Procurement: it’s not just a job, it’s a passion. Our next CPO on the Rise in 2011 is a Chief Procurement Officer in the hi-tech industry, who in his own words is “passionate about procurement.” And he means it. Here’s how he describes what he is doing today:
“We’re building a world class global strategic sourcing organization and recruiting the best and brightest procurement and finance operations professionals around the world to join our team and drive success.”
That’s it, nothing more.
I love this Chief Procurement Officer’s passion and energy for procurement; honestly, I aspire to it (ardent, as in Ardent Partners, after all means passionate). I have known this CPO for several years and I have had the pleasure of watching him present at a few conferences too – it is clear that he and his team are well on their way to building a world class organization.
This ‘friend of the site’ splits his time between Europe and the US; but, since he manages a fast growing, global team, he is often out and about. I caught up with him a short time ago, as he was preparing for a trip to Asia, amidst a period of growth within his group and its activities that he labeled as “insane.”
He had just celebrated his another anniversary with his company, which he had joined as one of the first senior sourcing professionals, charged with building a robust and progressive sourcing and procurement function. Fast company growth is a big part of this CPO’s story and is, in fact, one of the major challenges that he and his team face in 2011. For example, this procurement team’s savings target has literally doubled year-over-year. Even if the category spend volumes are growing dramatically (and with them the savings potential), this type of performance growth requires smart decisions related to resource allocation and project prioritization, tight execution, and a plan to on-board talent that can support all of the above.
Our CPO has tight alignment with the CFO on what they refer to as “rate reductions” which calculates the difference between what the company is paying now versus what it actually pays in the next year using a total cost analysis. The methodologies used to calculate rate reductions are agreed upon in advance by Finance and the one-page “Value Analysis” that his team prepares is signed off by Finance. He discerns rate reductions from savings which he defines as the “hard-line, budget-impact numbers.” Since procurement does not control the budget, he believes that tracking budget-impact savings is not the best approach for procurement and the company since it can bog down the process and shift the focus away from the real value that procurement does deliver. “I couldn’t be happier with how we are evaluated,” he notes. “Our engagement with finance has been great, particularly with the Financial Planning and Analysis team where we can help them understand unit cost.” This is particularly helpful in the budgeting cycle for units that are growing so fast.
But cost is not the main focus of procurement at this company; the CPO says that “procurement has a cause to ‘add value’ to the business. How do we align with quality and cost? How do we support, or even drive, a changing business model.” The company’s CFO, who has ultimate responsibility over procurement, supports this cause which is helpful since other business leaders still have to be sold as there is no mandate to work with procurement. As a result, our CPO spends a good amount of his time selling the value to different business leaders and ensuring that they are kept happy by the work his team delivers. One interesting aspect of the lack of a corporate procurement mandate is that the sourcing team is more organized by business unit than by category.
Our friend and his team are in for another busy year – a few items at the top of their “2011 To-Do List:” hire rapidly and expand the team globally, manage more spend and source more spend, more effectively and much more quickly (beyond savings, spend under management and sourcing throughput are two major metrics that they are trying to grow aggressively); several new categories also loom large on the sourcing calendar. If his team shares even a sliver of their CPO’s zeal and delight in his work, they’ll do just fine.
We’d like to thank today’s CPO on the Rise in 2011 for his time and support.