The CFO-CPO relationship is and always will be very important. Last week, Valentine’s Day gave millions upon millions of people the opportunity to focus on their most important relationship. This week, CPO Rising is giving thousands and thousands of Chief Financial Officers and Chief Procurement Officers the opportunity to focus on one of their most important relationships. Let’s examine this “very special relationship.”
Marriage of Unequals (1990s – 2007)
Many years could be described as rocky if we think of the CFO-CPO relationship as a long-term marriage. The CFO was a member of the upper echelon of senior management, while the CPO treaded water somewhere in the middle. This relationship of unequals created organizational tension as the CPO struggled to gain a seat at the table, striving to demonstrate its value in an environment where finance dominated the attention.
Affection Renewed (2008 – 2020)
However, like what often transpires in moments of crisis, renewed affection from finance toward procurement occurred during The Great Recession of 2008. Suddenly, finance was under intense pressure and scrutiny as it grappled with an economic calamity not witnessed in decades. Fear not, however, a knight in shining armor was about to rescue their partner and restore balance to the enterprise. Like a brief opening between shoulders at a cocktail party, the CPO muscled their way into the discussion and took charge of safeguarding the supply chain during this turbulent period — working closely with critical suppliers and developing creative contractual agreements to sustain a solvent supply base.
Newfound Admiration (Pandemic years)
Emerging from The Great Recession, the CPO attained newfound admiration from the CFO and others in the organization. Procurement had finally earned its seat at the executive table and was on more equal ground with the CFO. While a sense of partnership existed, in the years following 2008, the marriage grew distant and stale. The two parties cohabitated within the enterprise but spent their time separately focused on individual agendas.
Regain the Spark and Spice (Post-pandemic years)
Whether the CFO-CPO marriage was forced at the “shotgun” of a fiscal crisis or consummated after a long courtship, finance and procurement executives should seek to establish an inter-departmental relationship. What does that look like exactly? Consider the following characteristics as the required effort to reignite the spark and spice that this union needs and deserves. Consider each characteristic being like a dinner date, a gift of flowers, or a handwritten card that shows appreciation.
- Open communication and visibility. These are the foundation of any relationship that is genuinely healthy and collaborative. Communicate the wins but also discuss the challenges where input from another perspective could yield solutions. It also prevents any surprises later when there’s little recourse. In today’s volatile business landscape, communication and transparency are a must in mitigating risk.
- Active, formal, and constant collaboration. Developing cross-functional teams (that are staffed with members from each department) for important projects will help professionals on each side gain credibility and trust from their counterparts. No single department should hold all the accountability. Better still, establish a SWOT team to monitor cost pressures, inflationary concerns, and other potential business disruptions.
- Alignment of goals and objectives. Revisit departmental goals on a regular basis to ensure that each group and leader is focused on the most important things and that all opportunities to leverage the work of the other are exploited. Undertaking a digital transformation of payment or procurement processes? Ensure the needs and wants of the initiative are within the budgeted parameters or align on areas that fall outside those financials.
- Agreement on metrics. Removing all ambiguity and uncertainty around performance metrics will help procurement and finance spend more time on the strategic planning and execution of the highest-valued activities. It also provides the opportunity for more innovative thinking when clarity around metrics exists.
- Shared worldviews. Partners that take no action to resolve diametrically opposed views are not built to last. Build upon the common ground that exists between procurement and finance and work to frame the activities, strategies, and results of each department into a context that the other can understand and appreciate. Yes, savings are important, but the value is what’s remembered.
In the marriage between finance and procurement, they must look beyond the numbers for the union to be successful. Finance can manage to savings, but procurement delivers value from those efforts. It’s a complementary relationship that often goes unnoticed. An enlightened CFO understands the value that procurement brings, leading to more harmonious interactions and collaborative opportunities. Cultivate this essential relationship because divorce is not an option.
CPO + CFO: 2Gether + 4ever = 6cess!!
RELATED RESEARCH
Financial Digitization’s Role in Helping CFOs Deliver Strategic Business Value
Skills for the Modern Procurement Pro – Financial Analysis
Chief Procurement Officers: Developing Procurement Mastery
Throwback Thursday – The CFO and the CPO: One World, Two Worldviews
