Some chief procurement officers are in dead-end jobs. But is that the fault of the individual or the executives who hired them and who dictate their objectives and terms of reference? Carrying the CPO job title may sound great, but in practice it means little if all you are required to do is negotiate prices and your colleagues use phrases like “smoke and mirrors” and “creative accounting” to describe procurement’s results.
The real test of any CPO’s status is to ask: what is their next job in the organisation? I believe the majority of CPOs have no next job with their current employer. They will probably stay as long as their competencies support them and then move on to a similar role elsewhere. Recently there has been some publicity about CPOs taking CEO jobs – such as Jean-Philippe Collin at Peugeot – but they are in the news precisely because of their rarity. And although it is true that there are a number of hugely successful CPOs who derive enormous satisfaction from their jobs and, even though they are capable of further career development, would not consider another role, I suggest that they are more the exception than the rule.
Why does this matter? Well, I believe there is a direct link between a CPO’s capability and future career path, as perceived by others, and the value that ultimately he or she can bring to their organisation. Because so many procurement functions have traditionally been measured on price savings, there is often a complete lack of conscious thought among executives that procurement people could usefully work together with other functions to create further business value.
This lack of understanding perpetuates a vicious circle. Business executives recruit to match the task. An average competence CPO is hired to fill a relatively simple role of price and cost maintenance within the expectations of the organisation. Once in position, they will not be considered for inclusion in more complex business activities such as mergers and acquisitions, major project management or even operational productivity improvement. This, in turn, has a knock-on effect on the procurement group itself and the talent that it can attract and retain.
The task that must be undertaken is therefore twofold:
- Executives must be educated about what additional competitive advantage or other appropriate benefits can be provided by getting procurement right.
- Executives must be influenced to “overrecruit” their next CPO compared with their previous aspirations.
Over the past 30 years, I have witnessed progress in our profession, but it has been too slow. Unless we are happy to accept another 30 years of incremental creep, there needs to be a new approach. To break the cycle of procurement’s failure to be recognised, we must adopt what I call “radical evolution” – that is, taking the path that evolution would normally follow but lighting fires under it to increase the speed and magnitude of change.
Why some organisations get it right
Before considering what this means in practice, it is worth reflecting on why some organisations have already reached this level. The fact is, there are some extremely successful CPOs working in organisations whose CEOs have clear expectations of how procurement should provide more value to the business and who therefore require a different calibre of procurement leader. Why is that?
I believe that there are three main reasons and one subsidiary reason, only one of which is a repeatable process.
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Happenstance. A business executive has read about or experienced the internal fission when procurement fully engages with engineering, finance, production and suppliers. This may be pure chance, or perhaps increased competition has led the executive to look for new opportunities. The executive is prepared to sponsor a new approach and looks for a more broadly skilled CPO to lead the change than would normally have been required.
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Coincidence. An open-minded business executive meets a candidate with outstanding leadership and functional skills who knows where and how to lead change. It may not have been in the original plan, but the candidate is able, at the interview stage, to influence the executive to review the way forward. Just as with happenstance, this situation occurs regularly but randomly, with insufficient frequency to generate critical mass.
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By design. This situation appears to be growing in frequency, but not quickly enough. It occurs when an informed business executive (who could even be the CEO) requires precisely the skills and leadership mix because he or she has previous knowledge or experience. I have seen this myself and the effect it can have on the organisation is considerable. When a CEO introduces a CPO who is not only required to lead cross-business projects but is also clearly capable of doing so, other functional management are eager to engage. This is certainly a repeatable process but, again, if left to evolution it will take too long to achieve critical mass.
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Institutionalised journeymen. In some organisations (central government departments are one example), an ethos exists where to rise to the top in a career, individuals need to experience many areas of the operation. If the individual’s skills are appropriate, and if fast and rich learning is available, these organisations may support high-calibre and valued temporary CPOs (more of which later). However, this may not alleviate the talent problem in the function itself if procurement is not seen as a mainstream business activity in the way that it should.
Towards a new genre of CPO
If the solution is for business executives to recruit more competent and higher-calibre CPOs, there must be a change in the way they view the procurement proposition. This sounds obvious, but if it really were there would now be many more organisations working differently and far fewer procurement people complaining about their lack of positioning. Today, we see incremental change, at best.
