Forces are combining to align procurement and finance. For example, the evolution and expansion of the Chief Financial Officer (“CFO”) and Chief Procurement Officer (“CPO”) roles have served to bring these two leaders and their departments much closer together within the organization. Ardent Partners’ 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.
And yet, despite what one presumes would be easy access via a direct reporting relationship coupled with a widely shared view by a majority of CFOs that procurement has become more strategic over the last three years, getting on the CFO’s agenda remains a challenge for many CPOs. With an ever-expanding role, CFOs must choose their battles and guard their time wisely leaving CPOs to vie with their functional peers for the time and focus of the CFO.
Nonetheless, as CFOs and CPOs continue to face many of the same challenges in expanding their roles and influence within the enterprise, tighter collaboration between the two can open opportunities for each leader to leverage the success of the other to mutual benefit.
Here are six strategies that CPOs can (and should) use to engage their CFO:
- Strategy #1: Know Your (Starting) Place, Improve it: Assess the level of engagement the procurement department currently has with the larger organization (frequently engaged, viewed as a bureaucratic pariah, something in-between, etc.); understand procurement’s relationship with the finance department (regular partners, ad hoc, for budgeting only, etc.); evaluate the CPO-CFO relationship (direct report, strong partners, limited interaction). Now set in motion a plan to improve all three.
- Strategy #2: Cash In on Cash Management: Perhaps it’s my Italian heritage but I believe that a cash gift is always in good taste. The CPO has many tools to improve financial agility and deliver more cash to the enterprise among them an ability to negotiate better payment terms, deliver cost reductions (with TCO analysis), improve contract compliance, manage demand, reduce supply holding costs, and improve process efficiencies.
- Strategy #3: Collaboration & Cohesion: Remind the CFO that procurement and finance already partner (or should be partnering) across the P2P and build from there.
- Strategy #4: Flattery, by Imitation: The procurement team can and should model finance’s approach to its activities by knowing its numbers (performance metrics, budgets, etc.), acting with precision, emphasizing quantifiable metrics, and developing financial acumen.
- Strategy #5: Supply Chain Risk & Reward: Globalization has increased supply risk, take a lead role in helping the enterprise identify and mitigate it. Innovation has created greater potential rewards from supply chain, take a lead role in finding it, harnessing it, and bringing it to market.
- Strategy #6: Strength in Numbers: There’s great strength to be acquired by teams that consistently hit their numbers. Make sure the performance goals are in focus for the whole department.
For many CFOs, procurement is making a greater impact on a wider range of business objectives and metrics but the relationships can always be improved. It is incumbent upon the CPO to build a strong (or stronger) relationship with the CFO. CPOs should consider using the six strategies above as ways to make that happen.
Interested in topics like this that matter to the CPO, consider attending our CPO Rising 2016 event in Boston on March 29 & 30, 2016. Registration is now open.
