Nearly every business today is undergoing some form of digital transformation – the adoption of new digital technologies to solve problems and deliver efficiencies. In most companies, Procurement and its culture is part of this ongoing digital transformation.
Procurement leaders must do more than simply apply new technologies to address their real business challenges. They must take a hard look at the culture that drives the Procurement organization. And they must adapt or modify that culture to meet the challenges and opportunities their companies face today .
To start, CPOs/heads of procurement need to ask themselves a few questions:
- Is Procurement’s role transactional, or is it strategic?
Traditionally, Procurement organizations have seen cost savings as their number-one goal, with each procurement transaction as an opportunity to reduce costs. Essentially reactive by its nature, this has long been Procurement’s primary way to contribute to the company’s profitability — and to justify additional resources and investments.
However, as recent supply chain issues have illustrated so dramatically, Procurement organizations today must do more than simply focus on cost-reduction projects. Specifically, they must manage vital supplier relationships to ensure continuity of supply and minimize risk of supply chain disruption. To achieve this end, procurement can perform a vital strategic service by proactively collaborating with key suppliers to position their companies as the suppliers’ customer of choice.
- Who are Procurement’s customers?
Many procurement organizations see their primary customers as the company’s internal operating divisions whose purchases Procurement facilitates. But this is a short-sighted view. While these stakeholders are important, they are not the only customers procurement should focus on.
When Procurement takes too limited a view of its customers, you should not be surprised that Procurement is viewed as a “cost center.” If the greatest value Procurement can offer is to keep purchasing costs to a minimum, there is no real reason to give Procurement a seat at the strategic table. However, if Procurement views its customers holistically, and proactively recommends new solutions to optimize business growth – not always at the lowest price – Procurement can contribute more significantly to the company’s success.
At Beeline, we say “the customer is anyone who isn’t me.” By defining customer service in the broadest possible terms, we try to ensure that every interaction will be based on mutual respect and a willingness to go the extra mile. If Procurement takes a similar, holistic attitude about who its customers are, it will spend the time and energy required to build and nurture its key supply chain relationships.
This, in turn, will help the organization achieve not only cost reductions that contribute to the bottom line but also the strategic goals and objectives needed for top-line growth. At this point, Procurement will have earned a seat at the table as a trusted strategic advisor.
- How can you overcome the skills shortage?
To make things that much harder for Procurement leaders, we are now facing a global skills shortage. Baby Boomers are retiring. Other workers have chosen to resign their positions for a variety of reasons – to change companies, relocate, shift their roles, or maybe even change careers. Companies are finding it hard to retain talent and even harder to replace it when someone leaves.
Having the right talent is critical for operating an effective Procurement organization. So how can you ensure that you can attract or develop the skills you need?
Create a strategic Procurement culture
It is the responsibility of the CPO to create the right culture for Procurement. While each business has a culture that reflects the overall values of the company, it is important for the Procurement team to have a culture that will advance Procurement’s – and the company’s – – strategic goals. Then, Procurement leadership must dedicate themselves to the culture and lead by example.
While some short-sighted Procurement cultures focus on achieving cost reductions at the expense of anything that gets in the way, this inevitably costs the company in the long run. A better approach is to apply a total-cost-of-ownership mentality and be open to ideas and innovations, while keeping the correct perspective on supplier relationships.
The procurement team should view every stakeholder as a customer who needs to be treated with an attitude of “customer first.” This requires the ability to sell the value of Procurement by building fact-based presentations that influence suppliers, management and other stakeholders. It’s important to recognize that while Procurement does not own the expenditure, it does own the Procurement process.
While it may seem difficult to instill new cultural values in an organization, I have found these four actions effective in cultivating a strong and effective Procurement environment:
- Encourage, expect and prioritize the desired culture in your key managers and set the example at the top.
- Understand what makes the workplace great and make cultural fit a primary criterion of candidate selection.
- Reward employees who demonstrate their commitment to meeting cultural values.
- Develop a culture of respectful individuals, encouraging them to respect ideas, challenges, internal customers and external suppliers.
Align personal and business goals
The first step is to create a Procurement culture that people want to be a part of. Like any other professionals, Procurement people want to be happy in their work. They want to be engaged and they want to keep progressing toward their career goals. Since it is much more productive and cost-efficient to retain talent than it is to recruit talent, Procurement leaders must create an environment that retains its talented people and helps them grow.
