5 Steps for Keeping Procurement Strategically Relevant

Spend Matters welcomes this guest post from Jim Kandilas, CPA, EVP and Founder of The Shelby Group.

The procurement function has long suffered from a general mask of indifference from the C-suite. Year after year, CPO surveys document the quest for strategic business impact. Yet, for many, respect from fellow C-suite members remains an elusive goal.

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Is your procurement organization getting the respect it deserves? The steps below include basic questions and ideas for building and managing strategy I have gleaned from working with some of the best procurement transformation leaders in the business.

  1. Your Strategy: Can you summarize it in a one-sentence promise of value? When I ask procurement leaders what their strategy is, I often hear about their latest initiatives, project pipelines and attempts to increase compliance. These, of course, aren’t strategies – they’re tactics. Your strategy is your vision for how procurement can create value for the business and enable the CEO’s agenda for change. I recommend clients frame their vision in the form of a strategic promise of value. Keep it to a single sentence, make sure it’s jargon-free and focus on the accomplishment of shared business goals.
  1. Your Stakeholders: Who are your internal customers, and how can you help them? While procurement is a shared service, the value you create for finance is fundamentally different than the value you create for IT, HR, manufacturing or any other department. Support your strategic promise of value from step 1 with department-level value propositions to meet specific challenges and goals of each of your key stakeholder groups.
  1. Your People: Do you have the right talent in place to deliver success? Procurement departments are best known for the processes, policies and technology platforms that we ask our internal customers to embrace. We’re good at the upstream side of the business: spend analytics, sourcing and contracts management. It’s the downstream side where we tend to fall short. But wait – that’s where the money is! What are the people capabilities that will enable your strategy? Do you have the right talent with the right skills in place to help stakeholders save time and money and get more value out of suppliers? Do you have your people embedded where they are needed most? Have they taken the time to learn enough about the departments they serve to create real business value? 
  1. Your KPIs: How do you measure success? I believe performance metrics represent one of the greatest challenges to achieving strategic relevance. Does, for example, “percentage of spend with approved P.O.” really matter to your average business stakeholders? I recommend creating metrics for each of the stakeholder promises of value you created in step 2. In addition to quantitative metrics for cost savings and cycle-time improvements, these should include qualitative metrics for programs like supplier performance and risk mitigation.
  1. Your Feedback Loop: How will you monitor, evaluate and improve on your strategy? The first 4 steps listed here represent a plan for achieving strategic relevance by becoming stakeholder-centric. This is based on the premise that procurement is not just a set of policies and procedures. It’s an enabling business function that–when practiced in a collaborative manner–helps drive success throughout the enterprise. But none of this matters without a plan to monitor, evaluate and improve the results of your strategy. Periodically reviewing how you are doing with stakeholders is, of course, essential for ensuring your strategy stays on track.

What happens when procurement organizations fail to achieve strategic relevance in the eyes of business stakeholders? I’ll share thoughts on this topic in a subsequent post, “ Strategic Irrelevance: The real cost of getting lost in the weeds.”

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  1. Joseph Omollo:

    This is definitely helpful

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