Building Procurement Influence Series:
Part 1 - Influence Through Operating Model

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Dan F: The world is changing, businesses are changing, procurement is changing. CPOs have got this opportunity at the moment to really take advantage of the circumstances around procurement. How do we take advantage? How do we make sure we’ve got influence across the organisation? 

John P: Well, I think it starts with the operating model of procurement. Where does procurement sit in the organisation? Most organisations are coming from a decentralised place, moving towards centre-led or centralised. That’s what we’re seeing in the market. 

And it’s really important to have a flexible approach to that model, because as the organisations change, you need to be able to manage how the function sits and, more importantly, where are the table that sits. I think the challenge in the procurement landscape is that often, those functions sit within an operational lead or a CFO position. And it’s making sure that we have the right size procurement function for the organisation that sits around it. It’s really an important factor. 

It’s really important that we get into those positions early on. We need to get involved at the start, where businesses are creating strategies, so that our sourcing strategies can align to them. Often, we’re finding that we’re getting involved at the end of the processes and we’re getting involved too late. The influence comes from being involved early on. 

Dan R: I think sometimes that also occurs because procurement is creating objectives in isolation. If we have a look at things like the traditional we want you to save X amount of money, without considering the business objectives at a high level, which might be core focus on things like safety, we need to flip that a little bit – get involved earlier on in order to have bigger influence and say, okay, if our number one priority is safety, what can procurement do to get involved and to have a positive contribution towards that safety objective. 

But then that next layer down, in order to maximise our influence, we’ve got to be closer to operations – really starting to understand what their objectives are and aligning the procurement objectives with operations, and to flip that traditional, hey we’re here to save money, and to look at it from an operations point of view – how do we collaborate and make sure it’s more of a shared objective? to say, okay, you need to reduce your costs, how do we get involved to work with you to manage your costs better? It’s more of a collaborative approach. I think that’s one way that we can have a whole heap more influence with the business. 

I think the other thing that I see too, to go back to your organisational model, visibility is key for procurement. Influence is linked to visibility. And I think there’s a few ways that we can do that. One is obviously physically. Are we located where our operations are? So, actually being in-the-business and seeing what’s going on day-to-day. I think a lot of procurement organisations traditionally end up in a head office environment so that they’re centralised. You can still have control, but to put people where they need to be will maximise your influence with the stakeholders because you’re seeing the business and you understand the business. 

The other thing we’re seeing a lot more of is single point of accountability for stakeholder relationships. We see in a lot of organisations now that procurement has a role to align themselves with a particular stakeholder – might be a business unit or a functional head. 

John P: We often find that people say, I hate procurement, they’re getting in my way. It’s because they’re not thinking about procurement from a buyer’s perspective. I think what we have to be careful of is that the people who are in central procurement functions must have a really good understanding of what the buyer is doing and making sure that they see the world from the buyer’s perspective to make sure that those elements don’t happen so that they become a partner with the procurement business, rather than being a blocker. I think if you’re not doing that, you’re missing the opportunity to create value and create better relationships with your buyer. 

Dan R: It’s such a good point, John. And I think, speaking the language of the business is everything. We’ve got to move away from Procurement’s traditional language, which is soft savings and these sorts of things, and move towards the language of the business, which is cost per tonne, or the profit and loss statement and the key areas that we’re working on to affect the bottom line. Where I’ve seen that, where CPOs have aligned themselves with the business process and their language, they’re way more successful, and you get a lot more collaboration with those value-adding initiatives when you do that. We’re starting to see some really good results where that’s happening. 

And the last one is really about the site visits and supplier visits, that’s another part of being visible – getting out there, understanding the business, showing your face, boots on the ground. And that’s when people will come to you a lot earlier. There’s a lot of those water cooler conversations if you’re out there. And if you’ve got boots on the ground, you’re more privy to what’s going on, so you’ve got an ability to influence at an earlier stage. 

John P: And some of that stakeholder matching comes from category matching. We see organisations that the major spends are like technology, facilities management, corporate services and other operational functions. If you have those category people in your procurement function aligning to your business, whether they sit with them or not, they’re where you get the best relationships, and that’s how you end up with the influence.