Here in part 2 we look at those hidden human traits often overlooked by HR & Procurement Professionals when building their ACE team:

Nurturing talent

Building people capability in procurement is not purely about sending people on training courses. Training can be an efficient approach for improving technical know-how, but the challenges that hold back most procurement teams in the workplace tend to relate to their ‘human traits’. Issues such as mindsets, behaviors, and organizational dynamics are key factors which can impact upon their relationships with stakeholders.

Development programs need to help buyers create the right thinking habits, ones that help them demonstrate more powerful behaviors to engage in relationships more effectively, especially with internal stakeholders and suppliers.

Mindset

In a CPO Agenda article “More than just the goalkeeper” the writers point out a crucial question to answer for procurement professionals wishing to have influence in their organization:

“who am I in this organization and what do I do?”

In considering this question one of the conclusions drawn is that the principal roadblock for CPO’s and the procurement profession getting to where they profess to want to be, lies in the minds of the very professionals seeking the change.

The article also rightly points out that, such attributions of blame are often self-deceptions and that in reality the main barrier to progress definitely lies within the CPO’s span of control.

In our experience, everywhere we go we find procurement professionals who profess to want the strategic remit, but display a victim mindset (“they won’t let me”) so I don’t try anymore. The resulting weak behaviors demonstrated by the victims is observed by stakeholders and their reputation of the procurement function is damaged. This needs to change.

Self-awareness is vital

A reliable assessment of your team’s attributes and capabilities is the best way to bring self-awareness of your team into focus. Personal authenticity and legitimacy are powerful characteristics for influencing people. Put more directly, procurement professionals must have the skills they profess to have, so until procurement professionals achieve a level of business acumen to influence at the top table, they may be able to dictate through their position in the hierarchy (ie, decide what their team does), but they will always find it difficult to influence the wider organization and the business agenda.

Fundamentally for procurement, the type of personalities they attract into the profession and whether they really have the crucial ambition to be more strategic is a critical factor for the professions continued development. Our iProcure assessment tool provides all the flexibility needed to assess the current knowledge, and mindsets of job candidates before you hire them and for your team once you have. It provides the most reliable baseline data needed to develop meaningful personal development programs to build your teams procurement capability.

Behavior

Strategically aligned behavior is critical to procurement transformation. Capability development must therefore make a direct connection between business objectives and the behavior changes needed to achieve those objectives.

There are two types of behavior:

1. task performance or in-role behavior (increasing efficiency)
2. contextual performance or organizational behavioral norms (increasing organizational acceptance)

At Purchasing Practice we have developed a joined up approach to building capability in procurement that recognizes the impact of the environment on individual performance. This methodology recognizes that skills and motivation are attributes of the individual, but they can only make a difference when the organization provides the appropriate context in which they can be applied. Behavior change may therefore have to be preceded by a change in organizational mindset (beliefs).

Without the change in organizational behavior learning application will be diluted at best, and the behavior change you’re counting on for new business outcomes may not happen. Personal assertiveness, ambition and creating a supportive environment, need to be a key part of the play book for CPOs and their team if they are to play a greater strategic role.

Personal Risk (The Brave CPO)

As many have found out the hard way (myself included) there are also personal risks to consider. Experienced CPO’s will relate to the sensitivity required, likening it to walking on eggshells when talking openly and frankly about strategic matters. It takes bravery to put your head up above the parapet in a chicken shoot.

Ultimately, however, although it is important to be sensitive to your environments culture and norms where there is uncertainty about the basic value of procurement, personal risk taking is central to being a good leader. If you are unwilling to commit yourself – when you know that there are personal consequences – it is difficult to ask others to do the same and ultimately failure is only delayed not avoided.

So the DNA of a successful procurement leader must seek to balance the traditional remit of control and cost minimization, with a willingness to take risks to deliver breakthrough results which add strategic value. This often comes at the cost of butting heads against some powerful stakeholders.

Good leaders will encourage their team to take risk of their own, and encourage those around them to seek answers and solutions; and they develop people who will lead (in their own right), not follow.

Nuff said.