One way to do that is to ensure your organization is aligned with senior management and has their buy-in. Confrontation between Procurement and the operating divisions it serves is not productive. It only leads to internal groups not wanting to work with Procurement. I’ m amazed that in 2022 there are still organizations that are misaligned with Procurement – it’s not common, but it still exists.
If everyone knows your Procurement team is aligned with the company’s strategic goals, you can eliminate infighting and rogue spend. Once your team is thinking about what they can do to help your company win in the marketplace, they can be more than cost-cutters; they can be strategy-enablers. They can help you create bigger, more challenging roles for them to thrive in. And they can create bigger, more rewarding futures for themselves.
Use digital transformation to automate routine processes
The day-to-day transactional work of Procurement must still be accomplished. But this is where digital transformation becomes so important. If you implement the right AI-based technologies to automate routine, transactional processes, you can free up talent in your organization. You can reskill your workers and reposition them to handle more complex assignments that require human judgment.
As an added benefit, your new technologies should generate a vast amount of transactional data. Combined with the right analytics and visualization techniques, this data should provide the insight you need to make better, more strategic purchasing and business decisions.
Use data analytics to promote Procurement’s value
A lot of people talk about data, analytics and the importance of visibility. Many CPOs will refer to the visibility their data gives them into the Procurement process. But do you hold onto this data, or do you convert it into insights the whole company can use to track progress toward strategic goals?
In a previous role, my team developed a process to provide our C-suite with weekly metrics on the contingent workforce our Procurement team acquired and managed. This information was used to inform top management not only about workforce spend, but also talent trends and how and where our extended workforce was being used within the organization. It was actionable data that was used to make informed business decisions.
A question for you: Every day your Procurement organization collects a ton of valuable data. What are you doing with it?
Work with HR to build your employer brand
One part of your company that can really use the insights provided by your Procurement data, particularly contingent workforce data, is Human Resources. In more and more companies, HR and Procurement are working closely together to address the problems created by talent scarcity. In many businesses, Procurement and HR are also collaborating to shape their companies’ digital technology roadmaps. And, as part of this collaboration, HR can help you address Procurement’s changing talent needs.
Digital technology and talent retention alone will not solve all of Procurement’s staffing challenges. You will still need to find and recruit talent who can operate in a highly automated, strategic Procurement organization. One answer may be to use a blended or extended workforce that combines both employee and non-employee talent. Along with your cadre of skilled professional employees, you may want to use contingent staff, independent contractors, consultants, and other professional service providers on a project basis or to deliver skills on demand that are not required on a full-time basis. To attract both full-time and contingent talent – and to retain the talent you’ve nurtured and trained – it pays to develop a strong employer brand.
Companies have always focused on building a strong brand that is attractive to their customers. But they have only recently recognized the value of building their brand to attract potential employees. While this is often seen as Human Resources’ responsibility, Procurement is playing an increasingly import role – particularly in sourcing and managing companies’ non-employee workforces. Increasingly, HR and Procurement are working closely together – on projects like direct sourcing and talent pools – to build their companies’ image as great places to work.
What do today’s workers want?
At all times, but particularly in a “seller’s market” where talent is in such high demand, workers are looking for more than just good wages or salaries. Today’s workers want better work-life balance, flexibility and the ability to work remotely.
Workers also want to be measured by the value they deliver, not the volume. According to a study by Citrix, 86% of employees said they would prefer to work for a company that prioritizes outcomes over output. And they expect to be given the trust and autonomy they need to do their best work.
Use culture to prepare for digital transformation
Before you invest in new technologies to transform your Procurement operation, make sure you have the right culture in place: a Procurement culture that focuses on the big picture – your company’s strategic objectives – not just on sourcing transactions. Then, when you have implemented the right culture in your organization, use technology to make it more efficient and provide the data-based insights so valuable to your stakeholders.
But whatever you decide to do, do it now. The longer you wait to implement the cultural changes and technology your organization needs, the farther you will drop behind your competitors – competitors who are already seizing the new opportunities a technologically advanced Procurement operation can deliver .
For more information on the future of Procurement, tune in to Mike’s podcast, “CPO Open Mic,” where he interviews the thought leaders in our field. You can find the first two seasons of the podcast here. And you can follow on Twitter @ BeelineVMS