‘So, you’re our Cost Saving person then?’ says the CEO of company X. A short and outstandingly alarming sentence which appears to be a common theme within the Procurement community in 2016/17. Of course, many of the Procurement Professionals we engage with report that CEO’s and Execs completely understand the value of Procurement and its impact on the business, but it seems there is still the perception that Procurement focuses purely on cost savings.
We increasingly hear about Procurement ‘having a seat at the table’ with the Exec and Board and engagement levels seem to be at an all-time high compared to 8 years ago when I first started recruiting in the industry. This is also reflected by a lot of the organisations we work with having a mandate to work with Procurement on significant expenditure, but just how far has this understanding truly worked its way up to the Board?
Mark Ellis, partner at consultancy firm 4c Associates conducted a poll of 521 CPOs, managers and procurement personnel and 48% said their boss “still doesn’t get what the procurement team does or can do”. More than half (55%) said procurement was treated as a support function that existed to cut costs rather than add strategic value to the organisation.
“Procurement departments need to highlight to their businesses what services they can provide beyond cost cutting” said Ellis. “If all the [procurement] function does is speak in terms of savings then that’s how it will be perceived: as a cost cutter,” he said.
Ellis explains that procurement needs to adapt and demonstrate versatility if it wants to gain or keep a seat in the boardroom. Of course, all businesses have targets and numbers to hit and Procurement’s contribution will always play a major factor here, but also it should be perceived as a ‘value add’. This can be done by looking at innovative ways to engage the supplier base, developing and implementing processes and tools to raise purchase orders by the wider business – moving Procurement to an advisory and strategic function, not just a transactional one.
So perhaps next time you do see your CEO, you can initiate the introduction as the company’s strategic business partner? While you are waiting for the meeting to start perhaps shuffle your decks in the presentation and start on innovation or a new policy or process you are looking to implement. There will always be spend to tap into and costs to identify, it’s the perception of value add which will set you apart from your peers and provide you more engagement in the boardroom.