Procurement will only successfully reposition itself when board-level executives who are responsible for the function understand the full value it can deliver and then re-target CPO recruitment accordingly. But this won’t happen by itself – certainly not on the scale that is necessary. The truth is that our profession and those in leadership positions have done only half a job in marketing procurement’s value proposition to the people who really matter: top management.
To complete the task, informed and concerned leaders of procurement must step up and engage the decision-makers. And by leaders, I mean not only incumbent CPOs themselves, but also professional procurement associations such as CIPS in the UK and the Institute for Supply Management in the US. They must actively market the solution to senior executives, the membership groups they belong to (for example, the Institute of Directors in the UK) and other individuals in whose gift it is, and whose responsibility it is, to comprehend and act upon the new genre of CPO.
What is this new genre of CPO? What kind of person has the skills, experience and capabilities required to lead procurement improvement, command respect among peers such as chief engineers, CFOs, marketing directors and CEOs, and be accepted as a playing equal?
While there will be no template for tomorrow’s CPOs, they will certainly have both broad skills and growth potential. Many of them will not have come from the current ranks of career procurement professionals, nor will the CPO position be their final job. They will probably have an MBA and may be midway on their career path. They will be fully capable of influencing colleagues, since their interpersonal skills will be exceptional. Their experience may include managing a small business unit or perhaps being the CFO of subsidiary division or even an independent small or mid-sized firm. They will be seen as having executive potential and may be given a broader portfolio in addition to procurement.
At present, such people would not see themselves as candidates for a CPO role, because they will be aiming for a business executive position, and possibly the boardroom in the future, and the “normal” CPO role would not serve their purpose. And, in many cases, they would be considered “too big” for a CPO role today.
In recent years we have seen a growing number of organisations hiring non-procurement people as CPOs. Although their performance to date has been somewhat mixed, there can be little doubt that this trend will continue. Indeed, our profession needs more of these “outsiders” if it is to gain the level of recognition that we believe is now overdue.
The challenge for professional bodies
Although this trend may appear, on the face of it, to be a threat to the established procurement associations, which have traditionally focused on developing qualified career professionals, it actually presents them with an opportunity. This is because there is a requirement to support leaders who come into the function with little or no procurement experience and who need to acquire knowledge and get traction quickly.
In order to make the most of this opportunity, however, the associations need to play a different role. Instead of focusing almost exclusively on those who are already doing procurement, whether via formal training and education or “best practice” conferences, they need a clear marketing strategy to engage and inform top business and other executives with the procurement value proposition and to help non-career professionals gain the necessary insights.
The first thing that needs to happen is specific targeting for executive groups, perhaps via breakfast workshops with examples and converts speaking from within their ranks, rather than from procurement. Professional bodies will need to influence those organisations that support not only CEOs but also finance, engineering, administration and other executives, such that marketing opportunities are sponsored and provided. The messages must not reflect what CPOs are hoping for; rather, they must clearly show the business opportunities that are being missed.
Research carried out in the 1990s among CEOs in the US by Professor Robert Monzcka indicated that top executives are open to learning about and investing in procurement opportunities if the case is made to them. In this context, I believe headhunters and other recruiters also have a key marketing role to play. They are often trusted agents of their business clients and can have an important influence on the candidate specification. Their advice to seek broader and more upwardly mobile CPOs could contribute significantly to the change in executive mindset.
Second, products need to be developed that provide focused learning for transitional CPOs. These people will be looking not for the full professional training portfolio but for short, content-rich learning that enables them to lead, guide and steer, but not so much that they become career procurement practitioners (the CPO in transit will rely on others around them who are).
They will require “instant” best-practice experience for strategy, process – both practical and legal – marketing and customer of choice positioning. They will also need to understand the procurement skills mix required to engage the rest of the organisation, as this will not necessarily be evident from their past experiences. I believe that this can be assimilated by high-calibre candidates with the correct support in less than three months.
A new organisational model
The notion of a “journeyman” (or woman) CPO passing through the function en route to a possible executive position opens up a new procurement model – what I call the “career and journeyman” model (see figure 1, above). The introduction of such a CPO immediately changes the appearance of procurement. It becomes clear to young, high-potential people in the organisation – who would normally look at finance, marketing or sometimes engineering as their route upwards – that if management is prepared to invest in such a CPO then procurement is also a legitimate option.
