In today’s increasingly competitive economic climate in which so much more is delivered through suppliers, procurement has become a core business function. The role has grown from back-office purchasing to strategic sourcing to encompass executive-level strategy formulation and wealth creation across all spend. This development has further thrust the role of the chief procurement officer (CPO) into the spotlight, with companies now seeking to attract and develop the best talent to deliver this.
Like all executive roles, CPOs have a very small window of opportunity in which to make their mark at a company, and are thus under immense pressure right from the start to fulfill business goals and further their organization’s growth agenda. In our experience, the average tenure of the CPO is less than four years. So for any new incumbent, the first hundred days in the role are particularly vital when it comes to enabling future success.
Drawing on our extensive experience working closely with CPOs across various industries, we have compiled a comprehensive framework to set new senior leaders on a course for that success. In this white paper, we summarize that framework and provide three steps for CPOs to follow: namely, listen so as to understand the environment you are entering, shape a vision and plan, and deliver against expectations (see figure 1).
Step One: Listen—Understand Your Environment
Before a new CPO starts making changes and implementing any new procurement functions, it is vital that you invest time in understanding the environment you are walking into. That means gaining a detailed picture of the culture of the new organization and the CPO’s role within that, along with a clear understanding of any stakeholders and suppliers who will be crucial to your success. Of course, a CPO also requires a detailed plan for change, but this needs to be “kept in a back pocket” until you are confident that you know how to correctly position it within the business.
Understand the executive agenda early and determine the appetite for change. A company in rapid growth vs. aggressive cost reduction will have very different requirements of procurement. Meet with executives to understand the companywide strategy and then with business unit leaders to discover how each is implementing it. From here you can start to identify how procurement can enable the strategy.
Remember this: Listen, listen, listen. Obtaining sign-off of your procurement plan will be a lot easier if initiatives can be linked to the company or business unit strategies.
Understand the role
Gaining a detailed understanding of the CPO’s responsibilities is also important. Key factors to consider here are the current structure of the procurement function, its place within the overall organizational hierarchy, and the perceived value of procurement. It is also vital to understand the expectations of superiors and any other senior staff members whose objectives your role may support. Given the breadth of internal teams that procurement affects, your success as a new CPO will also depend on understanding the key internal stakeholders and suppliers with whom you need to establish an effective working relationship.
Remember this: As a CPO you should be clear on what you will and won’t address. You should focus on exceeding expectations on a clear remit, rather than taking on all stakeholder objectives.
Understand the culture
Start by piecing together a picture of organizational norms (values and attitudes) so you can better adapt your behavior and style. It is also important to recognize what drives the people and the various organizational units—such as operations, marketing, and sales—within the business. Then there are the formal and informal hierarchies within the organization, which any new CPO should take time to appreciate. Who sets the pace? How are problems escalated and solved? How is change implemented and maintained?
Remember this: New CPOs often rush to make changes as a means of stamping their authority on the business. However, this is often perceived as a threat to the organization and may come across as arrogant.
Understand the stakeholders
Building credibility depends on establishing good relationships with stakeholders. This includes your immediate procurement team, along with senior management more broadly. As a new CPO you need to understand the agenda of each stakeholder group. Given how important these groups are to your success, you should focus on their needs individually.
- The immediate procurement team. Identify the key players and build their support. Seek to understand the blend of expertise at play and how individuals complement each other. Start identifying the “stars” and develop a picture of individual capabilities and motivations. You also need to clearly communicate to each team member the specific role you expect them to play.
- Senior management. You need to ensure that your vision for the CPO function is aligned with overall business strategy. You must be clear on what the role will and will not address, the degree of change expected, and the time frame you have to deliver results. While this is an iterative process, it will serve you well if you seek guidance from day one. You will need to use a structured framework (such as the one outlined in this paper) to engage with senior management and frame the problems you seek to address.
- The business. Collaboration with stakeholders throughout the organization is crucial. Our research shows that a proactive approach is the most effective strategy. A formal stakeholder management plan for engaging any major players may help you overcome any challenges you encounter.
- Suppliers. As you build your plan, it will be important to identify any strategic suppliers and categories and engage with the companies that will be crucial to success. Your ability to deliver ongoing value to the business will be greatly enhanced if you can show your most strategic partners how they can fit into—and influence—your vision.
Remember this: Resist the temptation to try and please everyone. Rather, identify any “true believers” and capitalize on their support to help build a case for change. At the same time, you should spend time with anyone who is neutral or even negative, to understand their approach and work out how to rectify these challenges. This may seem an obvious point to make, but if you are unable to manage the simplest aspects of the role correctly, it may be hard for the wider business to believe that you can bring about significant change.
Your First 30 Days: Gather Knowledge, Become Data-Rich, and Establish Measures for Success
Get to know people. Walk the floors, conduct meet-and-greets, and establish relationships with your team and C-suite peers. Meet those people who may not be formally part of the procurement function, but whose roles affect how it operates.
There are four key groups to engage:
- Your procurement team. What do they do, who are the stars, and who needs support? What is your team’s reputation and what has it tried in the past? Get your head around the numbers and establish credibility by getting into the detail.
- Executives. What’s important to them, and how will procurement support their agenda? What sort of change are they expecting, and over what time frame? What issues “have a home” within procurement? Manage expectations—you’re going to be asked to solve a lot of problems.
- The business. Meet users and get their view on what works well and what doesn’t. Does procurement add value? If not, why not? Identify any quick wins you can act on right away. In short, build your brand and start getting things done.
- Your suppliers. Which suppliers are truly strategic? Remember that getting to know your external partners as well as you know your internal stakeholders is crucial to success.
It’s good to start with a plan, but don’t be too eager to apply it just yet. Be humble. Figure out what others know, and what they expect you to deliver.
Focus on data. It’s crucial to set a baseline (beyond pure cost) as this will be the platform for your plan and the key to stakeholder engagement. Be ruthless in your data gathering.
Understand what “good” looks like. Once you know who’s who and what’s expected, you can develop a draft strategy that builds on your experience and is tailored to stakeholder needs. Identify any quick-win opportunities that you can start on next month.
Step 2: Shape—Develop a Vision, Plan, and Metrics