Tag Archives: purchasing transformation

Establishing the Right Business Culture for Procurement

Four tips to change and develop the right procurement culture

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It is the responsibility of the CPO to create the right culture for procurement. While there is a culture within the organization that reflects the overall values of the company, it is extremely important that a culture is built for the procurement team. A dedicated, hardworking, entrepreneurial, collaborative culture will support the CPO’s success in the business.

To be effective, procurement leadership must dedicate themselves to the culture and lead by example. Some cultures are focused on achieving cost reductions at the expense of anything that gets in the way. This is a challenging environment and costs the company in the long run. I always wanted my team to be very analytical with a total cost of ownership mentality, but I also expected that they would be open to ideas, suggestions and innovative ideas that would be of extreme value to the organization, while keeping the correct perspective on supplier relationships. When involved in a relationship for a category driven by competition and market share, they needed an arms-length relationship. In these markets where the balance, cost or opportunities could shift quickly, the sourcing manager must be flexible to shift with the marketplace. In more strategic situations with a sole source of supply for specification or technical reasons, where price is non-negotiable, it’s critical to build an organization-to-organization business relationship that will provide competitive advantage. The culture must also drive sourcing managers to build strong personal relationships, but at the end of the day, the business relationship always comes first.

In top class cultures, 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 and the ability to build fact-based presentations that influence, suppliers, management and stakeholders. It’s important to recognize that, in many cases, procurement does not own the expenditure, but it does own the procurement process.

On the outset, it seems difficult to instill these values in the culture. I’ve found these 4 actions are effective in cultivating a strong, value delivering environment.

  1. Engage, expect and prioritize the desired culture in your key managers and set the example at the top.
  2. Make the workplace great and when recruiting, keep the culture as a key attribute of your talent management profile.
  3. Where employees demonstrate the ability to meet the cultural norms reward them and the team on their adoption of the values.
  4. Develop a culture of respectful individuals, enabling them to respect ideas, challenges, internal customers and external suppliers.

Are you up for the challenge?

Moving into the C-Suite

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You’ve made it! You’re now a CPO!

In last week’s blog, I discussed the short tenure of the CPO—what does this mean if you’ve just moved up to CPO? A recent McKinsey study focusing on executive transitions indicates that nearly half of top executives say they were not effective in earning support for new ideas when they moved into the C-Suite. One-third admitted that they have not successfully met their objectives during their tenure. While there is no predictor of success in a new role in the C-Suite, this blog is designed to provide some keys to success.

Many individuals want to start adding value quickly and make immediate changes; it could prove to be a career-ending mistake. The CAPS Research CPO study I mentioned last week and the related Korn Ferry Institute report highlighted the CPO’s tenacity in facing complex problems and ability to be calm and cool in a crisis. You know that procurement or supply chain professionals develop these skills through experience, so remember this is a strength that your fellow C-Suite peers can rely on. I’m guessing you don’t want a crisis now to show these skills, so following the Deming model of understand, plan do, check and act is a good recommendation for anyone taking on this new role. In the first hundred days, the new CPO should learn the business, business culture, political dynamics and pet projects of your other colleagues in the C-Suite.

It would be wise to evaluate the team and develop an assessment of the team strength, weak links, overall technical and relationship competence and develop a current state analysis. It always helps to get some meaningful metrics, benchmarks and a baseline of others in the industry. When comparing these performance indicators to your new organization, the gaps in team strength, organization and process will become apparent. Getting the team aligned to a shared vision, direction and focus will make your transition easier.

Developing a plan and getting input from your colleagues and stakeholders will assure your success when you present a comprehensive plan. The plan should include key activities, investment required, return on investment, key performance indicators, timelines and milestones and resources to be required and the change management process you will use to accomplish transformational change.

One thing to bear in mind, a transformational change of this magnitude normally takes about two years. If you make immediate changes without the preparing management and without the presentation of a complete program, you will not be considered part of the team. It’s always tempting to exercise your power and change things to show that you are there doing something, but it will be a disaster in the C-Suite.

The McKinsey study indicates that executives with the most successful transitions need more than 199 days to adapt to a new role. The four keys to success are:

  1. Build a plan focusing on internal alignment and the highest priorities of the business
  2. Create a plan that accommodates the business dynamics and culture
  3. Assess your team, understand the strong and weak players and get a perspective
  4. Every business has a business style, adapt to the style in the business.

You have made it, you’re in the game, make the right moves.