Editor’s Note: Today and for the next few weeks, we will feature a series of articles based in large part on Ardent Partners’ flagship research report, CPO Rising 2016: The Art and Science of Procurement (click to download). This benchmark report, sponsored by SAP Ariba, is based on the experiences of 331 Chief Procurement Officers and procurement practitioners. Today’s article is a preview of the report and features primary research data, analysis, and insight into current trends in procurement and supply management. Enjoy!
In 2016, 34% of Chief Procurement Officers (CPOs) report that their procurement department’s overall focus and resources are aligned with enterprise resources, whereas 56% of them report partial alignment and 10% report no alignment. two out of three CPOs in 2016 lack tight alignment between what they are working on and the overall objectives of the business. This is problematic for many CPOs and procurement teams, particularly those that struggle to overcome emerging pressures, like better communicating value and performance (33%), increase effectiveness and influence (23%), and increase the percentage of spend under management (21%).
For CPOs and procurement teams, poor business alignment is remarkably similar to having a car that is out of alignment: it creates higher levels of resistance (organizational friction), causing greater wear on the tires (waste of resources), and lower fuel economy (inefficiency). Over time, poor alignment can also create larger and more serious engine (department) problems. It is a problem that should be addressed sooner than later, as an ounce of prevention is worth a pound of cure. Here are three high-level strategies to foster greater procurement alignment with the rest of the enterprise:
- Engage the CEO and other top-line business leaders: Starting from the top and working down, CPOs need to understand the CEO’s view of the business and procurement’s role in executing enterprise objectives. It is what Uno’s Pizzeria and Grill CEO/President, Louie Psallidas, describes as “The Commander’s Intent.” The CPO and his/her lieutenants need to be on the same page as the CEO, including enterprise goals, objectives, strategies, and how to measure performance. If they are not aligned with the CEO from the start, it is hard for the CPO and his/her staff to succeed.
- Engage line-of-business leaders and practitioners: From there, CPOs and procurement staff need to look to their right and left in their quest for greater enterprise alignment. If the CEO has set the agenda and the path forward, enterprise stakeholders have set the pace and have the ground-level perspective that the C-suite might not. In short, they can be very valuable allies. Fortunately, 46% of CPOs believe that improving collaboration with line-of-business leaders is a top strategy. CPOs and their teams need to invest time and energy with their peers in order to build and foster these relationships.
- Engage strategic suppliers: In 2016, enterprises are increasingly put at risk by the conduct and reputation of their supplier base. If an enterprise stakes its business case on progressive ideals, like being green, sustainable, or ethically sourcing goods and services, then it is the responsibility of the CPO and his/her staff to ensure that their sourcing and procurement activities are aligned with the enterprise mission. If they are not, the disconnect can tarnish a brand (think Chipotle). Thus, it is imperative that CPOs and procurement teams engage closely with their supplier base – vetting, auditing, assessing performance, etc. – in order to ensure that they are consistent with enterprise values.
Like a car that goes without maintenance for a long time, or one that suddenly jumps a curb, a procurement department can become misaligned over time or over night. In such cases, it is imperative for the CPO to realize that his/her team is going astray and decide to realign the department with the enterprise. Executing a three-point strategy to engage the CEO, line-of-business leaders and practitioners, and the supplier base is an effective way to get the department back in the right grooves. From there, the CPO and his/her staff can work with all three sets of stakeholders to understand goals, objectives, and best practices that align with everyone’s values.