We are only in the early stages of our Chief Procurement Officers on the Rise in 2011, but before we resume, I wanted to highlight a few excerpts from my latest research report, The CFO and the CPO: One World Two Worldviews which looks at the opportunities and challenges facing these two C-Level leaders and their departments and makes a series of actionable recommendations that can help improve enterprise performance in the near-term and help build a foundation for a productive and thriving, long-term finance-procurement partnership.
The report is available from a few different sources listed at the end of this article – registration is required at each [Sidebar: We are doing some technical work at ardentpartners.com so we can centralize the distribution of our research. If you’d like to sign up for our newsletter which provides generally free access to our research, you can register for Ardent Partners’ research by clicking here].
Today’s excerpt looks at two “alignment drivers” for today’s CFOs & CPOs.
“The CFO-CPO relationship might be the most important relationship that exists or needs to exist within the enterprise.”
– John Paterson, Chief Procurement Officer, IBM
Today, the CPO and procurement department are better equipped to support the strategic objectives of the CFO and the overall enterprise than at any other time in history. This has been driven by the development of more advanced procurement capabilities and the utilization of powerful process automation tools which can support a wide-range of business objectives. As we will see below, these, and other factors, have also played a role in pulling these leaders closer together.
The current business environment is one that allows for much smaller margins of error and one that, for many enterprises, will mean a constant reevaluation of business processes and cost structures. This has helped align the focus and agenda of the CPO with the top priorities of the CFO and awaken the CFO to the opportunities that exist within procurement to support key enterprise initiatives. There are other large drivers and trends that have conspired with the business climate in recent years to help increase the alignment between procurement and finance. Here are two:
Supply Management Technology
One critical element in a CPO’s ability to lead a transformation effort has been the deployment and use of supply management solutions that automate different aspects of the source-to-settle process. These solutions drive efficiencies and enable procurement teams to become increasingly effective. They also provide enterprise-level visibility into spend, compliance, procurement processes and procurement performance. As more stakeholders from the lines of business and from the finance department access these systems for their own use to support their decision-making process (often done in concert with procurement) and to improve reporting, a greater awareness of procurement’s value to the organization is shared and understood. Specifically, the systems can help the finance department track spend and procurement performance and help it better understand and validate the relationship between cause (procurement action) and effect (value creation). For example, eSourcing tools can provide an enterprise-level view of sourcing projects (and their results) conducted over a specific time frame while Spend Analysis tools can help finance professionals better understand the amount of spend that procurement currently manages or influences and where opportunities for procurement to add more value exist.
Organizational Shifts and the Need for Increased Collaboration
The evolution and expansion of the CFO and CPO roles have served to bring these two leaders and their departments much closer together within the organization. Industry research shows that the CPO is more likely to report to the CFO than any other executive; as a result more and more newly opened CFO positions require at least an orientation towards procurement, if not an overarching competency in it.
Perhaps to counter the globalization trend that has scattered many workforces across the globe, enterprises by necessity have taken deliberate steps to break down walls between their different organizations and eliminate departmental silos, where they existed. When projects are able to draw from the strength of the group instead of the few, the results are likely to be improved. For example, numerous research studies have shown that the earlier procurement becomes involved in a sourcing project, the higher the savings and the better the overall project results. It is clear that the more proactive teams can be with one another, the greater chance of success.
The report is currently available from these four locations (registration is required)
Postscript: CPOs Go Bragh! (A little Gaelic, one day late)
