I have been working, managing, advising and training procurement teams for the last 20 years in a variety of locations in Europe, Asia and Africa, and I am still left with the question:
How is it possible that the person able to positively influence the company’s financial performance easier, faster and more drastically than anybody else, often operates in a disadvantageous position and does not enjoy the recognition they deserve?
What makes it more bizarre is the fact that this is happening in our times, when everybody talks numbers, short term, and the pressure on the numbers is never-ending in a variety of ways.
I have identified a number of reasons why this often happens. There may be more related to the industry, the company culture or the geographical location, but I found those below as a common denominator:
Everybody believes they can do the job…probably better
This may come from historical reasons and the evolution of the procurement function. I am not old enough to experience the function being purely transactional, not even protecting the business from any compliance or regulatory risks, being headed, in many cases, by people of questionable qualities or credentials. What additionally works against us is the fact that the business is difficult if not impossible to know the value that is lost if the activity is not performed by experts. For reasons of confidentiality, it would be practically impossible to know the prices that the competitors enjoy for their suppliers and have a clear understanding of the success or quality of the function’s deliverable. Add the fact that it is in human nature to enjoy feeling empowered, and facing suppliers can put one in this position, and you have a clear understanding of why everyone wants to do this job.
We cannot advertise our successes
Would it be wise for a Procurement officer to become very verbal about the successful result of their efforts and start disclosing details about the levers they exercised, the critical intelligence they managed to collect for the supplier, their sources, the intentional delays, the intentional introduction of competitors in a process, the climate created, the alleged budget constraints, etc, etc? If they did, they would be exposing to future suppliers the way they operate, and it would make it harder for them to repeat the successes in the future. The result is minimum publicity and reduced recognition.
It is not unusual that the resistance to change restricts the potential of the procurement function, more so in the cases where they operate with limited empowerment that does not allow them to perform the challenging role that can enable them to deliver significant value.
In many cases, the business does not realise the value creation potential that is associated with a well-trained, well-managed and empowered procurement function. It is, therefore, seen as a support function, yet another cost centre, a necessary burden to the budget.
It is important to the success, if not the survival, of the function that we work hard to change this. One way to do it is to:
- Produce evidence to the business that the Procurement function is a profit centre that can work with the CFO to identify the necessary savings that will deliver the desired financial performance.
- Transform the function into a cost reduction/cost avoidance value creation engine that works in perpetuity engaging virtual team members across the business and then schedule and prioritise the actions that will deliver the desired results.
I had the opportunity to train and manage Procurement Teams that followed this approach and delivered beyond expectations. If I were asked to name the single most important factor that made it possible, I would mention empowerment, without any doubt.