Review part 1 here

If you would like to learn more about our capability development systems you can contact us at: info@purchasingpractice.com

“Yes, there are two paths you can go by, but in the long run.. there’s still time to change the road you’re on.”                                        

From: Stairway to Heaven by Led Zeplin   

Without a top level mandate, the CPO’s ability to prove procurement’s strategic value depends in part upon the degree of successful procurement integration that can be achieved with other stakeholders. Unfortunately, other functions will only truly integrate when the benefits resulting from such integration can be verified.

1.    Procurement has had a ‘good recession’

2.    Demand for Procurement Talent has never been higher

3.    Technology continues to open new doors for procurement

4.    Expanding influence and innovation are on the agenda

5.    It doesn’t matter if we have a boom or bust economy

“A brand is a promise. By identifying and authenticating a product or service it delivers a pledge of satisfaction and quality.” Walter Landor.

Why does Procurement need a Brand?

So if Procurement cannot clearly articulate its value proposition, don’t be surprised when your internal stakeholders don’t ‘get it’ and brand procurement as a “service function”.

How do you measure procurement’s brand?

A guide for CEO’s, CFO’s and CPO’s on why procurement is a key capability in developing advantage via corporate social responsibility

What’s in it for you?

Improved risk and reputation management in your supply chain

 Reading time:

15 minutes

Using Green to Stay in the Black:

Consumer Concerns

• were not produced using slave labour,
• had respected the environment,
• that the technology to produce them was acquired without corruption payments, and
• that the human rights of its employees and the local community had been protected, etc.

Linking CSR to Business Strategy – Leading via Reputation

Linking CSR to Strategy

CSR_Corporate Reputation

Procurements Role in CSR

• Understand your organisations exposure to CSR risk and the drivers for CSR
• Establish governance around CSR via an executive steering committee
• Develop category & supplier strategies around CSR
• Develop monitoring and reporting capabilities around CSR issues

Drivers

• risk management
• life cycle cost optimisation
• performance improvement and
• innovation and new product development

Sourcing Process

Relationship Management

Codes of Conduct

Education

• Proactive outreach – Co-operation, co-ordination, and collaboration.
• Developing environmental procurement policies and specifications
• Awareness campaigns of buyer requirements
• Helping suppliers with audits and assessments
• Helping with access to tools and information
• Mentoring and training suppliers

Audits

Exit Strategies

• Where would you go?
• Who owns what?
• What would you need that only your current provider has?
• Is it documented?
• How to keep the relationship on good terms?

Conclusion

First impressions

 “you have to take the internal customer along with you”, “you have to persuade them” “you have to get their buy-in first”

Support mentality

Words to lead by

    “To increase shareholder value by exercising our procurement expertise and leveraging group scale.”

    “To provide the optimal supply with the best possible quality at the right time, on budget and based on total cost of ownership.”

Business focus

Capability

Delivery

When does the procurement profession make the link to value?

The stage is set in the battle for procurements future:

1. Oxford Economics Study Summary

Static, Expansion, Contraction, Elimination (%)

Players Positions (%)

2. What does it mean for the future of procurement?

2.1 Introducing the players – scene 1:

Players Interest (%)

Ostriches

Empire Builders

Value Creators

The Grim Reaper

3. Call to action

Here we argue that procurement must first adopt the right self-image before it can convince others of its value:

First impressions

Procurement professionals are indoctrinated into the profession with messages such as:

 “you have to take the internal customer along with you”, “you have to persuade them” “you have to get their buy-in first”

But what if internal customers are wrong?

Support mentality

Procurement frequently defines itself as a “support function” whose status is derived by the amount of money it spends and the amount it saves. One reason for this is that procurement’s role is frequently not directly tied to key business goals. Instead, it is perceived to be about supporting other functions to achieve their objectives and reduce costs. This mindset undervalues procurement’s potential to influence strategy directly.

Words to lead by

One test of procurement’s esteem can be found in its mission statement (if it has one). Mission statements communicate a lot about the aims, aspirations and values of the function and provide a window on its self-esteem. Compare:

    “To increase shareholder value by exercising our procurement expertise and leveraging group scale.”

with

    “To provide the optimal supply with the best possible quality at the right time, on budget and based on total cost of ownership.”

 Which function would you prefer to belong to?

A compelling vision directly linking procurement’s role to the business strategy is one step to building self-esteem, but must also be backed up with . . .

