How Procurement Professionals Can Add Value to the Enterprise
January 23, 2020 | By Ryan Sheets
Researchers: Remko Van Hoek, Carlos Mena, John Gattorna
In many industries and organizations, colleagues perceive procurement professionals as “one-trick ponies” whose sole contribution is to save money on purchased goods and services. Many C-suite executives have recently been challenging this perception, recognizing that procurement and supply chain professionals can create enormous value for the organization in many areas, not just through savings. The problem, though, is that everyone else in the organization still perceives procurement as solely focused on cost savings. Historically, procurement professionals had a two-way relationship: themselves and peer-function managers. Now, though, C-suite executives also focus on how procurement can contribute to value creation across the enterprise. What was once a two-way relationship is now a three-way relationship, a triad. Therein lies the threat for procurement professionals: how to manage relationships with peers and C-suite executives simultaneously, while also maximizing their value creation contributions.
This conundrum is the topic of Remko Van Hoek, Carlos Mena, and John Gattorna’s “Mind the Gaps: Exploring How Value-Creation Perceptions Across the Internal Triad Influence Identity and Impact.” This article examines strategies for closing the “perception gaps” within this new triad. Doing so will enable procurement professionals to work well with other members within the organization and thus “deliver unparalleled value.” Their research uncovers these gaps, catalogues the perceptions of a variety of stakeholders, and prioritizes which gaps should be addressed in order to increase value creation.
As procurement continues to mature as a field, it will often face difficult branding challenges similar to those of procurement professionals. The research of Van Hoek, Mena, and Gattorna provide both a methodological framework and a framework for addressing these gaps that might benefit future supply chain and procurement professionals facing equally difficult branding challenges.
Examining the Perception of Procurement Professionals
“Mind the Gaps” examines how procurement professionals can meet C-suite imperatives while also maintaining its horizontal alignment with peer-function managers. To “deliver outstanding and distinctive value” procurement professionals must understand how others perceive them and compare that to how they perceive themselves. The authors held a total of five workshops, three with UK procurement professionals and two with Belgian senior managers who interact directly with procurement. The information uncovered in their research immediately uncovered a variety of gaps.
How Procurement Professionals Perceive Themselves
Procurement professionals surveyed in these workshops shared three perceptions about their role in the organization. One of these, “procurement’s consistent priority is cost,” emerged as the one area of consensus that stretched across all parties in the triad. Procurement professionals rightly feel mandated by both executives and peers to reduce costs. While this seems a positive area of consensus, it actually reinforces procurement’s feeling like an undervalued “one-trick pony” that is only “truly valued for [its] ability to cut costs – a perception that leads to a sense that they are not fully included in the strategic debate.” Talk about a pyrrhic victory: its clearest mandate and clearest day-to-day contribution is also the aspect that keeps it from being seen as making a strategic contribution!
How Business Peers Perceive Procurement Professionals
The viewpoints of surveyed business peers depart widely from the views of procurement professionals. They view procurement as being “preoccupied” with cost savings to the extent that this “preoccupation” likely drowns out all the other contributions procurement makes. It is not surprising, then, that business peers cannot see the benefits procurement can bring to strategic discussions. Procurement professionals therefore have to ask themselves some tough questions if they want to contribute to business strategy discussions. Namely, they must take ownership for how their work can (and already is) contributing to strategic initiatives. To do that, though, they have to ask what daily practices and procedures perpetuate their peer’s perceptions of procurement professionals.
The workshops and surveys suggest two things: that procurement “talks the costs-saving talk too much” and that businesses care less about savings than they do. As a result, procurement professionals can, and should, be more actively discussing value in a broader manner. The survey shows that the gaps with regard to business priorities, while noticeable, remain relatively small. What this means is that finding a starting point for discussing the broader value-contribution potential for procurement professionals will not take a herculean effort.
Empowering Procurement Professionals to Do More
“Mind the Gaps” builds off of these findings and proposes a framework that can help procurement professionals prioritize value creation in more substantial, meaningful ways. First of all, procurement must deliver results to peers and executives alike. To do so, it must prioritize its work in order to deliver the right sort of results. For example, procurement has many projects it would like to do but it lacks C-suite support for them. Pilot projects, then, emerge as a key way of building this support and showing broader value to the enterprise. After successful pilots, procurement can sell the success to peers and executives through effectively told stories.
Fortunately for procurement professionals, the C-suite expects contributions in areas as diverse as corporate social responsibility, innovation, measuring value, risk, and supplier relationship management. C-suite support, if combined with successfully piloted programs, will help procurement professionals redefine their role within the enterprise. As it does so, procurement professionals should seek to avoid certain pitfalls while managing this triadic relationship. Examples of these pitfalls include:
- Overcommitting to C-suite goals before quelling resistance from business peers
- Overcommitting to pet projects that lack either C-suite or business peer support; these pet projects represent a risk and should be deprioritized until after procurement has delivered on C-suite and business-led initiatives
- Failing to lead from behind on initiatives that the C-suite and business peers value; procurement has to be a team player even on projects they view as unimportant
- Failing to push back against projects that only have C-suite support; procurement possesses the knowledge to conduct careful analysis and build cross-business support that might change the priorities of C-suite executives
Avoiding these pitfalls, while not an easy task, will help ensure alignment with the rest of the business. As procurement delivers continual results on costs savings, it will also be able to use these results to prompt initiatives and discussions regarding innovation and measuring value. As it creates value in new areas, procurement’s profile will be raised within the business. This higher profile will help procurement recruit top talent, which will further cement its ability to create value across the enterprise.
How this Research Affects You as a Manager
Underappreciation kills morale and productivity. Chances are, your procurement team perceives that “they create more value than business peers give them [credit] for.” Underappreciation is but a small step to insecurity, and insecurity leads to poorer decision-making and a lack of employee engagement. Granted, much of this comes from procurement professionals focusing too much on costs savings and not making its case for what unique perspectives it can bring to the value-creation team.
Below is a roadmap for how procurement professionals can more fully contribute to value creation. If you are a procurement manager, these steps will help your team improve its alignment with C-suite and business peer initiatives; if you’re not a procurement professional, perhaps support your peers in procurement as they execute on these three steps. After all, “value creation is a team sport.”
- Deliver results across a wide spectrum of business initiatives. Performance is the only thing that will prompt executives to bring procurement into the strategic team and make its voice heard frequently and regularly
- Engage the business via a management-by-walking-around strategy. Take time to understand internal customer needs, perceptions, and requirements. Responding to real peer needs “is critical to bridging existing alignment gaps and earning the right to really show off procurement’s value creation ability”
- Encourage additional cross-functional training by having employees participate in job-switching activities and opportunities within procurement and having procurement do likewise. These activities will build critical understanding and a greater level of empathy for the challenges each business unit faces
Closing the perception gaps won’t be easy, but with time and the right sort of effort, procurement can align priorities and work across boundaries to create value. The future identity of procurement and its place at the strategic table depend on these proactive efforts. Value creation is indeed “a team sport.” The research of Van Hoek, Mena, and Gattorna provide a roadmap for how procurement can have a starting role on this team instead of always being on the bench.