There is no better time than now to be a procurement professional. Currently, many of us can relate to talent crunches and new pressures. We’ve all encountered headaches and extra work from supply chain disruptions throughout the pandemic too. Yet, these changes are providing a greater opportunity for procurement practitioners to change the way we work, think, and measure our impact within the organization.
I recently had the pleasure of participating in a Phillip Ideson-moderated Art of Procurement webinar - Resolving to Escape the Restraints of Cost Savings in 2022 - with my colleague and friend Greg Anderson.
We had an in-depth discussion on the changing role of procurement within many organizations and how that impacts how success is measured. We are seeing not only a greater emphasis on the importance of digital transformation, but an increasing willingness to evaluate the impact procurement can and should have on the larger business. As Greg suggested in the webinar: “The biggest trend is that procurement’s importance is on the rise.”
I couldn’t agree more. When we talk about procurement transformation, we are talking about the entire procurement ecosystem not just digital transformation. We need to ask:
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Do we have the right talent in place to be as strategic as we need to be and how should we adjust our talent management strategy to meet changing needs?
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Do we have the capacity necessary to engage in meaningful and sustained strategic conversations with our stakeholders?
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Do we have the best operating model in place that automates what should be automated to free up resources to devote to larger, more strategic priorities and initiatives?
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Do we have the proper supplier mix and mindset to drive innovation and solutions for our business needs and challenges?
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Do we have a positive user experience that encourages people to engage with procurement?
Focusing on these core areas will help procurement drive value for the organization beyond simple cost savings. Because when you ask these questions and design a process and ecosystem that makes procurement easy to engage with “some magic starts to happen” as Greg says.
Again, I couldn’t agree more. It’s 100% about business alignment. We need to put in the work to share our vision with our stakeholders. Open their eyes to a new way of collaborating with procurement and help them envision the impact this partnership can achieve for their strategic and growth goals. Further, this may require your organization to consider splitting into two functions with upstream and downstream components separating to create improved focus and drive greater value. Upon making this decision, it’s important to revisit your vision for procurement and consider your stakeholder’s user experience with the department.
A key to sharing procurement’s vision is choosing our words carefully. Procurement has traditionally focused on cost savings and spend-under-management. These are important to us, but not necessarily important to our stakeholders. Stakeholders instead want to know how procurement is helping build their business. The fact that we have different metrics that we’re measuring by than the stakeholders in our own business is, I think, at the core of the problem.
But what can we do to change the conversation away from cost savings? Procurement has been measured by savings primarily because it is such a tangible thing to measure, says Greg, but “procurement people need to become more comfortable with having measurements that are different and sometimes not as clear as savings.”
I would argue that we can slowly shift the language from that of cost savings to instead focus on being fiscally responsible or being a good fiduciary for the business. This subtle change in perspective can help move toward more strategic language and metrics. While procurement was the group that originally introduced cost savings and spend-under-management as key metrics, we need to show how we have evolved. One way to do that is to highlight how procurement serves as a portal for the many suppliers who are bringing knowledge and innovation to your organization.
“Shift [the discussion] on suppliers from dollars going out to knowledge and innovation coming in.” – David Clevenger
We should move away from the expectation that the supplier community we engage is simply about delivery of goods and services and instead begin to focus on the innovation it brings to an organization – and the innovation we help uncover through our supplier partnerships. Procurement is uniquely positioned to drive that supplier innovation and construct guardrails around that relationship.
Alternative metrics to cost savings should be customized to the project and stakeholder objectives to ensure procurement’s expanding value is captured and appreciated. It won’t be as clean and precise as dollars saved, but it will be more meaningful and impactful for the business
“When you look at measurements…if the role of procurement is changing than the way the performance is assessed has to change as well.” – Greg Anderson
At the end of the day, if all systems are working in concert to achieve the objectives of the organization and if procurement is playing a part, they should also get a share of the credit.
And with that, I will leave you with two thoughts on what we think the priorities for 2022 will be. Greg says it will be to rethink what procurement can do for an organization. I say the priority will be innovation. In addition, being a more strategically impactful function focused on growth and innovation rather than savings generation, top talent is more likely to pursue a career path in the procurement space – which will help all organizations achieve those 2022 goals and stakeholder promises.
To gain more insight and detail on our thoughts on this topic, listen to the full webinar. You can also download our whitepaper on how you can improve your current procurement operating model to achieve the strategic goals of your organization in the year ahead.