Procurement’s Tipping Point – Only True Leaders Will Prevail

It’s said that Henry Ford once enlisted an efficiency expert to examine the operation of his company. While his report was generally favorable, the man did express reservations about a particular employee.

“It’s that man down the corridor,” he explained.“Every time I go by his office he’s just sitting there with his feet on his desk. He’s wasting your money.”

“That man,” replied Ford, “once had an idea that saved us millions of dollars. At the time, I believe his feet were planted right where they are now.” (Reader’s Digest, August, 1981)

Why do I find this anecdote relevant for leadership in procurement? Because procurement is at a tipping point. In my opinion, this is the most important period in procurement history since Peter Kraljic created his strategic matrix in 1983. Fully blown digitalization, industrialization 4.0, 3D printing, cognitive procurement are all loudly knocking on our doors and we need to have agile leaders willing to answer. And even though this evolution on the surface seems to be about automation, leadership challenges are always people-centric and procurement is in a unique situation where it needs to simultaneously and in the same measure work on two fronts – soft and digital skills, both of which have been neglected.

That’s why I mentioned Ford, not only did he implement the first mass production assembly line, he also knew how to recognize what conditions would be optimal for different personality types to thrive in. For procurement purposes, my view is that it can be condensed into 2 key concepts:

Enablement

A procurement leader knows that organizational methods and digital tools enable the procurement team to run a structured and transparent system. Given that Deloitte’s CPO survey from 2016 tells us that 60% of CPOs don’t think they have a clear digital strategy in place, it raises a concerning issue of just how many procurement departments are drastically behind the times.

Empowerment

A procurement leader knows that his/her department is a company within a company and possesses the vision to hire and develop team skills according to specific demands of modern procurement. That means that it is no longer enough to have the same dominant/negotiator personality type in the entire team, but to branch out to analytic/strategic types on one hand and on the other, employees with high emotional intelligence indicators who are  capable to nurture innovative supplier relationships and internal business requirements. The same survey tells us that 62% of CPOs do not believe their team has the skills and capabilities to deliver their procurement strategy. This percentage is a huge blow to our industry and it speaks volumes about the level of leadership.

That is why there are painful questions that need to be asked in every company:

Top management – How important is procurement to us? What do we expect from procurement? Who is our CPO and is that person in tune with the market, as well with digital and competency innovations? Do we have to think about outsourcing our procurement department?

CPOs – Honestly, am I a leader or just an employee? Do I have the necessary skills and foresight to transform procurement into a strategic and digitally supported function?

Procurement managers – Do I have skills beyond operational ones (analytic/strategic/soft)  that will make me invaluable to the company?

There is so much work to be done. The number of CPOs that have transformed their procurement into a strategic function is still alarmingly low. People often mention the distinction between managers and leaders. Personally I feel CPOs do not have the option to be anything less than visionary leaders if they are to truly integrate digital tools with highly competent personnel. What is needed are people who don’t fear change, but invite it with a knowing smile on their face. Are you one of them?

 

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Drasko Jelavic is a strategic procurement expert and Cirtuo’s CEO & founder. With almost 20 years of experience in strategic transformations, his knowledge was continuously upgraded in a top consulting firm in a variety of business industries.