Six things every procurement leader should be able to answer

If procurement wishes to take a seat at the top table, as a function it needs to be able to clearly articulate its role, value and status - on the spot.

Too often procurement can be found head down, in the middle of the latest cost reduction drive or category strategy. It will be reacting to and making sense of emerging demands and complex requirements, but not present enough, or in control enough to clearly communicate its purpose.

Here, we share the six things that every procurement leader should be on top of. Not being so means at best, that functional gaps exist, and at worst, there is a lack of business partnering ambition.

The six must-knows

Efficio has worked with hundreds of procurement organisations over the past 20 years, some great, some less so. Only the very best however, were able to clearly and compellingly articulate the following six things. Some of them, surprisingly simple:

1. Spend
2. Progress against key procurement measures
3. Awareness of ‘unwritten’ measures
4. Team motivation and performance
5. Digital strategy
6. Biggest market risk/opportunity

Here is why these facts and measures are so important, along with the key steps needed to progress understanding.

1. Spend

Such a seemingly simple fact but a baseline often thwarted by multiple or inaccurate financial systems, weak accounts or PO data collection and devolved, unmethodical categorisation. How do the lenses of addressable spend, influenceable spend or managed spend blur procurement’s understanding?

Without this data point, opportunities become harder to identify, or worse, phantom opportunities are pushed and fretted over that are immaterial or perhaps don’t exist. Savings don’t get measured, finance loses faith in the validity of numbers and compliance drops.

Whether your organisation pushes from the centre or prefers to pull the strings of collaboration, knowing what spend is out there is critical.

2. Progress against key procurement measures

As an organisational pillar, procurement is likely to have targets that support top-level business measures, be it year on year cost reduction, in-year savings or fulfilment accuracy. 

However, procurement can often be a black box where the results are not known until the end of a sourcing activity or when rebate accruals become clear. This uncertainty causes concern as governance escalates and pressure mounts – with procurement teams often having to react in an increasingly unstructured last-minute push for the line.

3. Awareness of unwritten measures

Whilst bonuses may be driven by meeting defined KPIs, it can be the unwritten measures or expectations that define procurement’s acceptance and success. Does the organisation value the ease of doing business with procurement above all else? Or innovation and revenue generation? Or the ability to be a trigger for CSR and environmental development?

Being able to understand the underlying mood and culture of the leadership team and wider business and then articulate it broadly is critical.

4. Team motivation and performance

For leaders, having a barometer on the team is essential to maximising functional effectiveness. Hard work spent on creating a vision and engaging with the organisation can only bear fruit if the engine is there to deliver it. If the team is not right, you’ll have failed before even starting.

To quote one of our clients, do they have the “Will” and “Skill”? Will addresses intrinsic and extrinsic motivation – the desire to perform and the incentive to perform. Skill addresses training in all of its forms, as well as best matching capability to task whilst supporting development.

As procurement evolves, these factors don’t remain constant. 

5. Digital strategy

Whether or not you see digital as the future of procurement or as an enabler, having the confidence to say what you don’t need as much as what you do, is critical. To accurately define the digital tools that would add value requires procurement leaders to understand not only how the team delivers value, but how they are currently limited.

It also demonstrates an understanding of market offerings, a desire to drive innovation, and hopefully builds credibility to make the business case for the right tech (rather than making do with a bolt on module of the wrong tech).

6. Biggest market risk/opportunity

Strategic advantage is born out of speed to identify risks and opportunities and then avoid or embrace them respectively.

As business pace quickens, driven by competitors, legislation, geo-political changes, media, technology – the list is long – there is never a time when there is no risk or no opportunity. Identifying these, prioritising them and actioning one or two at any time is key to driving procurements relevance and value-add within the organisation.

BAU delivery will help keep your organisation performing, but risk and opportunity management may transform fortunes.

We believe that procurement teams have a huge amount to offer the organisations they support and that, by taking a step back periodically to review core objectives, teams across the globe can continue to deliver value in all its shapes and forms. Hopefully these six things will serve as prompts for your thinking.