Business focus

If procurement is to fulfill its potential, it must generate value. It does that by getting as close to the business as it can – by focusing on the business not supply relationships. The procurement function brings the analytic skills, enterprise-wide and supply chain perspective to influence the strategic direction of the business.

Capability

Only by building capability as the foundations for success can CPOs create respect and trust throughout the business. Building capability means putting in place development plans that build both hard and soft skills to lead teams and individuals who deliver results via procurement transformation.

Delivery

When well led, closely aligned with the business, actively engaging stakeholders and with the appropriate mix of leadership skills and technical strength, procurement strongly impacts business performance.The acid test of success is performance delivery in line with board expectations, which in turn should build the esteem in which the profession so rightly seeks to be held.

Nuff said …

The post The 'inner buyer': Raising procurement’s self-esteem appeared first on Purchasing Practice.

The executive in the organisation to whom the CPO reports plays a vital role in breaking down corporate roadblocks, setting priorities and supporting procurement’s profile within the business.

The CPO reporting relationship therefore has an important role in ensuring the effective contribution of procurement to organisational goals and strategies. Significantly, the reporting line sends a clear message regarding the importance of procurement.

For many companies the CPO cannot be a “true strategic partner” to the board if they are not directly a board member and instead relegated to a supporting role.

While the CFO or COO and CPO must be close strategic collaborators, in most companies the CPO should not report to these positions based upon key business drivers which I discussed previously.

Placing the CPO at the top table facilitates organisational alignment and helps avoid potential conflicts of interest arising when:

• The increasingly cross-functional nature of procurement requires independence from departmental politics
• Outsourcing decisions impact other areas of the business, such as finance or operations
• The CPO is seen as a potential successor to the CEO, as CPOs are increasingly seen as CEOs in training.

I have regularly stated over on Buyography my belief procurement needs a clear strategy for its future direction. Where do we want to be? What is the ‘end-game’?

Without a clear answer to this question the profession is left drifting along. As the phrase goes:

“If you don’t know where you are going, any road will take you there”.

This is not a strategy to ensure our future survival.

Nuff said …

The post Placing the CPO at the top table appeared first on Purchasing Practice.

The executive in the organisation to whom the CPO reports plays a vital role in breaking down corporate roadblocks, setting priorities and supporting procurement’s profile within the business.

The CPO reporting relationship therefore has an important role in ensuring the effective contribution of procurement to organisational goals and strategies. Significantly, the reporting line sends a clear message regarding the importance of procurement.

For many companies the CPO cannot be a “true strategic partner” to the board if they are not directly a board member and instead relegated to a supporting role.

While the CFO or COO and CPO must be close strategic collaborators, in most companies the CPO should not report to these positions based upon key business drivers which I discussed previously.

Placing the CPO at the top table facilitates organisational alignment and helps avoid potential conflicts of interest arising when:

• The increasingly cross-functional nature of procurement requires independence from departmental politics
• Outsourcing decisions impact other areas of the business, such as finance or operations
• The CPO is seen as a potential successor to the CEO, as CPOs are increasingly seen as CEOs in training.

I have regularly stated over on Buyography my belief procurement needs a clear strategy for its future direction. Where do we want to be? What is the ‘end-game’?

Without a clear answer to this question the profession is left drifting along. As the phrase goes:

“If you don’t know where you are going, any road will take you there”.

This is not a strategy to ensure our future survival.

Nuff said …

The post Placing the CPO at the top table appeared first on Purchasing Practice.

Here we argue that procurement must first adopt the right self-image before it can convince others of its value:

First impressions

Procurement professionals are indoctrinated into the profession with messages such as:

 “you have to take the internal customer along with you”, “you have to persuade them” “you have to get their buy-in first”

But what if internal customers are wrong?

Support mentality

Procurement frequently defines itself as a “support function” whose status is derived by the amount of money it spends and the amount it saves. One reason for this is that procurement’s role is frequently not directly tied to key business goals. Instead, it is perceived to be about supporting other functions to achieve their objectives and reduce costs. This mindset undervalues procurement’s potential to influence strategy directly.

Words to lead by

One test of procurement’s esteem can be found in its mission statement (if it has one). Mission statements communicate a lot about the aims, aspirations and values of the function and provide a window on its self-esteem. Compare:

    “To increase shareholder value by exercising our procurement expertise and leveraging group scale.”

with

    “To provide the optimal supply with the best possible quality at the right time, on budget and based on total cost of ownership.”

