When Top Gun’s Maverick and Goose professed their “need for speed!”, it’s probably fair to say they weren’t expecting it to come from procurement. Let’s face it — speed is not an attribute often associated with procurement, a premise with which even procurement’s most ardent boosters would likely agree. To the contrary, procurement is often thought of as a highly process-oriented, administratively driven opponent to expediency. To the broader organization, procurement can be seen as an impediment to progress and a source of frustration.
This reputation could be, at least in part, attributed to where the procurement function has traditionally been situated in the organization. In many cases, the CPO reports to the CFO, an individual in the company most focused on the bottom line. As it relates to suppliers, the CFO is often concerned with squeezing the greatest possible cost reductions and savings. Negotiations, supplier shopping and the often-onerous onboarding processes imposed by the financial office can chew up valuable time.
The CEO has different priorities. Responsible for top-line growth, executing with speed, responding to competitive pressures and real-time changes in market dynamics, the chief executive may not always be most concerned with the procurement team’s ability to scour the globe for the cheapest possible supplier.
In fact, in my experience, the CEO’s single greatest frustration is watching how long it takes for decisions to convert into delivery.
The CEO may place more value in a procurement team that is agile, nimble and can respond quickly to immediate needs. After all, in today’s business climate, the speed with which an organization reacts and mobilizes can make the difference and produce the competitive edge.
With this in mind, it’s fair to question the placement of procurement in today’s organization when the senior leadership pulls it in different directions depending upon to whom it reports. Since so much of an organization’s spend is directed to external suppliers, the implementation of a CEO’s vision or directive at pace is likely to be executed by suppliers anyway. It stands to reason that procurement should have greater engagement with the CEO.
That said, a change in dynamic would necessitate a fairly significant paradigm shift for internal procurement teams. Procurement teams would need to demonstrate the ability to respond quickly, react vigorously and shed many of the stereotypes and labels previously identified. For example insight needs to be available all the time and not just after an RFI.
This is easier said than done, if procurement teams are not mentally conditioned to operate this way, or don’t have the capacity.
It is possible that the only way that the CEO can get their agenda implemented at the pace required is by having the CPO report to them. To earn this, the CPO is going to have to speed up and turn on a dime.
I will turn to this in my next blog.