Procurement transformation has become a familiar topic here on CPO Rising, particularly over the past couple of years when it has become increasingly clear that what got procurement departments where they are may not get them where they need to go. Ardent Partners believes that Chief Procurement Officers (CPOs) and other procurement leaders need to foster innovation at multiple levels in order to elevate the procurement organization and the enterprise as a whole to the next level of performance. Put another way, procurement transformation cannot and should not be attributed to any one particular factor; people, processes, technologies, knowledge management, and stakeholder relationships, each need to be regarded as causal – and instrumental, really – in driving forward procurement transformation within an enterprise.
Each of these variables is significant in their own right, and their importance should not be understated. That is why procurement transformation needs to be broad-based – it needs to account for each of these aspects in order for a lasting and successful transformation to take root within an organization. Thus, this series will examine each facet of procurement transformation in greater detail, and shed further light on what CPOs and their teams need to do to successfully implement a holistic procurement transformation project. Today’s installment will focus on knowledge management best practices to ensure that all relevant stakeholders can access the information they need, when and where they need it.
How to Transform Procurement in Five Steps – Step Five: Internal Stakeholder Engagement
For the modern CPO and procurement team, the term, “stakeholder engagement” can and should be applied to two different constituent groups: internal stakeholders, like AP/Finance, HR, Legal, Manufacturing, and Product Development; and external stakeholders, namely an organization’s suppliers. Engaging with internal and external stakeholders early and often throughout the sourcing process is ever more critical given that procurement’s role continues to converge across the enterprise into traditionally siloed groups, linking enterprise and procurement success; and that the role of suppliers in delivering value and mitigating risk continues to increase. As such, this article will explore stakeholder engagement in two parts – internal and external stakeholder engagement
As CPOs and procurement leaders become increasingly involved across the enterprise, the first few things that they need to do are to introduce their vision of procurement, the impact that they intend to make, and to win early buy-in from their counterparts. Because procurement has traditionally been siloed, even marginalized, within many enterprises, it is essential that CPOs hit the proverbial reset button and lay out their vision for a world-class procurement organization. They need to set or reset the narrative with their counterparts and recruit them as fellow change agents within the context of their broader transformation strategy. Of course, the longer that a procurement or purchasing department has been marginalized or regarded as mere order-takers, the longer and harder the CPO is going to have to sell their counterparts on their vision of procurement in order to win their buy-in.
Here, buy-in is much more than just a vague sense of support for the work that a CPO and their team are doing. It is the intent to work with each other on a host of shared interests and goals, not the least of which is the success of the enterprise. With “skin in the game,” internal stakeholders like CFOs, HR directors, head counsel, and other business leaders will mutually understand that the success (or failure) of the CPO and their team is dependent on communication, collaboration, and alignment, and vice versa. If all stakeholders believe in the plan to transform and they invest their own time and resources in contributing to its success, then the plan is much more likely to succeed than if they had nothing invested.
CPOs need to drive a culture of regular communication and mutual collaboration across the organization. This includes attending regular meetings with other departments, joining kickoff calls to cement procurement within the foundation of the project, and embedding with other departments in order to build cross-functional teams and extend procurement’s reach and value. CPOs also need to align themselves with these departments in terms of processes, technologies, goals, measuring performance, and especially on how to define success.
- Process alignment helps to ensure that procurement and their constituent stakeholders have compatible workflows that support each other’s role and do not undermine it. The earlier that procurement becomes involved in a sourcing event or transformation project, the earlier it can align itself with others on the process and the more cohesive that process will be (whereas latecomers may not “gel” as easily as those that were involved from the get go).
- Technology alignment makes procurement transformation easier than if all or even some of the constituents were on disparate systems. If technology adoption is part of the transformation plan, then it is vital to understand how or whether it will be compatible with other business units, particularly those “downstream” in AP/Finance, or “upstream” in Legal. Technology alignment can be tricky, particularly within organizations that experience technology adoption in waves or in piecemeal. But if CPOs and their teams are able to align technology systems upfront, say, with an enterprise source-to-pay suite, then it is much more preferable than going it alone.
- Aligning goals, performance measurements, and definitions of success is perhaps most important in the grand scheme of things. In order for procurement transformation to succeed, procurement has to be supported across the enterprise, particularly as its influence and reach expand in parallel. Things like placing more spend under management, working with more low-cost or strategic suppliers, driving greater contract compliance, managing risk, and other procurement virtues need to be taken as shared, enterprise-wide goals and ways that the enterprise measures performance, not just procurement. At the end of the day, all of these goals and measures (and more) contribute towards not just the success of the procurement department, but the enterprise as whole, and that needs to be recognized from the start.
Final Thoughts
There are many moving parts within the organization, and as CPOs and their teams touch more and more of these parts, it becomes increasingly important for them to communicate procurement’s value procurement and the vision for its future within the organization. The time is now for CPOs and their staff to assume lead roles within their organizations and propel procurement and the enterprise forward. But to do so, they will need to walk across the hallway, collaborate and communicate with others like they are in this together, and then align themselves to one another to prove that they are in this together.
RELATED RESEARCH
Transforming Procurement in Five Easy Steps
Transforming Procurement in Five Steps: Step One – People
Transforming Procurement in Five Steps: Step Two – Processes
Transforming Procurement in Five Steps: Step Three – Technology
Transforming Procurement in Five Steps – Step Four: Knowledge Management
