Over my 30 years in Procurement the function has come a long way. Many Executives have taken the function to new levels, contributing largely to the success of their companies. However, throughout my meetings with procurement executives one topic comes up every time. Whilst some have made enormous progress, others complain about not being respected within their companies. They do not have a seat at the executive management table, do not get the chance to talk to the CEO, and believe they are a mere fulfilment department for the requests of others in the company. They are certainly not seen as a true business partner.
Whilst historically procurement departments were responsible to serve the “internal customer” nowadays that role is not acceptable anymore. I have never seen myself in the role of serving “internal customers”. There are no internal customers. We all have the same customer, the one paying for products and / or services of our companies. All employees of the company get paid by the same employer for serving the same real customer. It is our joint responsibility to serve and satisfy them since our salaries are paid by OUR customers. We must move away from this dialogue and focus instead on the true end customer.
So why is it then, that procurement executives and their departments do not get the respect and recognition they are asking for? The honest answer may not be the one we like to hear. Maybe there is nothing to talk about, maybe there is no story to be told, nothing interesting to be shared. No wonder nobody is interested in getting to know more about the procurement department if all they are known for is making things more complicated and slowing processes down. As long as Procurement Executives ask for a mandate to do things they won’t make much progress. A pity if we have to force our way in instead of being asked to offer support. I prefer the pull principle over the push principle. In line with John F. Kennedy’s famous quote “Ask not what your country can do for you – ask what you can do for your country” Procurement has to ask the same question: what do our stakeholders really need and what is it we can do for them?
But how can Procurement rise to become a true business partner to all relevant departments in the company? There is no certain recipe, but there are ways to get much closer. In my experience the following 10 steps create the base for business partnership.
1. Maturity Assessment
It is absolutely necessary to understand how mature Procurement really is. Where are we on the maturity ladder? How do we compare to other Procurement organizations?
In order to find an answer to those questions consulting companies can provide maturity assessments and plenty of benchmark information. However, most of that information can be collected ourselves. Membership in Procurement associations, contact to procurement colleagues and universities, and internet research can help to gain a true understanding. Often though, an outside assessment is able to provide a “neutral” opinion.
Once we know how mature our organization is we have to ask ourselves where we would like it to be. A description of the “To Be” level helps to create a vision. Do not confuse a vision with a mere business mission. Whilst a mission is present-based the vision has to give an outlook into the next 5 or, even better, the next 10 years. Dream big! Dream the impossible…and start to work on your vision!
The vision helps to get the team aligned. But equally important is communicating it and explaining why it is the right vision. Once everybody stands behind the vision the creative level of the team will be incredible. Ideas are born, passion developed and team spirit created. This carries the organization forward.
4. Stakeholder Management
It is not sufficient to just get the team aligned. It is at least equally important to get our stakeholders informed and aligned. Consider their input and advice! What does it take to be successful? Where are the pain points? Where can Procurement support ?
Good stakeholder managers are in the position to build up supporters in the executive level – continuously. Mouth to mouth praise is extremely helpful.
In addition, keep in mind that Stakeholder management is not a onetime event. It is an ongoing exercise, 24 hours a day and 7 days a week.
5. Story Telling
Stakeholders do not necessarily buy into your vision without understanding what Procurement’s contribution to the company’s success is. “What have you done for me lately?” is a valid question, one that deserves an answer. What were recent success stories, how did we specifically support Manufacturing, Finance, Marketing, Sales or other functions in the company? Give precise examples. It’s all about story telling. Do good and talk about it! It is important, however, to be honest about mistakes and failures. As long as they happen once and lessons have been learned from those experiences, they can support everlasting and continuous performance improvement.
6. Awards and Recognition
A good way to build up a company’s reputation is by attaining external awards and communicating those achievements throughout the company. Winning an external award proves the capabilities of procurement and creates an external, independent benchmark. Who were the competitors, who was shortlisted and why was the award presented to the company specifically? The answers to that create another story for your stakeholders and build deserved pride in the team.
7. Continuous Benchmarking
Continuous benchmarking is a must. It delivers information about where we are falling short, where we are ahead and what could be done better. It is all about continuous improvement and ruthless comparison. Good ideas can be copied, bad ones avoided. Copy shamelessly!
Benchmarking must include all areas of Procurement: organization, team capabilities and education, tools and processes, communication, innovation, efficiency, effectiveness and so on. Nothing must be excluded.
Procurement is at the center of information flow within the company. It is where external and internal information come together. That creates a perfect base to constantly challenge the status quo throughout the company and provide new and better solutions to stakeholders and business partners.
Prerequisite is a good relationship with the stakeholders. Challenging the status quo must happen in the spirit of business partnership with the aim of contributing to the success of our business partners. If they are successful, Procurement will be successful.
The progressing Digitalization, and with it creation of new business models, gives Procurement a unique opportunity to establish new business processes contributing to the success of the company. Procurement at the intersection of internal and external informations rises to deliver business insight and foresight!
Often Procurement departments do not have clear goals and objectives. That is a mistake. Goals and Objectives must be measurable and aligned with business partners. Aligned goals support the spirit of partnership and describe the contribution of Procurement in detail, as well as forcing accountability. Being involved in the budgeting process and providing valuable input builds a perfect base for defining mutual goals.
Success can be measured and talked about. It motivates the team, builds reputation for the Procurement team and delivers stories to talk about.
Visual management is helpful, the creation of scorecards supports the communication of progress across the team and the company.
“A fish rots from the head down” is understood globally. The Leader of Procurement is responsible. Blame culture and whining cannot be accepted. An open door and open mind are essential for success. Team spirit is the slogan. We win together or lose together. I certainly prefer winning.