One of the questions we frequently get is: How do I make sure the value that procurement provides to the company is measurable? Traditional KPI’s might be pretty straightforward, but what about the less objective/measurable ones such as bringing innovation into the company, continuity of supplies, service level, trust/customer satisfaction, etc…
Procurement is always pushed to deliver more, month after month and year after year. More value, more impact, more innovation. Then, whether it is quarterly or annually, we sit face to face with finance or the whole C-suite and they say, “Your reports indicate that procurement has saved the company X dollars. Where is it? Why can’t I see procurement’s impact on the bottom line?”
I’m not going to tell you that savings don’t matter. Savings matter; it is what it is. But we all know that other things matter too – and 2020 gave us (among other things) an abundance of opportunities to prove that. In the past, many procurement teams have divided their results into quantitative and qualitative metrics. Hard and soft impacts. Savings and value.
Here’s what I suggest: how about measurable and visible? Measurable would cover all of the typical quantitative metrics. Things like savings, spend under management, changes in the size, distribution, or contribution of the supply base, etc. These are categories of performance or contribution where procurement can provide a dollar figure or a percentage as the answer. But there are a lot of other things we do that, while not measurable, are absolutely visible. Or are they?
We have a responsibility to self-promote and self-advocate. We need to make our non-quantitative contributions visible – undeniable even. That might be by communicating them during the year and it might be doing a better job of tracking them and turning them in at the end of the year alongside savings. Emails, company newsletters, review meetings: every one of these is an opportunity to increase procurement’s visibility.
Here is a perfect example: Stop and think for a minute about all of the things you and/or your team did in 2020 that made business continuity possible. I’m willing to bet that there are more than a few.
There are a lot of things about 2020 that were sad and hard and just plain awful. But that list of achievements you just thought of is a gift. Time stands still for no one; this is the year – and now is the time – for procurement to sit down with the C-suite and say, “Here are the things that we did (in addition to delivering savings) that made it possible for the lights to stay on.”
Procurement wants to have top-line impact, right? Well, how many customers were going to have their demand met if procurement didn’t bring in the required PPE, or find a supplier that was willing to provide a service on location through a COVID spike? Exactly.
In one podcast interview last year Phil Ideson and I spoke with Arthur Piszczor from Corcentric about facilities services. He talked about the fact that what has typically been a cost-driven services category has become an HR concern in the shadow of the pandemic. Will people feel safe? Will they come to work? Regardless of how they feel, will they actually be safe? That conversation really affected me, and in every category conversation I have had since, I have looked for the HR angle. Guess what, nearly everything has an HR angle right now.
I’m making the same case for procurement and company operations. You tell me, Mr. or Ms. CEO, which of your top line results WASN’T made possible because of procurement? Did you rely upon a product, a service, a technology subscription, a logistics carrier, fuel, utilities, etc.? Not one dollar of revenue was possible without us. (And you are very welcome, by the way.)
Now that’s not always going to work. At some point we’re going to reach this hypothetical ‘next normal.’ When that happens, we may not be able to claim that everything was because of us. But, if we do our job right and we communicate effectively, we will have made some inroads and made our point. Procurement is so, so, SO much more than savings.
Our original topic was how procurement can make our impact more measurable. As we expand beyond savings, the simple answer is that we can’t. Not everything important can be measured. What we can do is make our impact more visible. That way, when the question about savings and bottom-line impact is asked, we can answer it and then say, “and we also…”