Over the next few days, we will be blogging from the ProcureCon Indirect conference in Charlotte, NC, where Coupa is a sponsor.

Organizational Structure, Building Credibility, and the Art of Procurement Transformation

This morning’s highlight (aside from Rob Bernshteyn’s presentation – more on that later), was a panel discussion featuring procurement executives from Invesco, MetLife and Illinois Tool Works, moderated by Bill Schaefer of IBM Procurement Services.  The panel discussion covered a range of topics – but two in particular were noteworthy:

• Organizational Structure. Bill asked the panelists where they are with their current organizations, and where they’d like to be, and all three advocated the benefits of not falling beneath the CFO and his organization.  Now three data points does not constitute a trend, but it is interesting to get the viewpoints of three particularly well-spoken and successful procurement executives on why the proper organizational structure and alignment is so critical achieving the objectives of the Procurement and Sourcing organization. Though all three were quite respectful of their Finance counterparts and allowed that operating from within the CFO’s organization can be effective under certain circumstances, they were unequivocal in their belief that in their current roles, falling outside of the CFO’s sphere has been particularly helpful in aligning their efforts with the business units they ultimately support. One rolled up to a vice chairman of the board, another to the SVP of IT and Operations, and the third to the COO. All three cited alignment with the business as the primary benefit – primarily because it connected them directly with the operational staff in each business unit, versus the Finance lead or Controller in each group. And one cited that aligning under the COO was very effective in positing the procurement organization as one of the driving forces in ensuring that the businesses operated within their budget allocations. I saw a lot of nodding heads in the audience, and can’t help but wonder if the procurement profession as a whole wouldn’t be better served by similar moves to align procurement and sourcing under a more operationally-oriented part of the organization?
• Building Credibility. Almost all business programs will include organizational behavior as a core discipline, but many business students will be dismissive of those “soft skills” classes. But the three procurement leaders featured in this morning’s panel made clear collaboration, communication, and partnering skills are absolutely essential in building credibility with senior management for their respective organizations. So what does that mean? All three advocated hiring for deep category expertise, because without that, procurement is “just a clerk processing orders.” To truly drive value, the procurement organization must be staffed with professionals who understand their customers’ business, and who align their efforts with the business’s objectives. It’s not sufficient to hire category expertise, however. MetLife AVP of Global Procurement Brad Costedio made clear that you need to be conscious of hiring people who can “gel” with their counterparts in the business groups, because without that, “you’re not going to get anywhere”, even with deep category expertise. Chris Duchene, VP of Corporate Strategic Sourcing at Illinois Tool Works went one step further and explained how important it is to not speak like a consultant outsider – you have communicate in a way your business partners can understand (i.e. in other words, save “strategic sourcing analysis” for procurement conferences), and engage with them in the procurement and sourcing process. And above all, don’t be confrontational – disruptive folks can be a killer. And Mike McHale, CPO of Invesco, advocated that you lavish praise on your business group customers and let them take the credit for your joint successes. Because if you do, you’ll be surprised by how the word gets out about the value the Procurement organization provides. As details of successful projects find their way around the organization, the model naturally moves from “push” (where Procurement pushes its way into the business group to affect change) to “pull” (where the business groups ask for the procurement organization to help them), and you win over the hearts and minds of your business group counterparts across the organization. So to be truly transformational, your procurement leaders must be well-schooled in how to leverage influence. A strong lesson indeed!

Stay tuned for more from ProcureCon Indirect. The next post will be a recap of Rob Bernshteyn’s presentation and his “journey through time” of spend management technology.