I have personal experience of this effect where, over a period of three years, hundreds of high-potential people competed for places in an effectively branded and marketed procurement function. These people were well educated – to degree and, in some cases, master’s level – and whereas most had little or no experience in procurement, they were seen as equals by the qualified engineers and chartered accountants elsewhere in the organisation. Indeed, several came from other parts of the organisation and it was natural for peer co-operation to occur.
It is important that this group of people quickly learn about procurement, but experience shows that they are able to do this provided they have content-rich learning and workshops in which to practice.
An important prerequisite to managing this model is that journeymen may not stay longer than a specified “dwell time”. This type of candidate does not plan to make a career in procurement and certainly does not want to be “trapped” there. However, as the brand value of procurement increases, there may be people who wish to stay and develop a procurement career. In figure 1, the dwell period is 24-30 months, but this can vary depending on the organisation.
On appointment, the journeyman’s exit trajectory is agreed and attention is paid throughout the period to ensure that the appropriate connections are arranged. Subsequent positions could be elsewhere in the organisation, or indeed outside it. Success for this model is measured not only by the increased value provided to the organisation, but also by how hard it is to retain journeymen during the agreed period as a result of high demand for their services elsewhere in the organisation.
It is important to manage the impact of this model on incumbent procurement careerists. This can certainly be a challenge, but for many it can help to raise their game as the general level and nature of procurement activities change. Also important is maintaining the correct balance between journeymen and careerists. The ratio can vary between 65:35 and 75:25 depending on the maturity and nature of the business. Levels of journeymen lower than 25 per cent probably have too little impact on the organisation.
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Procurement professionals want to step up to the plate and take on broader responsibilities than they have today. Some are succeeding because of their innate abilities and some because their organisations have demanded change. If left to evolution, one may anticipate that such change would continue and, at some stage, possibly reach critical mass in terms of the level of understanding by business management.
However, evolution is notoriously fickle and if the numbers of enlightened organisations are as low today after almost 50 years of experiment and academic debate, then we must now give it a push forward. Until now, procurement professionals around the world have typically not broken through the respect and equal value barrier, mostly because they belabour their woes to each other and sometimes because they were not able to do otherwise. Only by involving senior executives directly, and in sufficient numbers to achieve a full understanding of procurement’s potential value and how to secure it, will the profession move forwards.
The opportunity is there to be taken. So let’s take it.
BRIEFING
Q&A on the ‘career and journeyman’ model
Inevitably there must be debate about the “career and journeyman” model proposed in this article. I have started with a few obvious questions:
Q: Is the career and journeyman model workable?
A: I believe it is. I have seen it work and the top-calibre CPO is a very effective attractor of talent.
Q: What about other CPOs and procurement professionals? How will they see this initiative and how will they be judged and measured if the new model is introduced?
A: There has been only incremental change for the past 30 years in procurement. This has allowed average performance to prevail. Even though change is taking place, there are many organisations still supporting average performance, which in turn supports continued cynicism from those who will not believe in procurement excellence. Players must raise their game to meet the new model.
Q: Is there a place for career CPOs?
A: Yes, there is certainly a career for highly skilled CPOs for whom the next executive level is not an option. Not all organisations will choose to prioritise investment in procurement or supplier-related benefits, and if they continue to demonstrate their value both to management and to their own staff, their continued success should be assured. Today, there are certainly many successful careerists in this category.
Q: What if the organisation is too small to support a journeyman CPO and journeymen procurement people?
A: Relative investment and return must be reconsidered. A small company may choose to recruit a journeyman CPO on the basis of the impact that will be made not only on procurement but also on other parts of the business. But the mindset must also change, as the model would support recruiting a new CPO every two to three years. This is not usual for small organisations.
Q: How will the model be marketed?
A: National procurement associations will be invited to support the “career and journeyman” model. An approach is planned to the UK’s Institute of Directors for a paper and pilot workshop in order to test readiness. Headhunters will be asked for support in furthering the conceptual model. Beyond this, it will be down to concerted marketing to executive bodies, as well as approaches to individual organisations. A conference is in the early planning stages for 2009.
Nick Deverill (ndeverill@btinternet.com) was, until recently, the CPO of Anglo American, and is now an independent consultant, coach and lecturer, based in the UK