[Publisher’s Note: Ardent Partners is hosting a new webinar. Click for details and to register “Game of Thrones: How a Strong CFO-CPO Alliance Can Command Top Performance” – July 25 @ 2 pm]
And now, back to our regularly scheduled programming:
As part of the research effort for our upcoming State of Strategic Sourcing report, I caught up with a Chief Procurement Officer who’s a ‘friend of the site’ and who had recently joined a large financial services company as its CPO. What follows is a partial transcript of our discussion (a part that did not make it into the report).
Andrew Bartolini (AB): Thanks for taking some time today to speak to the CPO Rising readership. I’m sure it’s a hectic time coming into a new position just a few months ago
Chief Procurement Officer (CPO): Happy to join you today Andrew. I really enjoy the site and your reports.
AB: Tell me about these early days at the New Co.
CPO: Well, to start, I didn’t realize it during the interview process but I have been blessed to report to a CFO who actually knows what a great procurement organization looks like. So right now, the keys are mine and I can focus immediately on what we need to do versus spending time selling a vision.
AB: So, where did you start?
CPO: I started with the team and asked them how we were doing in general, what works, what doesn’t and what metrics they were tracking. They told me they had saved $250 million last year and I nearly fell out of my chair. $250 million? Why was I brought here? But then I realized that they were basically counting lifetime savings over the entire contract, none of which was tracked to the P&L, none of which was communicated to the line of business, and none of which was scrutinized by anybody outside of procurement. And I realized we’d have to work on better metrics that can ensure credibility and work to reset expectations using a more realistic way of measuring and reporting our results..
AB: What metrics are you focused on?
CPO: The team is already tracking a large set of metrics – operational metrics like req-to-PO cycle time, things that are important to me, but not to our executives. We’ll need to make sure that we’re measuring correctly and reestablish a baseline.
AB: What metrics are important to your executives?
CPO: Savings is important but we’re also focused on other things. From a process standpoint, we’re focused on on-boarding suppliers and contractors faster. Today it’s a huge spend for us, but it’s also a huge problem – if we improve this, it will be very valuable to the business. I’m the CPO and it took us 10 weeks to bring on a strategic sourcing consultant for a 6 week project. I know that’s anecdotal, but if I’m having this problem, I’m sure the business is.
AB: How do you attack the problem?
CPO: The first thing you have to do is actually start measuring it. If you can’t measure it, then it’s hard to say that you’re improving. Part of what I want to do, what I am doing, and have done is to not only put in place how long it takes to do things, but also measure the quality of the work that’s coming through the pipeline. For example, with contractors let’s understand the structure of different kinds of projects – fixed cost, time and materials, are they paying on delivery or on some interval and then it’s getting into the statistics and applying procurement best practices to it – All to answer, how long did it take us and is the quality any good? IF we know this, we can start to move the dial on both [time and quality].
CPO: I am much more interested in measuring our baseline than I am in moving the dials. I think we are going to fix a number of things simply by measuring them. It will take time – the only people who care about these metrics right now, are the people doing the measuring for me. We need to change that without overreaching.