 Which function would you prefer to belong to?

A compelling vision directly linking procurement’s role to the business strategy is one step to building self-esteem, but must also be backed up with . . .

Business focus

If procurement is to fulfill its potential, it must generate value. It does that by getting as close to the business as it can – by focusing on the business not supply relationships. The procurement function brings the analytic skills, enterprise-wide and supply chain perspective to influence the strategic direction of the business.

Capability

Only by building capability as the foundations for success can CPOs create respect and trust throughout the business. Building capability means putting in place development plans that build both hard and soft skills to lead teams and individuals who deliver results via procurement transformation.

Delivery

When well led, closely aligned with the business, actively engaging stakeholders and with the appropriate mix of leadership skills and technical strength, procurement strongly impacts business performance.The acid test of success is performance delivery in line with board expectations, which in turn should build the esteem in which the profession so rightly seeks to be held.

Nuff said …

The post The 'inner buyer': Raising procurement’s self-esteem appeared first on Purchasing Practice.

The Brave CPO: Which path will you take?

The Brave CPO: Which path will you take? The start of 2011 has seen a debate about procurement’s challenges as the combination of austerity drives and economic recovery converge.
 
Some commentators say the profession risks falling back into obscurity once the recovery really gathers pace.

I share this concern, which was heightened by the recent SM Poll showing that cost reduction remains the number one priority for procurement in 2011.

When does the procurement profession make the link to value?

CPOs have enjoyed the spotlight for two to three years now, and have received increased influence as a result. They can now chose two path’s:

1. Continued cost cutting focus, or
2. Making the link to value.

Viewed in this light the results of the survey, which does not even mention making the link to business strategy, are disappointing.
 
With the exception of increased outsourcing and CSR, all the other priorities lay at the low end of procurement’s value chain, which “follow” rather than “influence” business strategy. This clearly needs to change with some urgency if purchasing’s fall back into obscurity and irrelevance are to be avoided.
 
So what is required?

Here are my recommendations to steer the right path:

1. Clear direction. If you don’t know where you are going any road will take you there.

2. Establish an unequivocal link to business strategy.

3. Market the “value” of procurement relentlessly.

4. Engage the business.

The key quality required to achieve this is leadership.

Procurement needs brave CPOs who possess the skills, courage and conviction to position procurement in a leadership, rather than support, role and to make the business case to build the required capabilities to operate at this level.

For those of you already working under such a CPO you should learn and absorb as much as possible before carefully considering your next career move.

For those of you unfortunate enough not to have a Brave CPO, I recommend you find one to work for – why not make it your new year’s resolution?

Nuff said …

Happy 2011.

The post The Brave CPO: Which path will you take? appeared first on Purchasing Practice.

Procurement is now front & centre of the business world. So when will CEO’s place it at the centre of their business strategy?

If ever there were a set of conditions to emphasize the procurement functions strategic place in business and the modern world, it is the current maelstrom of recession, sovereign debt, gathering inflation, political revolution and natural disasters. The impact of these event’s has sent oil and commodity prices rising, company valuations plummeting and halted the production of some of the world’s largest companies.

When supply fails as it has for many recently due to the problems brought about by Japans triple whammy of earthquake, tsunami and nuclear disaster, the consequences have become plain and evident. Companies such as General Motors, Apple, Boeing, and Caterpillar have all been affected. GM closed its Shreveport plant, whilst Apple & Boeing have suffered component shortages and hits to their stock price.

Even in the public sector procurement is in the news. It is has become the war cry of governments around the world to battle inefficiencies and reduce sovereign debt by adopting private sector style strategies to reign in cost, utilising a more central command approach via category management and strategic sourcing.

This rise to prominence during the current economic crisis shows that procurement is much more than the ‘engine room’ for business. Rather, it is positioned as the financial platform for sustainable growth, profitability and value creation. Procurement not only creates value by sustainably matching demand and supply, it also creates a platform for competitive advantage and differentiation by capturing innovation and scarce resources from supply markets.

Despite this dependency upon supply for sustainable value add, CEO’s the world over have made cost the priority for their CPO’s. Driving the trend towards; single sourcing, low cost country sourcing and extended supply chains with the associated increase in risk.

