Posted 31st Mar
A large proportion of you may recognise this scenario – you are a head of the category (marketing in this instance) and during the budgeting cycle for the next financial year your business identifies the need to improve costs and identifies an amount of saving needed. The CEO turns to the CPO and informs him that the procurement department must deliver the necessary savings and to mobilise the team as soon as possible to make the savings. Slight panic then ensues which ultimately ends with you being given a savings target to deliver during the coming year. Difficult conversations with the CMO and their team then ensue, none of which want to see their budgets reduced. After lots of challenging discussions you manage to pull some sort of savings plan together and from then on you are constantly asked to demonstrate how you are delivering versus your plan. You regularly complete your savings delivery versus target spreadsheet which is aggregated across the Procurement team and reported to the Board.
A smaller number of you may recognise another scenario - you are a head of category (again marketing) and during the budgeting cycle for the next financial year your business identifies the need to improve costs and identifies an amount of saving needed. The CEO turns to the Board and informs them that each area of the business needs to identify where savings could be made and that the CPO and their Procurement team are there to support them in identifying and then delivering those identified savings. Slight panic then ensues as each business area cascades this message through their teams. You get a call from the CMO asking for you to please come along to their next team meeting to see how you could help them to develop a savings improvement plan across the marketing category. You dust off your annual category planning template and head off to meet with people who now see you as their new best friend. Using your procurement experience and marketing category knowledge you help the CMO and their team to develop a joint plan that not only delivers the necessary savings for the business but will ultimately make their day-to-day operations easier to manage as well as helping them deliver against their objectives. During the year, you meet regularly with the CMO to report and discuss your joint progress so that they can, in turn, report how they are delivering against their marketing savings targets to the Board.
Unfortunately, the first scenario isn’t as extreme or unusual as procurement professionals would hope and although the second scenario can and does happen there is no getting away from the fact that when joint accountability is put in place there are very different conversations that take place between category managers and their stakeholders, resulting in a much more coordinated and sensible approach to driving category savings targets.
The latest Future Purchasing Category Management Report backs this up with the need for “joint accountability for delivering category targets with stakeholders” being identified as one of the top 19 practices that organisations should implement to improve its category management. For example, only 31% of all respondents now have joint accountability for delivering category targets and Leaders (those who have embedded or optimised category management) are at 45%, so still have some way to go. This shows progress from just 36% in 2014-15.
The report’s analysis demonstrates that joint accountability is a top driver of performance but only 3 in 10 organisations have implemented it. There could be several reasons why so many organisations are yet to instil joint accountability as a fundamental working practice but one is highlighted in the two scenarios above – without direction from the executive management of an organisation to ensure joint accountability, it will always be more difficult for Procurement to work effectively with their stakeholders.
This can be especially true within the marketing category, particularly where budget reductions are expected, as many marketing departments believe they don’t have enough money to do everything they would like to do anyway so any threat of taking money away is always going to be viewed with suspicion. Setting joint targets puts much more emphasis and responsibility on to the CMO which then opens a very different approach.
Ultimately, the real answer is that most marketers don’t want their marketing budgets touched at all, but if their organisation has mandated that they need to be responsible for delivering cost savings or improving cost effectiveness it would be very surprising if the CMO didn’t ask for experienced people to help them develop and deliver a jointly-created improvement plan.
Joint accountability will only work if it is set as a business priority and has the commitment from all the executive team, with the CFO often being a key driver in setting this agenda, but they need to see the role of procurement as a facilitator and enabler of delivering financial improvements and not solely responsible for delivering them. But maybe before that can happen, procurement teams need to believe they should operate in that way too!
by Tony Squires