Source One’s own Jennifer Ulrich recently wrote an article for Spend Matters titled “ ”. In the article, Jennifer indicated that even mature sourcing organizations with a comprehensive category management structure have “to change their organization’s mindset if they want to truly transform procurement. To transform the function, they’ve got to first change the way other business units perceive and engage it”.
Easier said than done, for sure! The biggest challenge with business alignment is understanding the more subjective aspects necessary to truly fill that role. How do you really know your organization is going in the right direction? To start, I recommend doing an honest assessment of where you are at, by asking yourself three questions:
First, what is the vision and mission of your procurement department? Further, have you shared that mission with the stakeholders you support, and do they support it? Many procurement leaders I speak to haven’t considered establishing a mission for their group. They certainly have annual goals, primarily tied to savings, that don’t necessarily align with the business in broad terms (of course everyone wants cost savings, but not everyone is measured on it). This leads to an immediate disconnect with the business, and the primary reason why you tend to get feedback like “procurement only cares about cost savings” and “they don’t understand our business”.
Ideally, every time a new stakeholder group (or individual) is introduced to procurement, there should be an engagement plan that clarifies not only the role procurement plays for the organization (including policy, process, etc) but the overall mission procurement has. This should be a mutual conversation to ensure that procurement also has a clear picture of the goals, objectives and mission of that group. Normally, this type of discussion leads to a higher level of engagement, and ensures a seat at the table of the business.
The second question is what type of resources are you hiring? Resources with a high level of business acumen – people who can speak the language of IT, Marketing, Finance, Engineering, etc – are ideal when looking to increase alignment with the business you support. Still, I rarely find business acumen as a prerequisite for hiring in procurement.
In my experience, procurement groups are terrible at thinking outside the box when it comes to recruiting and hiring. Instead, they default to an “apples to apples” comparison of resume to job description, which only serves to ensure the getting the same types of people (and there for the same types of results) they’ve gotten in the past. It’s hard to quantitatively assess critical thinking, relatability and common sense – and much easier to check the box such as “10 years sourcing experience, 5 years plus sourcing software, etc”.
The last question you should ask yourself to ensure alignment isn’t about the internal organization at all, but rather the supply base. How is your procurement organization perceived by the supplier community? Are you seen as a gatekeeper, as the negotiation “hammer”, or as a bottleneck? If so, then you probably aren’t aligned to the business. The business wants happy suppliers, they want suppliers to be responsive, and they want suppliers to help them do their job better, faster and more efficiently. If procurement isn’t seen as an enabler of these things by suppliers, then you are doing something wrong.
Of course, we should also be the negotiator and the gatekeeper, but if that is the first impression your supplier has, you have a problem.
So why should procurement be concerned about what suppliers think? Well, when it comes to business alignment, the suppliers will surely be sharing their view of the procurement organization with your stakeholders, but second and more importantly, because a happy and engaged supplier is much more likely to give you access to better products, services, pricing and terms – in short it creates a competitive advantage for the business, which is really what we are there for!
Business Alignment is challenging to obtain, particularly in ever-changing and evolving environments. To get there, you must do an honest assessment of what the org is today and think about ways to enable your stakeholders. It is well worth the investment – once alignment occurs, the business will be seeking out procurement, and not because there is a mandate, but rather because there is value!