The key challenge for CPO’s now after these tumultuous events is to make the business case for a procurement strategy which goes beyond cost savings and is measured against a balanced range of business metrics.

Nuff said …

The post Procurements Value Add: If not now – when? appeared first on Purchasing Practice.

As the US Thanksgiving holiday reminds us all that 2011 is rapidly drawing to a close we take a look at five reasons for procurement to say thanks:

1.    Procurement has had a ‘good recession’

Recessionary times has placed procurement in the spotlight.  Whilst there has been company-wide belt tightening – procurement’s increasing influence over their organizations spend has increased almost across the board allowing them into new areas of the business. With its increased profile, procurement has become the ‘go to function’ for cost savings.

2.    Demand for Procurement Talent has never been higher

A recent report from The Chartered Institute of Purchase and Supply (CIPS) and Hays Recruitment, showed the number of procurement officer jobs had increased by 200%, with requirement for senior buyers growing by 110%. Additionally there were 75% more jobs available in procurement management during April to June 2011, reflecting the trend of procurement placements becoming high-level strategic function in an organisation.

3.    Technology continues to open new doors for procurement

The role of technology in driving procurement transactional efficiency has been highly successful. This has released procurement from a mundane transactional task focused role, to focus on developing its strategic potential. The increasing capabilities in technology enabled analytic’s are now allowing solution providers to channel their development efforts into creating solutions that drive increased value for procurement.

4.    Expanding influence and innovation are on the agenda

CIPS now offers training courses in expanding procurement’s sphere of influence. CPO’s are actively looking towards marketing techniques to develop value propositions and re-brand their function. CIPS has also recently published a guide entitled “innovate or die” further emphasising the professions desire to expand procurement’s influence from the ‘bottom line’ to the ‘top line’.

This is an encouraging indicator for the future development of procurement’s role.

5.    It doesn’t matter if we have a boom or bust economy

Whatever 2012 holds for the world economies procurement has the opportunity to build on its ‘good recession’. The great thing about a strategic approach to procurement is that it has a major role to play in good times as well as bad. A double dip recession is likely to continue the pressure on procurement to deliver savings. Whilst a slow recovery will still require a strong cost management focus, the better prepared procurement organizations will be able to adopt a wider set of metrics to measure their contribution to the organization.

Wherever your organizations sits this Thanksgiving don’t ignore the value your procurement organization can add to your business.

Nuff said …

The post Procurement Thanksgiving appeared first on Purchasing Practice.

Procurement Brand Development

“A brand is a promise. By identifying and authenticating a product or service it delivers a pledge of satisfaction and quality.” Walter Landor.

Why does Procurement need a Brand?

Procurement’s brand is arguably the CPO’s most valuable asset.

Procurement’s brand is the totality of how its stakeholders see’s, talks about, and experiences it. CPO’s must therefore have a clear view of how they wish to position and promote procurement within the organization which involves developing a strong value proposition.

If you were asked to give a 30-second elevator speech to define procurement’s value proposition, what would you say? I have asked this question of procurement people many times and, frequently find them stumbling over their words spouting statements about cost savings and vague buzz words such as ‘value add’. When pressed to define ‘value add’ their understanding of such jargon is unconvincing.

So if Procurement cannot clearly articulate its value proposition, don’t be surprised when your internal stakeholders don’t ‘get it’ and brand procurement as a ‘service function’.

A brand creates a unifying sense of purpose for procurement staff and helps build awareness among stakeholders of its value proposition.

How do you measure procurement’s brand?

Reputation x Visibility = Brand Strength

Therefore the better and more focused procurement’s reputation is and the greater its visibility with its target stakeholders, the more valuable its brand.

Nuff said …

The post Procurement Brand Development appeared first on Purchasing Practice.

It is becoming increasingly important that procurement is able to measure and report its impact on company performance, using metrics the CFO will understand and accept. RONA or Return on Net Assets, is one such metric.

RONA, is a financial measure that helps to express the relationship between profit, sales, expenses and total assets. RONA demonstrates how a company generates profit.

For example the impact of cost reductions, sales increases and inventory reductions are measured by RONA.

The goal of each company is to reach more sales at lesser costs by using fewer assets. Buyers contribute to this goal by keeping inventory levels low and by reducing costs and expenses.

