I am glad that I did not have this unnamed Chief Procurement Officer and “friend of the site” for Freshman English. You are too. Trust me. You will see what I mean in a minute. Our focus today is on a Procurement Executive at a Fortune 500 company and our next CPO on the Rise in 2011. This Chief Procurement Officer was nearing the end of his fourth year in his current role when we recently caught up with him to talk about his priorities for 2011 and reflect on his journey as the head of a growing procurement department.
Over the past four years this executive has worked to transform an procurement organization that lacked a set of organizing principles related to scope of work, roles and responsibilities, and strategic direction. Visibility and controls were also lacking. Over the next couple of years, he led a multi-pronged effort to build, develop, and enhance the procurement department along its people, process, and technology areas. Some of the improvements included:
People
- Reorganized and right-sized the staff so that roughly one-third are focused on transactional areas while two-thirds of the team are focused on strategic activities.
- Aggressively pursued sourcing expertise. As he says, “We have gone out of our way to hire effectiveness. We looked for people with prior consulting experience, good analytical skills, and a strong client focus – people who can manage projects and present well.”
- He believes that “recruiting to achieve the right technical skills is less challenging than finding the right soft skills.” As a risk mitigation strategy, he likes using the “temp to perm” hiring model
Process
- Developed new policies and built them into the sourcing, contract and procurement processes, including a “No PO, No Pay” policy
- Introduced and instituted a standard sourcing process
Technology
- Developed a new commodity code
- Deployed a new eProcurement system – This CPO believes that all eProcurement systems have their gaps and issues but the keys are to work within those constraints and minimize customization. From a solution selection standpoint, this CPO recommends selecting the solution with “the least integration challenges” and “that ease of use and ease of maintenance must be balanced.”
As he reflects on the early successes of his team, he believes one key was to “deliver savings on a very limited number of low risk projects early in the transformation to instill confidence and to buy the time needed to get the transformation correct.” The strategy appears to have paid off as this fundamental transformation effort has led to some very significant value creation and quantifiable results. Among them, the team manages almost $30 million of spend for every FTE (full-time employee), has saved $200 million in contract savings, has near 100% compliance (98.7%) in eProcurement usage by the enterprise and a 92% “Above Average” satisfaction rating for the department’s operational engagement and level of support (as rated by the rest of the enterprise).
That sounds pretty good; but, when this CPO reflects on his team’s performance to-date and general maturity, he gives it “a 2.5, maybe a 3 out 5.” That’s a tough grade, from my vantage point anyway, particularly when you consider his team’s starting point. Some would trumpet the eProcurement adoption rates and general satisfaction grades alone as cause for celebration – they are no small achievements. But not this leader, he sees much more work (and opportunity) ahead for him and his team. We’ll focus on his key 2011 initiatives next time.
