Procurement – Seat at the Table. . . or on the Menu for Lunch?
This issue has lingered for at least the 30 years that I’ve been in the profession. Getting procurement a seat at the table. And getting us off the menu for lunch.
The problem is, you can’t just invite yourself to a table. Just like you can’t invite yourself to the White House for high tea.
And so, the focus cannot be on how to shoehorn our way to the table with the C-Suite. Just selling a value proposition isn’t going to get us there either. They’re already getting that from all the other service providers in the company who are trying to justify their way too.
Concurrently we also keep trying to convince the business units inside our respective companies to engage us earlier and comply with our processes. Selling them on the value of procurement.
Sensing a trend here? What’s wrong with this picture?
The paradox here is that procurement is doing wonderful things negotiating externally with suppliers.
It’s internally that we struggle. Probably more than any other service provider.
And therein lies the problem. We are not a service provider, like HR, legal, and finance.
Service providers are centers of overhead. Like it or not, that’s the CEO vantage point. Being a service provider is the kiss of death. It’s code for “look here first when you need to do layoffs”.
When was the last time you heard a CEO say she wants to beef up her HR dept, investing far more headcount and budget? Or the accounting dept? Or the payroll dept?
But you hear and see such investments made for sales. And R&D. And manufacturing. And business development. And new product development.
Those groups have such a firm seat at the table that they can’t even get up if they wanted to.
Do you really think we’re going to talk our way into these roles? It’s not going to happen.
No amount of rolled up cost savings is going to convince a single CXO to elevate procurement to the table.
You know why? Because that money doesn’t exist. That’s the super painful reality.
“$500M was saved for the year!”, the CEO reads in a procurement report, enthusiastically. The CFO gets excited too… “That’s fantastic! We could use that money!”
But in very short time, they will both come down like a roller coaster.
And you know why. That money doesn’t exist. It was given back to the business units and the business units….. well they spent it. That money’s gone. It didn’t even get a chance to earn interest.
So there’s a few different things that need to happen. Consider these the 4 legs of the stool:
One is, we need to start positioning ourselves as a source of enterprise advantage – a center of profit. In all of our communications. In all of our marketing.
Two is, our metrics need to change. Cost savings need to be rolled up as Contributions to EBIT. We need to change perceptions regarding the money we save.
Third, and the hardest one to achieve of all, is one I’ve been pushing pretty hard in industry: cost savings (Contributions to EBIT) need to go directly to the CFO, not back to the business unit.
Fourth, these business unit contributions, provided they don’t result in quality or performance issues, need to become strong performance criteria for the business unit leaders. It needs to be hard coded in their performance reviews, and it needs to count.
If these things are done, procurement will organically find themselves with a seat at the table. And we won’t be shoehorning or cajoling ourselves into that role. We’ll be pulled in, because the value proposition will be too much to ignore.
Just the way we want it.
Now go off and do something wonderful. Be your best!
Omid G.
“THE Godfather of Negotiation Planning” – Intel Corp
P.S. Ask the dozens of Fortune 500 companies how we’ve helped them navigate the way to procurement greatness through training and our Capability Building program - with org wide assessment processes and customized training that elevates organizational skills & results in a way that traditional training never achieves. Contact my office to find out more at executivelearning@competitorsview.com