Of course, there are many other important metrics that CPO’s must understand and use, but RONA provides a clear quantifiable measure of procurement’s contribution.

Nuff said …

What measures do you use?

Let us know

Learn more about procurements impact on company performance at the Purchasing Practice Academy

The post Measuring Procurements Financial Impact: RONA appeared first on Purchasing Practice.

Does your procurement strategy drive business success?

Strategic procurement drives competitive advantage by enhancing revenues and lowering cost.

Does your procurement strategy drive business success? Procurement can be said to be strategic in an organization, only if it contributes directly in the business planning process.

To do this successfully, however you first need a clear understanding of your organizations strategy:

• Is your organization following a Cost leadership, or differentiation strategy?
• What is your organizations growth strategy – new product launches, acquisition plans, divestiture plans etc?
• What make v buy decisions support your organizations value chain?
• At what stage of the industry or product life cycle is your organization and how does this effect procurement strategy?
• What are your organizations competitive priorities – cost, quality, speed to market etc?

When you have the answers to such questions you must determine if you have the right mix of capabilities to make an effective contribution and put in place development plans to close any capability gaps.

If you have the answers to all these questions and the capabilities in place to execute plans to make an effective contribution, then congratulations – you are already a leader in your field.

If you find yourself not able to answer all the questions and have gaps in your capabilities then you have an opportunity to develop your procurement capability and demonstrate procurement’s vital contribution to the long term success of your organization.

Very few CPO’s are in the fortunate position of contributing to their organizations success at such an aspirational level, but it is to such a level that the ‘Brave CPO’s’ out there must aspire, if we are to continue procurement’s drive to sit at the top table.

What are you doing in your organization to contribute at a strategic level?

Nuff said …

We welcome your comments

The post Does your procurement strategy drive business success? appeared first on Purchasing Practice.

Procurement Brand Management: What’s in a name? It sometimes seems so from the number of times the procurement press raise the debate about what to call ourselves. Procurement Leaders magazine (and the others) have repeatedly used the topic on their blog. In this article and this article, and this article, etc. It seems like a regular topic to fill editorial space, when in fact the purchasing press are as guilty as anybody in using multiple terminology.

Needless to say, I am among those who think we have better things to focus on – like adding value. Value is the key, and each company’s value chain is different.

Arguing about Purchasing vs Procurement does not really add value. What  about other names in common use like, Supply Management or Supply Chain Management and others?

Procurement could rightly be argued to be a part of the supply chain. Does this make procurement subservient to supply chain as a function? I don’t think so. It depends upon the  focus of the firm.

A firm level debate?

The discussion needs to take place at the firm level and so the debate to standardize terminology across all firms could go on forever – and quite frankly, alienate the profession with stakeholders.

What is important for practitioners, is to understand their role in their firms value chain and to make sure they contribute to it. To obsess about the name this is done under, is not the best way to enhance the status of the profession.

Linked to this argument is, to whom procurement reports? Again we see significant variation among firms. Should we report to the CEO, CFO, COO, CIO, or HR? I have seen them all – and this too, reflects the focus of  the firm and the potential for our profession to add value – and the maturity of the profession in the firm.

Value Chains

A further argument in this debate links the issue of our ‘name’ and ‘role’ together. If we think in terms of value chains where we ‘buy, add  value, and sell’, then we could argue for a ‘commercial function’, with  Procurement – Sales & Marketing, creating an integrated supply chain reporting to the same CXO. A Chief Commercial Officer for example. I have seen this also, and it worked very well. So this raises the possibility of the Commercial function.

Conclusion

In the end, it must be a good strategic fit with the firms value chain and reflect the ability of our profession to add value. This in turn is linked to the level of maturity, % of spend with external suppliers, importance of the supply  chain etc. So the important issue for CPO’s/Heads of function to focus upon, is to build the capability of its  staff to a level where they can make that vital link to the firms strategy and truly add value – under an appropriate name for each firm. With this capability achieved – the name will choose itself and become an irrelevant issue.

Nuff said …

If you would like advice on building capability and linking the procurement function to the business strategy to add real value from your procurement, send us an email at info@purchasingpractice.com

The post Procurement Brand Management: What's in a name? appeared first on Purchasing Practice.