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Defining Your ROI

April 29, 2014

Why should anyone employ you? What difference will you make to the business?

Two weeks ago, IACCM ran a webinar with the results of its most recent salary surveys. It also discussed industry estimates of job opportunities for those in Procurement, Legal and Contract Management. The picture was mixed, but for Procurement in particular it was generally negative. More companies plan to reduce the size of their Procurement function than plan to expand it.

But hold on. Don’t we keep hearing about the importance of cost reduction and improved supplier management? Surely the prospects for procurement professionals should be good. And with all the new regulation and fears over reputation risk, the outlook for lawyers must similarly be promising.

The answer seems to be no. While these issues are important, top management does not necessarily see the answer lying in more staff. They see opportunities for more automation, more outsourcing and more up-skilling of other functions. And a big reason for this is the failure of most Procurement and Legal functions to develop a compelling case for their value-add.

Last week I was talking with Mark Rosen, from Corporate United, who told me that the ROI (return on investment) of procurement staff is falling quite rapidly. So if I am the CFO, why would I support further recruitment? Instead I would be looking to cut the costs of the function.

Right now, Contract Management seems to be relatively immune from the cuts and indeed is seeing net growth. But that is from a low base, in a discipline that is seen as increasingly important in delivering results. But already the pressure is growing to develop specific measures of value. Theoretical savings and cost avoidance are not enough. If you don’t find a way to define your ROI, you are at risk

IACCM has developed a number of insights to the ROI of contract and commercial management and work on this continues.

  1. kulbir lamba permalink

    It interesting to come across the concept of individual’s ROI to the firm. What are the methods/ benchmarks an individual can measure it or at least can fix the standards..

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