Ardent Partners recently published my annual CPO-themed report – CPO Rising 2015: The Agility Agenda – which is drawn from the responses of more than 300 chief procurement officers and other procurement executives (as well as 26 CPO interviews) and presents a comprehensive, industry-wide view into what is happening in the world of procurement. As we do each year, we like to discuss the research report in a series of articles that examines some of the key findings and major takeaways from the study.
The CPO needs VIP access
Imagine that you work at Amazon and during your weekly team meeting, Jeff Bezos knocks on the door and asks if he can “sit in.” Imagine you work at GE Healthcare and are reviewing the next model of a newborn incubator with the product team, and Jeff Immelt slips into the back of the room. Now, imagine there’s casting call for the upcoming Frozen 2 movie in the Disney offices, and Bob Iger walks in with some ideas on what actors would be great as the new love interest….
Does anyone in the three hypothetical meetings above ask their CEO to leave? Of course not. CEOs have the extraordinary responsibility of overseeing their entire operation. To do this right, they need many things. Unfettered access to anything and everything that’s going on within the enterprise is certainly critical. CEOs have extraordinary access to their staffs and all other resources, and that access helps them manage more effectively and drive the enterprise forward.
At the end of the day, access is really all that chief procurement officers want – access to the boardroom and the C-suite and access to other business leaders (particularly during their budgeting and planning stages). Having the right access at the right time helps CPOs and their departments manage more spend and manage it more effectively. Access also helps them better align their department resources in support of overall business objectives. It also continues to be important to the many CPOs who have been empowered to do more in recent years and take on more responsibilities as they expand procurement’s influence into less traditional areas.
The good news for many procurement teams is that their CPOs actually have pretty good access to their top executives. In 2015, more than half of all CPOs report directly to the top of the enterprise, with 32% and 22% of CPOs reporting to the chief financial officer (CFO) and the chief executive officer (CEO), respectively. In the current age of innovation, it is the CPO’s relationship with the CEO that may soon become the most promising. After all, if a CEO believes that innovation is at the heart of the long-term growth and success of the enterprise, the CPO should be a most welcome direct report (We’ll look at the fast-evolving CPO-CFO relationship in a future article).
While CPO access to top executives is on the rise, CPOs are still not satisfied with the level of access, engagement, and collaboration that their teams have with key budget holders in the business, particularly when it comes to sourcing opportunities. This needs to change, because when it comes to the top strategies to help procurement ascend to the next level of performance, CPOs believe that gaining access/engagement earlier in the engagement on sourcing opportunities is the single largest opportunity to drive future success (identified by 63% of all CPOs).
Getting involved sooner on a sourcing project can make the difference between acting as an active project leader or as a simple order-taker. Ardent Partners research confirms this view and has shown that getting the sourcing team involved earlier on a project can also drive savings, improve quality, and reduce risk. Consider the impact that a simple redirection to a lower-cost component or to a current, preferred vendor can have during the design phase of a new product’s development. The ability to capture and use innovative ideas and other value-added input from suppliers is far more likely to occur when the sourcing runway is long and project requirements, goals, and objectives can be shared and discussed in an iterative manner with leading suppliers.
Most CPOs have earned their VIP access; now they must push for their sourcing teams to get better access too.
Want more on management best practices? See 6 Managing Skills That Companies Take for Granted.