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Getting To The Top Table

September 12, 2010

Most managers aspire to a senior reporting line. They are sure they deserve it; and of course they see this as a way to gaining respect and power (and probably also money!).

So it is not unusual for me to be asked questions like ‘Where does our function report?’, or ‘Are there examples where we report to the CEO?’ These are asked in the hope of a silver bullet that can assist the case for their own promotion. One such question came to me today – in this case related to Procurement, but it could equally have been from Commercial or Contract Management and the general tenor of my answer would be the same.

Here is the question I was asked: “Organizationally, where should a Chief Procurement Officer be placed in the organizational chart?  Show this role be a direct report to the CEO to raise influence? Procurement in many organizations are cost centers and not profit centers, since we don’t spend the money (the Business Unit does) we lack influence. By being a cost center how do you grow influence and thus push change through an organization for new ideas, new strategies and thus savings. In some organizations the Business Units have the ability to “opt out” of Procurement initiatives, ie Strategic Sourcing, Category management/change management, etc. How do you work these issues?”

Of course most people would like to report to the CEO – and most never will. That group of direct reports will be reserved to a range of officers that is relatively unlikely to include Procurement. But that does not mean lack of influence or lack of access – we determine those by ensuring our relevance to the executive agenda.

Success in raising the procurement profile will not come from either pleading or waiting to be noticed. It will come from a demonstration of leadership in delivering value. That means giving thought to the executive agenda, and working out how and where to contribute in ways that go beyond the traditional expectations. I know many procurement executives who ‘pitch’ for greater power or an expanded role – and don’t get it because they (their department) have not demonstrated any distinctive competence, they have not earned trust.

Clearly a Procurement role that is focused on negotiated savings and overseeing compliance is unlikely to be held in great esteem. It is a chasing game, an audit role. When execs see you, it is usually because of bad news, because something went wrong. The original question also betrays a problem – the comment that the business units hold the budget and therefore have the influence. That is to some extent true – but Procurement in most companies seems to do its utmost to alienate suppliers and drive them into the arms of the business unit. Yet that is not inevitable – and gaining influence depends on being seen as a source of support or power, not a group that everyone wants to avoid.

How do internal customers and external suppliers see you today? As a source of support, assistance and high value access and information? Or as an administrator, an auditor, a barrier to getting things done? We must be ready to undertake honest appraisals – and then to set a vision for what we want to become, how we want our image to be seen.

Gaining greater status will depend on doing things differently, bringing innovation, new solutions, avoiding problems rather than clearing up after them. Of course your current tasks matter; but how many of them depend on you to do them? Can you take active steps to empower  and enable the business to do more for itself, and then monitor results? As a result, can you divert resources to areas where you will achieve visible and measurable improvement – for example, improve up-front requirement definition; gain in-depth insights to supplier performance; monitor and identify sources or needs for non-compliance and therefore opportunities for change; spot areas where rules, practices, processes are outdated or are causing delays and remove or improve them; truly focus on risk management (not risk allocation) and also evaluate the financial impacts of risk alternatives; look at some of the new ways to gather market information so that procurement becomes an adviser to management, rather than to itself; look at ways you are aligning with product or service management groups and see to what extent you might be driving greater market advantage through shifts in procurement. And as part of this, be rigorous in identifying service expansion or improvement initiatives (for example, post-award contract management, supplier relationship management) and the new or improved skills that will be needed to enable performance.

As you know, executives want value-based cost reduction; they care desperately about reputation risk; they want the business to become better at eliminating rules and bureaucracy; winning markets, managing risk. These are all areas where procurement can visibly improve its performance and contribution without having to change reporting line. But if it does these things, it will certainly shift status – and potentially have that top-table seat.

A CPO and senior management team within procurement can embark on this journey through a planned approach that includes a shift in their emphasis, the types of questions they ask, the data they collect, the conversations they have inside and outside the department, the areas in which they invest in skills, either through training or hiring policies. They can impact behaviors with the right internal and external appraisal criteria, score cards etc.

 In the end, our influence will depend on the type and nature of information we bring to top management. This reflects our knowledge, our scope of interest and our capabilities.  I spoke with one CPO recently who has been successful. He monitors the number of times that he – or members of his team – meet with the CEO. And he also monitors the reason they are there. In the beginning, 4 out of 5 meetings were due to ‘issues’ – supplier problems, escalations, internal exposures. Procurement was associated with ‘problems’. Today, 3 out of 5 visits are associated with some form of innovation or improvement initiative, either sparked by Procurement or because the CEO wants them involved. The number of visits today is almost double the number of visits 2 years ago.

I thought that this was an interesting story – and an interesting way to measure our ‘journey’. I wonder how frequent, and for what purpose, your CPO is meeting with your CEO today? Are you seen as part of problems, or the solution to problems?

One Comment
  1. Sourcing Innovation has provided a brief but useful expansion to these comments. See–ask-the-right-questions.aspx?ref=rss

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