possible), and an "opportunity-centric" approach that optimizes the results achieved. What are the distinguishing factors between companies in these two categories?

In my experience, those procurement and SCM departments who invest time and effort to develop and master the skill of "speaking like a CEO/CFO" are the departments heading to the top of the profession. They are also most likely to enjoy a "no budget hassle" existence. On the other hand, those departments who don't -- or won't -- master this skill seem to be perpetually stuck on the tactical hamster wheel, and are continually playing a defensive game on staffing levels.

I've touched on this subject during conference presentations, but I'm recapping it here in order to reinforce a few key themes:

  1. You need to adopt and speak the language of the executive suite (the "financial language" of the CFO) in order to be effective in your communications with senior management -- and build senior management's excitement (see Chapters 1, 3 and 4 of the new book Next Level Supply Management Excellence for a comprehensive discussion of this topic)
  2. Develop a vision with BOLD objectives that directly to senior management's interests and objectives (e.g. improvement in Earnings per Share (EPS), Return on Invested Capital (ROIC), cash flow, risk management, etc.)
  3. Lay out your transformation plan and detailed roadmap (note: this starts with a candid "current state assessment," compares the current state to best practices, and then uses the gap analysis as input to a well-constructed transformation roadmap)
  4. View technology as an enabler of your transformation plan and stretch objectives, not an end to itself
  5. Build your business case (what you expect to deliver, in exchange for resources and budget)
  6. Be willing to make a commitment (of new $ results) in order to gain top management's commitment and support
  7. Finally, lead and make it happen (it won't just happen by itself)

When my colleagues and I work with clients, we prefer to start with a business case from a total transformation perspective. Why? It is part of a logical sequence. Once you've assessed your current state and compared it to best practices, identified the opportunities from successfully transforming your practices, and designed the detailed roadmap to get you there, why not request the full amount of resources needed to do the job well?

It might sound optimistic to ask for more resources when the current business outlook for your company is weak, but it can work if you approach the subject in the manner I describe. In fact, we've worked with several companies who -- following our suggestions -- added more resources to their strategic procurement staff during the recession. Today, they are receiving the bottom-line benefits of taking that bold leap.

The alternative, quite frankly, is to be subject to the same headcount reduction guidelines that are often widely applied to all departments in times of business stress. That's not where you want to find yourself; and, quite frankly, there is no compelling reason to end up there.

- Robert A. Rudzki

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