How are CPOs reacting to life under the CEO’s microscrope, leading change in other functions and the pressures of tomorrow? They thrashed out the issues at a conference in Boston
Making your way in the world today takes everything you’ve got. Taking a break from all your worries, sure would help a lot.
- The opening theme from Cheers
While many CPOs would welcome a breather after the travails of the past 18 months, the chance is unlikely to present itself any time soon. so when CPOs gathered in Boston, home of the fictional tavern, in November for the 2009 Aberdeen Group Chief Procurement Officer summit, strategies to tackle tough times were high on the agenda.
“There’s no doubt these are challenging times for CPOs,” said Andrew Boyd, president at Aberdeen Group. “But it is not all doom and gloom. In a recent study of CPOs, almost two-thirds said their role had been positively affected by the downturn, 34 per cent said they were more visible and 29 per cent were viewed more strategically.”
So as the focus of the CEO’s and CFO’s magnifying glass intensifies, how can CPOs deal with the increased scrutiny?
“We’re all looking for cost reduction to drive profit margins. Those types of change and innovation are what we are all about,” said Roy Anderson, recently installed as CPO at financial services firm State Street. “I tell my staff that innovation is what you are core to – the creativity you bring to an organisation, the new suppliers you bring.”
“But how many of you had some ‘issues’ getting those change ideas embedded in the organisation? You tell people about demand and levers and change and new opportunities, and they say: ‘Roy, that’s a great idea! But not in my area.’”
But supply leaders should be energised to realise necessary changes. “I see the CPO and people in procurement as the type of people who can make those changes,” Anderson added. “You should be enthusiastic about your jobs. I personally think the CPO role is the best job in the world. you should make them understand that you are a change agent.”
Nor should this attitude be left at the door to the purchasing office, said John Campi, former CPO at Chrysler and the Home Depot. He said leaders needed to apply “boundaryless” behaviour, so the CPO could drive change, and lead and improve execution in the organisation.
Anderson said the ability to implement change was primarily down to the staff you employed. “Do you have people in your organisation who are intelligent enough and confident enough to drive change and can be the authority in that category?” he asked.
Bruce Kilkowski, vice-president of procurement at retailer JCPenney, said this involved extracting the maximum value from your current team. “Say you could get another 15 to 20 percentage points of improvement, what would the impact be in terms of added value? A lot of this is not about the generals, it’s really about the privates.”
But do your staff have the skills to explain change and innovation throughout the business? They might be a great negotiator or market analyst, said Anderson, but for this, they needed to communicate and sell. “Face it, we are salespeople. Procurement is definitely long gone. We sell concepts to internal customers, we sell to our supplier base to be more innovative in their solution set and we sell to the internal customers to explain what the changes need to be.”
David Parsley, president and CEO of Centralized supply Chain services - which provides procurement services to US restaurant chains Applebee’s and IHOP (International House of Pancakes) – said people must be shown that change is better than the status quo.
“Here’s the paradox. If continuous improvement is good, and improvement by definition is change, why is there so much resistance to change?” he said. “Changing to improve is a very positive thing. You have to create a culture that embraces change and looks at change for potential improvement. Thinking about how we do things better, not just different.” But this required a “safe” environment where staff could speak up, and be heard, without fear.
Test of credibility
Implementing change would also depend on strong leadership from the CPO, but do you have sufficient credibility to deliver it? As Anderson pointed out, as the profession develops, half the content of supply chain courses was out of date by the time students reached their third year.
He encouraged leaders to assess their own qualifications: did they remain relevant? And if not, what were they doing about it? It was hypocritical to force others to train and enhance their skills without doing so yourself, Anderson said.
Self-improvement could be as simple as learning from your peers and colleagues. “Iron sharpens iron. We are a network of purchasing people. We need to keep ourselves sharp as a procurement network,” argued Peter Connelly, CPO at diversified manufacturer Leggett & Platt, who received Aberdeen’s executive stewardship award for leadership.
Parsley made the move from CPO to CEO following IHOP’s acquisition of Applebee’s and the decision to form an independent co-operative supply chain function for the restaurant’s operators. Keeping people at the forefront of your thinking, and ensuring you were open and honest with them, even in difficult periods, would be a powerful tool.
“People are paramount,” he said. “You can have all the great tools and processes in the world but it’s about people because they are the ones who make it happen. If you ever lose sight of that you’re going to get lost.”
But although the temptation to “take a breath” may be intense, especially under periods of pressure, it could be dangerous to lose focus when attempting change so you must “stay on target”. Parsley’s golden rules of leadership included surrounding yourself with great people, giving them the required support and making your goals and objectives clear.
According to Gus Pagonis, a former three-star US Army general in charge of the supply chain in the first Gulf war and head of supply chain and procurement at Sears, buyers must also remember their roots. “Now you are moving up the corporate ladder don’t forget what it was like at the bottom when nobody at the top was listening to you,” he warned. “Don’t cause the same frustration for the new procurement people coming into the field. Empathyis something very important in leadership.”
Taming the ‘Rottweiler’
Campi, who now leads his own consultancy Genesis Management Group, argued that supply chain collaboration would be the primary focus for supply leaders to tackle over the next few years, but it would be difficult to convert “Rottweiler” behaviour into successful partnerships. Although the goal may be to drive cost out of the entire supply chain, “nine times out of 10” the buyer did not listen to the supplier so it didn’t happen.
At Chrysler, Campi attempted to introduce “suppliers of choice” – vendors that were so critical to the firm they would not have to bid for work. Whether they were manufacturing or services businesses at heart, he said, all organisations will have suppliers like this. “Suppliers that are so darn important I can’t afford to have anything but full collaboration with them,” he said. “They need to understand what my strategy is, what the risks are, and my financial capability as well as me understanding theirs.”
The goal of this collaboration was to embed the supplier in the design process to harness its skills and innovation. But there would have to be a radical shift away from a “buyer knows best” and single-item price savings culture to one of joint trust. Kilkowksi pointed out if you couldn’t collaborate internally, in procurement or with stakeholders, collaboration with vendors would be impractical. He said collaboration needed the ability to ask tough questions of partners to enable improvement.
At Xerox, the key is to work so closely with internal partners you can barely see the join. “One of my goals, as a purchasing executive, is that my team members are embedded so deeply into lines of business and design teams that they look like members of those teams,” said Marty Annas, vice-president of the company’s equipment procurement group. “They don’t say ‘there’s a procurement guy, what does he want down here?’ We’re part of that team. Integration, engagement and alignment are crucial.”
