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Are We Focused on the Right Transformation Objectives?

By February 20, 2019No Comments

In The Hackett Group’s 2019 CPO Agenda Report, titled Building Next- Generation Capabilities, there is clearly misalignment between what procurement is expected to do and what we are placing an emphasis on – and, more importantly, investing in. While technology continues to be a significant component of procurement’s budget, most of the critical development areas identified are related to our capabilities.

Since procurement capabilities are a core component of the AOP philosophy for how to transform and elevate procurement, this report provides a lot of food for thought. In fact, it will be one of the topics Philip Ideson and I address in our February This Month in Procurement podcast this coming Monday.

Hackett’s research shines a light on 5 critical development areas. They were selected based on the scale of the gap between how important the survey respondents indicated they are and procurement’s current ability to address them. In other words, these are the capabilities that procurement desperately needs, but does not sufficiently possess. They are: analytics, alignment between talent and business needs, supplier relationship management, agility and customer-centricity. Of this list, only analytical capabilities are being actively addressed by more than one-third of the CPOs surveyed, with 50% of the respondents saying they have a planned or ongoing development program.

The million dollar question is why? If we are pursuing transformation, and the skills required to excel in a transformed procurement function are less technical, why aren’t more CPOs investing in programs to improve procurement’s ability to build and leverage relationships or to improve agility?

There is the possibility that budgetary constraints are holding us back. The same Hackett report states that, “Procurement expects its budget to increase this year [2019] by 1.3%, half the amount allocated in 2018.” But there is another possibility we need to consider and address. It is possible that the enterprise doesn’t need us to become more than a strategic savings engine.

Long before procurement was trying to align our talent and priorities with enterprise objectives, we were working to increase internal stakeholder satisfaction. This led to the improvement of sourcing processes and technology usability. Somehow we’ve managed to make progress with our stakeholders (although there is still plenty of opportunity there) without achieving enterprise level alignment.

Have we tailored our development priorities to satisfy internal stakeholders whose procurement preferences are not representative of what the enterprise wants us to be?

The fact that analytical capabilities (a technical skill) are being addressed while relationship management and agility are not, suggests that a majority of enterprises want their procurement functions to be focused data driven opportunities, not subjective ones.

The only way for us to find out is to ask. There is no sense in fighting an uphill battle to transform into a procurement function that does something other than what our executive team has in mind. This is true whether our journey forward follows the path described by other leading procurement organizations or not.

If the leadership team wants us to be one thing, but stakeholders express the desire for us to be another, that is an important conversation as well. Procurement shouldn’t be outcast for pursuing objectives clearly established for us by the people responsible for the overall health of the company. After all, we exist to further enterprise objectives, not our own aspirations.

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