Procurement in Practice: American Red Cross CPO tells how he crafts a ‘shared vision’ with his team, stakeholders (part 2)

We’ve been talking with Tom Nash, CPO of The American Red Cross, about his advice to new CPOs, having carried out successful initiatives in his four CPO and CSCO roles within four very different industries). His candid wisdom about his experiences (including global process owner for procurement at Shell Services Company) and how he applied them to his early days as the new CPO can be read in part 1: American Red Cross CPO has key request for each stakeholder — ‘Come to me directly with any problems.’

In part 2, we ask him: Given that organizations can sit at very different levels of maturity from a process, automation, talent and communications standpoint, where does the new CPO start?

Getting everyone on the same page

One of the best pieces of advice Nash received came from a previous CEO who told him not to make any major changes for the first three months: no major staff decisions or major organizational changes unless absolutely necessary, just to go out into the business and listen and understand. “In other words, follow the Covey principle – ‘Seek first to understand,’ ” Nash tells us. “I thought that was pretty good advice.”

“So after my first week in the chair and after I’d conducted my one-to-one discussions, and listened and observed, I sent a note to my whole team. The note asked for their patience while I settled in, it told them what my observations were, and it laid out what I think I’ve learned from them — because I want to make sure I have that right. And I gave them the opportunity to correct any misunderstandings.

“Now this communication is important, because for any new CPO it is never as simple as following a standard playbook because every situation is different. Again, make your approach fit-for-purpose. And be careful to determine whether your new boss wants an evolution or a revolution. In any event, you don’t want to repeat the past, but you do want to respect it.

“Typically,” he explains, “I draft a 120-day plan based on my limited due diligence; what I plan to do in the first 30 days, the next 30 and so on. This includes a written ‘statement of direction’ based on current reality and early vision of where the organization should be going. It’s not perfect and there are gaps, but it’s a good place to start. I share this draft with my team, my boss and my stakeholders to have them help me shape it so it becomes a ‘shared vision’ of what procurement should be. It’s important to do this after the first few weeks and after you’ve had those conversations, so it’s fresh. And the key is — you share it.

“The plan contains some basics, like understanding how the business operates, meeting with key people (which you’ve already done), developing a statement of direction, because people want to know what your agenda is. And other parts of it are pretty specific, but that’s where the gaps are. So how do you solve that? You create it in draft. Then you explain to the teams, both direct reports and senior stakeholders, that they are going to help you shape the specifics, because it’s not Tom’s agenda, it’s ours. Taking the first stab is my job, after that it’s everyone’s job, so be sure to make that known in the disclaimer.

“This sharing avoids people wondering what you’re doing and what you’re going to do, and it gives them a written document of the direction that is to be refined over time. It talks about the what, why, how, when, who and for what result. It includes clear, written expectations of the team and clear, written ‘critical few’ measures of performance. Now everyone’s on the same page.”

Being helpful to stakeholders

As Nash said in part 1, his first question of the stakeholders is “what advice do you have for me?” To which the answer has consistently been “be helpful,” because if the business leaders don’t see you as being helpful, they are less likely to support what you do.

He explains that there are co-layers to that learning.

“It’s something I didn’t learn about at the beginning of my career. It was one of those holes that you fall into before you learn to do things better. I realized that I needed to do more than just meet with these senior business leaders occasionally, I needed to have regular calls with them, at least once a month or so. The call is only 15 minutes’ long, but it is a regular chat, executive dialog if you will, with each senior stakeholder. The purpose of each call is to share anything that has come up that month that affects them or their business, and how they can help (even if it’s just to make them aware). Then I turn the mic over to them and ask: Is there anything I can help you with?

“In my experience the stakeholders love this — it’s something not many CPOs or business leaders do, but it’s appreciated and sets the right tone of mutual respect. The trick is, you must make these regular, have them in the diary a year out, so they become commonplace and expected each month.”

He says this is important because “it’s a style thing.”

“Most organizations and the senior leaders within them have their own way of doing things,” Nash says. “It took me a while to get used to this, and it can be uncomfortable at first because the onus is on you to initiate the calls and have an agenda that is a good use of their time every month — it’s not a chat about the weather. I’ve been doing these calls for four years now, and we have an executive dialog about things that will impact both our organizations. Right at the start of my time here, I asked the senior execs what they expected of me, and they answered: ‘Keep me informed.’ So I am fulfilling that promise.”

The intimate nature of these conversations gives the stakeholder an opportunity to mention things that might not come up at the board table. And for that reason, Nash has encouraged his direct reports to do the same with their stakeholders.

“It takes practice,” he says, “and a different mind-set, but it’s a simple and practical approach that pays dividends — and the stakeholders love it.”

The same end game

“At the end of the day,” says Nash, “I’m here to help the business improve its performance. We cannot be successful as a function if the business isn’t successful, and vice versa.

“It’s always good to keep in mind that the role of the CEO and the presidents is to run the business, make the decisions and own them. The role of the CPO and the team is to ‘propose and facilitate,’ and the business’ role is to ‘decide and own.’ These are two very different things. We propose the procurement/supply strategies based on facts and benchmarks that influence the business to make good business decisions. We do this by providing the business with practical and meaningful options, with the pros and cons of each option, but it’s the business that is ultimately accountable for the decision they make or option they choose.”

Nash gives an example to help put this in context:

“A CPO tells the board they are contributing by facilitating financial improvement. But the businesses say they can’t see that money in their wallets. So, the interpretation is that procurement is sharing fluffy numbers that aren’t real/money doesn’t show up in their wallets. Now, if they don’t see the money and if the money is truly real money, there are only two places it can go: It gets spent on something else (because business had authority to do that) or it goes directly to net income.

“So what do we do? When the business agrees on a P&L improvement strategy, then the business has to validate the results and confirm they can see its positive impact in their P&L statement. Most organizations leave this up to Finance, but Finance can’t explain where the money went — the businesses can. So once the business has agreed to the dollar amount that procurement and supply management have facilitated, then business has to be accountable for what they did with the money; they either spent it on something else/re-invested it or it went directly to business net income.”

Many CPOs and finance leaders simply “command and control/sweep the budget” of the financial improvement and believe this is the only way to control the money that is saved. Nash believes a better approach is for the business leader to be accountable for what he/she did with their money and that way, neither the CPO nor Finance needs to be a police officer ensuring the business doesn’t spend the money that everyone agreed was indeed saved.

“This is a level of clarity and simplicity that is really important to put in place, because once the businesses agrees to do this, they will stand by it. Simply put, neither Procurement nor Finance should want to be perceived as the police; we’re facilitators and influencers, not guardians of the business’ money box because very simply the business has to be accountable for how they wish to spend their money, and that has been a key learning for me.”

Spend Matters is grateful to Tom Nash and The American Red Cross for such candid and helpful insight. Look out for more CPO stories in the rest of our series: Procurement in Practice.