Recently I listened to the live webcast from the CEO and CFO of one of my clients and was struck by the tone and language used both by the presenters, and the questions the Analysts used. Just over 3 months earlier a profits warning had been issued, and here they were talking about a return to steady growth in current activities and talking passionately about new business growth in new markets.
Which got me thinking. In the same organisation the procurement leaders talked incessantly about saving money: targets were set for the team, entirely focussed on savings, and only focussed on P&L savings until we came along and suggested a few other ways of looking at procurement contribution such as cost avoidance, added value and increased revenue. However it was the cost down – or P&L saving – that was easily the most measured by this organisation. The leaders felt this was because this was the only one that mattered, the only one that was ‘real’ and felt their teams were fully aligned with them on that. I had my doubts – (I suspect the teams simply did what the leaders valued – such a pity that Leaders don’t take the time to listen to their people more – more on that in another blog). Crucially, however, there is a learning here. Clearly the business was entering into cost cutting and savings programmes as a result of the profits warning, but their communications to Analysts made the merest hint of a mention of it. The entire focus was growth, and how the business will be expanded and what the future state will look like. A journey of change, of interest, of increased revenue and of increased profit. This is the stuff the Analysts were keen to hear.
When CEOs and CFOs talk to me about procurement, they know that something needs to change but they can struggle to pinpoint what it is. Often, they recognise their current procurement people may be good negotiators who’ve saved them a lot of money, yet they know they’re dissatisfied but can’t articulate why. I talk to them about 10 capabilities that a good procurement function brings to support the organisation and explore where they think their business is. These are:
1. Business Alignment
2. Structure, Governance & Operating Model
3. Leadership, People & Team Strength
4. Process Excellence & Capability
5. Category & Supplier Value Management
6. Supply Chain Reform
7. Rightsourcing – Out/In/Off/Near/On & Low Cost Country Sourcing
8. Risk Management of Supply Chain
9. Product, Process & Relationship Innovation
10. Ethical Sourcing & Corporate Social Responsibility
Note that not one of these talks about savings, yet clearly all of them will drive value for the business. The emphasis of my discussion is far more about Leadership, Structure, Rigour, Governance and Risk. It’s about working more inventively, quicker, better, together. It’s about a business process, not a procurement process.
This is the stuff that resonates with CEOs and CFOs, so next time you prepare yourself for a presentation to the board, reflect for a few minutes. Talk about savings, you may be viewed as pedestrian offering the same thing you always have, talk about some of these things and you just might find yourself landed with a whole heap of interested follow up questions.
Tell us about your experience in the comments below. Perhaps you’ve come as a new Director or CPO and added some wider thinking for the board? We’d love to hear what worked for you.