How To Address Procurement’s Influence Challenge Before 2020

CPOs and other procurement professionals have been wringing their hands over their functions’ lack of influence in the organisation for decades now. It’s high time the issue was addressed by tackling the biggest hurdle of all – a lack of alignment.

There are just over four months left in 2019. Four months to get into shape – not for the beach, but for a highly successful 2020, enabled by dialling up procurement’s level of influence and clout in the business. Let’s stop talking wishfully about “gaining a seat at the decision-making table”. Instead, let’s flip the entire table over and reinvent the way the business views the procurement function.

A lack of alignment 

While there are a number of contributing factors to procurement’s lack of influence (including the amount and type of value delivered to the organisation), unaligned KPIs, targets and goals are consistently cited as a key – if not the key – reason for this issue.

Here are three ways procurement can address the alignment challenge and subsequently improve its level of influence.

1. Nurture a “bigger picture” mindset in the procurement team

One of the issues that can lead to unalignment is caused by procurement professionals focusing on the wrong thing. For example, damaging a supplier relationship by negotiating aggressively over one or two percentage points in cost savings may help the function achieve its short-term targets. But your organisation would benefit more from a robust, long-term supplier relationship built upon a solid foundation of trust.

2. Tie all activities to enterprise-level goals

Ideally, every activity undertaken by procurement should be linkable to an enterprise-level goal. Not doing so is one of the key causes of divergence between procurement and business goals.

• First, ensure the entire procurement team is familiar with your organisation’s enterprise-level goals and targets. This may require frequent communication and reminders.
• The next step is to align every goal, target and KPIs to these higher-level targets. For example, preferred negotiation outcomes can be expanded to include the business’ corporate social responsibility goals through social procurement initiatives.
• An effective way to do this may be to add a new column to your usual table of outcomes that lists the enterprise-level goal to which the activity is linked.

3. Create shared KPIs with other functions

Shared KPIs are an extremely effective way to ensure alignment with the business and other functions. A common example of this is shared KPIs between procurement and the finance team. Also consider sharing KPIs with IT to help make their strategy successful, or with your organisation’s CSR team to help achieve environmental and sustainability goals.

Keep in mind, though, that one of the keys to successful alignment and shared KPIs is having a common language. Minimise the procurement jargon, and learn the terminology and reporting methods used by finance and other functions in order to demonstrate how procurement can help them meet their goals.

Use these three methods to re-align procurement to enterprise-level goals and targets. This will not only help build the function’s influence in the organisation, but will help ensure procurement remains relevant into the next decade.