Publisher’s Note: We at Ardent Partners are still pretty jazzed from our second annual CPO Rising procurement executive summit, which we wrapped up less than 24 hours ago. It was an engaging, enlightening, and rewarding couple of days at the Harvard Club of Boston, and we’re all grateful to our community of procurement leaders and practitioners who attended and supported it. As we come down from the high of the event, we want to revisit the very notion of the Chief Procurement Officer and how the role has risen to such prominence….
Astronaut, athlete, movie star, princess, or president…whatever their childhood hopes and dreams may have been, it is safe to assume that today’s Chief Procurement Officers (CPOs) did not grow up dreaming that one day they would hold a C-level title as the leader of a procurement organization. In point of fact, the role of a CPO is a relatively new executive position; but that has not stopped it from quickly gaining in stature and impact.
An Emerging Role
When business historians reflect on the first decade of the 21st Century, the broad-based transformation that occurred within the average enterprise’s procurement department will be on the list of the decade’s top trends and highlights. This is best evidenced by the emergence of the CPO – sometimes called “Head of Procurement.” The creation of this procurement leadership role with true C-level stature and C-level access has been a validation of the impact that procurement departments have had and can have on the enterprise. It is also a clear indication of the increasing importance now placed on the procurement function.
There are many factors that impact the role and duties of a Chief Procurement Officer, including the industry, region, company size, executive orientation, and organizational design and reporting structure of the procurement department. External factors like the economy, business and global trends, and the supply base also shape the position. Broadly, the professional specifications of a CPO role (and the underlying skills required to perform in it) can be quite diverse. For example, CPOs of small procurement organizations often find themselves needing to perform in the role as a “player-coach” – someone who serves as the leader and “face” of the operation but also needs to do some of the team’s “heavy-lifting.”
On the other hand, the CPOs of large, complex, global procurement operations require a breadth of skills and experience that can rival those needed for any other C-Level position, so much so that many of these CPO positions offer annual compensation packages in and around the seven figure mark. While large differences can and do exist between CPO roles, there are also a common set of operating responsibilities and skills that are shared by a majority of CPOs in place today. Interestingly, while the path to a procurement leadership role is often enabled by technical and functional prowess, it is a CPO’s leadership, communication, and relationship-building skills coupled with a clear understanding of business fundamentals and an ability to offer insight in support of the development of business strategy that enables them to thrive and succeed in the role.
Professional Experience & Qualifications
The career paths of many of today’s CPOs have passed across similar terrain – an early post-undergraduate career in procurement (or finance) followed by some significant experience with a process-driven company or in a process-driven role and then spending several years in a procurement leadership role before ultimately becoming a CPO. The typical new CPO has been working in and around the field for between fifteen and twenty years with at least five years in a director/VP level position before stepping into the CPO role. A more recent career path that some CPOs have been able to follow allows them to bypass some early lower-level experiences and “earn their stripes” more quickly by working as management consultants with a focus on either procurement or process and/or by developing a very deep industry expertise before moving directly into a procurement leadership (not CPO) role and progressing from there.
The educational background of the typical CPO tends to be technical in nature (i.e. an undergraduate degree in business or engineering) that is often enhanced by a Masters degree in business or a specific technical field like engineering. While direct industry experience is seen as a very real benefit in the hiring of a CPO, it is not generally a prerequisite to an offer. What is often more highly-prized than specific industry experience is the experience of working within similarly-structured and similarly-sized organizations and having proven success in managing people. Finally, since most companies view their procurement organizations as either in need of a transformation or in the midst of one, proven success in driving change/transformation projects within procurement is seen as very valuable experience. Also worth mentioning is that one of the latest CPO hiring trends has been the move by many enterprises to bring in an outsider rather than hire from within their current ranks.
Aspiring CPOs, who are not currently on the career path described above should take heart that more and more CPOs are gaining their jobs in newer and/or less traditional ways. For example, more CPOs are beginning their procurement careers as middle managers after receiving an MBA degree. Ardent Partners’ research has recently found that approximately 75% of all enterprises with annual revenues of more than $250 million dollars have a single point of contact who functions as the de facto Chief Procurement Officer (to be fair, not all of these professionals have an actual CPO title or true C-level access). This broad diversity of enterprises that now have a “CPO” coupled with the increasing profile (and, in some cases, increasing compensation) of procurement and the CPO role should mean that more people with greater abilities will ultimately be attracted to the procurement function.
The procurement function has certainly evolved since the time of seminal business author and visionary, Gene Richter – accelerating along the way. The corporate usage and understanding of procurement has evolved and become much more sophisticated. With this rise in awareness have come greater responsibility and expectations and the need for more advanced and professional management of the procurement function. With broader executive access, some top-performing CPOs have recently moved into broader operational roles like CFO and COO; a few are even joining corporate Boards of Directors. This new trend will only serve to create much more interest in the procurement function and the CPO role and draw greater talent to them.
As we look ahead, one thing is clear – the CPO will continue to rise! Procurement’s impact on business processes, business relationships, and business results will continue unabated. The CPOs and other leaders at the helm will face daunting challenges, execute exciting strategies, and blaze new trails as they collectively continue to change what it means to become a CPO.