Last week, we provided a discussion on embedding procurement within the business. Yesterday, in Part One of this CPO Case Study, we introduced a CPO who’s gone and done it (and, as you’ll see, done it well) – Ron Carcamo, Yahoo! Inc.’s Chief Procurement Officer (and friend of the site) – we also provided some of the back-story on the procurement transformation underway at Yahoo! (If you haven’t already done so, reading Part One is recommended, as it helps set the tone and context of what follows here in Part Two). Today we present the specific actions that his team took that when combined with executive support “operationalized” his strategy of embedding the procurement team in the business.

Recall from yesterday that the Yahoo! procurement team had made significant strides in recent years but still had a ways to go to reach Best-in-Class status when the financial markets unraveled. At that moment, business in 2009 appeared mighty grim. Never one to waste a crisis, Ron accelerated his plans to start “integrating” (we’ll use embed the rest of the way) his staff more closely with the business and took three primary steps to achieve his goals.

Step One: Get Close (Proximity)

Ron began with the difficult decision to physically relocate his staff and reassign their seats to be adjacent to their business partners. This was a symbolic move, but it was also a significant one. For the procurement team, this move literally meant moving to different buildings. By Ron’s reasoning, the mere proximity of his staff to business stakeholders would help bind them together. Ron asked his team to attend most, if not all, business partner staff meetings and all monthly and quarterly meetings with the EVPs. His team would not always have anything to add, but sometimes they did. What was most helpful to the procurement team was to learn about plans and projects months in advance of the actual need. Case in point: “In the past we would sometimes be given two weeks to complete a sourcing project and close a deal. Our involvement with the business started to change that. Early on, we found out about a very large IT project almost nine months before it was launched, giving us a much better opportunity to add value,” noted Ron. Ron knew they were onto something when several business leaders called him to check on why a certain procurement lead had missed a meeting. Missing the meeting wasn’t necessarily a big deal, being missed (and thus, being viewed as part of the team) was and is a big deal.

Step Two: Play Your Position

Once his team started becoming an active part of the larger business team, it had to ensure that it was on its best game, that it could inject itself into strategic discussions and into specific projects in a way that added value. Knowing and owning the spend data was instrumental in achieving this. With this knowledge in hand, his team was able to serve up opportunities at the EVP level, which by the way, is huge. In any job (in any company), when you are engaged at the right level and delivering value, the feeling is great. Having earned some initial credibility, Ron’s team then began to focus on the change management issues (the change in this case being procurement’s involvement and its introduction of a governance structure – more on that below). They also worked to educate their business partners on how to access and use procurement technology.

Step Three: Become an Extension of Finance

Probably because he comes from finance, Ron doesn’t have any of the usual CPO-CFO relationship issues. He also takes the departments’ alignment for granted and is happy to view procurement as “the execution arm of finance.” When his team became fully embedded in the business, Ron saw that an opportunity had been created for procurement to help finance become better engaged with the business and achieve its goals. So he leveraged the finance relationship and began participating in the CFO’s staff meetings. This led to a very strong working relationship between procurement and finance and led to the formal integration of finance staffers on actual sourcing projects.

Executive support

As prepared as his team may have been to “Search and Engage,” the results would not have been possible without strong executive support in four main areas:

• EVP alignment, sponsorship and accountability – Having a champion ensured that the EVPs and others in the business were receptive to the new faces in their hallways and new voices in their meetings.
• Spend optimization initiative – An external champion was needed to drive this project forward; the output of this initiative made the procurement team smarter and better prepared to deliver.
• Implementation of an active Governance & Project Management structure – Once the procurement team was engaged, it was able to introduce (with help from above) process rigor where none had existed previously
• Communication of success – Nothing succeeds like success, especially when the enterprise leadership is doing the chirping.

Quick Summary: Suffice it to say that the results were significant and highly visible within Yahoo! When Ron looks at the key differentiators in how his team was able accelerate procurement’s influence in 2009, the strategy to embed procurement in the business is a primary driver.

We hope you enjoyed this two-part CPO Case Study. Special thanks goes to Ron Carcamo for his time and for his willingness to share best practices with the CPO Rising readership.

Tagged in: Case Study, CFO, Chief Procurement Officer, Collaboration, CPO, People, Strategy, Transformation