What does procurement actually do?
In my previous posting on how to win executive support a reader comment highlighted the fact that many procurement professionals still struggle for support and greater recognition, which can – in his terms – damage your “procurement mojo”.
So for those readers who still need to convince a sceptical organisation, here are some tips to help market procurement’s benefits to a broad audience across the organisation.
How well we sell procurement’s value to the business is key to our success. It is therefore critical we communicate procurement’s intrinsic value to the organisation to gain the influence we desire. Learning to market this value is a critical step in gaining influence.
The primary purpose of marketing procurement internally is to raise awareness and understanding of its services, benefits and to facilitate commitment to integrate these services into business processes. Once achieved procurement can start to embed itself into the fabric of the business.
To foster stakeholder commitment, we must sell procurement to our stakeholders by clearly and consistently communicating its “value proposition” – the benefits procurement offers to both stakeholders and the wider business.
If you were asked to give a 30-second elevator speech to define procurement’s value proposition, what would you say? I have asked this question of fellow procurement professionals many times and frequently find them stumbling over their words. If procurement cannot clearly articulate its value proposition, don’t be surprised when your internal stakeholders don’t get it and brand procurement simply as a service function.
CPOs must decide what procurement’s brand image is and then seek to align stakeholder expectations behind the brand’s experience, creating a real perception purchasing is delivering on its promise.
Other professions have developed effective brands. Legal is about contractual risk management. Finance own cash management and reporting. Human resources manage human capital. Sales provide revenue generation. Marketing manage brand awareness and development. No one in an organisation would ever seek to claim responsibility for these functions and that they have superior capability to conduct them.
This is still not the case in many organisations for procurement. These functions do not have to justify their existence through cost savings. They are simply accepted as a core business competency that has to be done right.
CPOs must articulate a value proposition to the organisation beyond cost savings. The goal is for procurement to be perceived as a core “must get right” function in which businesses must excel in order to be successful. Once achieved, procurement’s “mojo” will no longer be in question.
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Though all parties realise the importance of acquiring goods or service at the lowest costs, they all assume that their functions override procurement.
Apparently a mojo is ‘a magical charm bag used in hoodoo’.
Why do we need one?
I believe that procurement’s brand image is the “cost-effective, minimal-commercial-risk management of sourcing, tendering, contracting and purchasing of bought-in resources and then the handover of fit-for-purpose service, goods or works provision to the personnel responsible for ongoing contract and supply management”.
Sometimes the personnel who handle the ongoing contract and supply management are the same as those who procure, but the roles are distinct and should not be confused.
Your seventh paragraph seems to touch on an other problem, which is that many people seem to confuse procurement and purchasing. It seems that you too may have some uncertainty about the difference? Clarity about the difference seems to me to be vital when trying to create a procurement brand image.
If procurement is done properly then the business will have a clear understanding of its own business needs, because procurement will have steered it through an exercise to determine its exact requirements for subsequent tendering, contracting and purchasing. Its management teams and other staff will have the same clear understanding and, vitally, its suppliers likewise. This way everyone ‘sings from the same song sheet’. Of course if it is done properly the business will also benefit from minimal incremental commercial and contractual risk.
Maybe the brand image can be compressed down to “procurement manages the optimal acquisition of a business’s bought-in resources”?
Why are we as a profession still playing this old tune? “When will someone listen to us?” Purchasing/Procurement, we can’t even decide what to call our function. For as long as I can recall this has been a constant message along with “now is the time for procurement to shine” Perhaps we the question we should be asking is how do so senior executives get to that level without understanding the importance of an effective procurement process? As an alternative we, as a profession, should concentrate on delivery. In my experience delivery of results has been the most effective method of raising the profile of procurement across a business and converting sceptics. In the words of Henry Ford “Whether you believe you can or whether you believe you can’t, you are absolutely right.”
I agree that the “value proposition” is absolutely key. The big issue here is that the businesses, despite wanting to believe the claims of benefits and savings, simply can’t translate or track what looks like excellent performance into a direct P&L impact.
There is new thinking emerging however – operating a re-bate model allows negotiated discounts to be returned to the business in hard cash a physical cheque. This prevents budget holder re-spend or a convenient erosion of the often substantial Procurement generated benefits. Re-bate models have previously often introduced complexity and VAT issues but processes and technology can now overcome this. Under this new operating model Procurements financial contribution becomes totally transparent and the value adding tasks such as risk reduction, innovation and collaboration get more airtime. See my blog post at http://www.oxygen-finance.com/news/9 to read more.
The fact that we continue to talk about how to sell procurement means we are still failing to connect. Perhaps our ambition to show we have people with the business brains to be a strategic function has caused us to complicate a simple message. A clear, simple, bold and confident pitch tells a story that has impact. So here goes:
Fact. Procurement can help you buy better. Here’s why.
We can beat your budget and help you get more for your money. We’re not just about cost though, we help to improve cashflow, manage risk and build sustainable relationships with suppliers to get the best out of them for our business. To get the best from us, get us involved as soon as you think you need to buy. Buying better means we can give better value to our customers, deliver better results for our shareholders and people and free-up cash to invest in the things that matter to our customers.
I think it’s about procurement showing that it can protect the revenue generation element – what’s the point of the sales function generating £1 if the procurement function allows it to cost £1.10 to achieve it? Plus, procurement is in a really good position to impact strategically and operationally on CSR economically, which of course can also add significant value to the brand.