The windmills that CPOs fight every day are, unfortunately, not illusions as they were in Cervantes’s Don Quixote. But the process is equally maddening, it only differs depending on the size of the company.
I begin thinking about this every time a CPO I know leaves his job, voluntarily or otherwise. In most cases, management uses the phrase that CPOs didn’t meet their expectations. Paradoxically, that same management oftentimes is unable to express their expectations clearly or to measure success in a systematic way. The reason behind that inability is that demands and expectations are moving targets in most companies. In that kind of environment, the wings of a windmill seem as an apt metaphor for ever changing priorities that CPOs keep getting slapped in the face with. I’ve written previously about the role of procurement leadership in this issue, you can read it here.
Who would want to walk a mile in CPO’s shoes?
Let’s get reminded of the main tasks of a modern procurement function in a nutshell – besides the traditional role of delivering quality goods and services on time, at the right place and at the right price, procurement has to always keep in mind further value it can contribute, especially when it comes to supplier relationships and keeping the supply chain risk free as much as possible.
Essentially, the demands and challenges keep increasing, but the attitude towards procurement and procurement’s own behavior has remained the same as it was a generation ago.
In my work with a few hundred CPOs ranging from SME to multi-business multinational companies, a pattern arises from a set of challenges that leaves CPOs high and dry:
- The CPO is separated from the company on three levels:
- CPOs are perceived the least of all C-level positions
- In most organizations, CPO’s competences and experience somewhat differs from the rest of the procurement team
- CPOs are the furthest away from the end consumer in many companies
- Companies often suffer from a pre-existing genetic condition where CPOs are given extremely limited access to promotions into other functions. CPOs themselves are rarely interested in that kind of mobility.
- CPOs get sucked in operational/ tactical activities, leaving them no time to devote to procurement’s strategic development.
- CPOs don’t have at their disposal sufficient spend data, combined with a general deficit of procurement and supply market analysis.
- The aforementioned moving targets in companies make it increasingly difficult to maintain systematic progress, because every other day something else is important.
- The industry is losing sight of true strategic procurement transformation based on business requirements, competences and accurate data. That trend combined with a single focus on operational/tactical software solutions keep pushing CPOs back into firefighting mode.
- The supply market has no sympathy for the CPO. Compliance and regulation issues, supply risks, political upheavals and commodity prices increases need to be methodically addressed.
- What CPO challenges have you witnessed?
Given all these issues, the CPO’s position is not an enviable one. Especially if we take a look at development paths for SMEs and multinationals in the future:
Strategy gap I relates to the fact that a whole generation of procurement professionals was not awakened by the strategic matrix developed by Peter Kraljic. The focus resumed to be on sourcing. The only change was that such a practice got an undeserved title of strategic sourcing.
Strategy gap II shows that some big companies with large teams and ample budgets did manage to enable the development of strategic procurement. The gap that remains is between companies that invested in procurement and those that still have not seen the true value of strategic thinking.
What size has to do with it?
Apart from general procurement trends, there are distinct challenges for different company size CPO:
Small companies – Procurement outsourcing is gaining traction and there is considerable concern that small companies won’t be able to keep up with digital and automation challenges. Low-profile buyers will no longer be cost-effective in this area. I have to be blunt here and I hope this will be taken as helpful advice – but my recommendation for CPOs in this environment, who have an ambitious streak, is to simply look for a more competitive position.
Medium companies – Here CPOs can encounter that procurement is still having image issues when compared to the rest of departments. Also, true support management is hard to come by or carve out. Most of the employee profiles are on the operational/tactical spectrum and there is often issues about successful integration of digital tools.
Big companies – Complexity is the root of the problem here. The system is difficult to navigate, interests and organizations are often in contradiction, accurate and integrated data is seriously lacking. Also, escalation of buyer power and over-compliance can keep pushing strategic procurement efforts back into pure tactical thinking. What remains is to stay strategy focused and keep delivering.
Is everything really that bleak?
If you just take a look at all the issues, you might wonder why would any person put themselves through this? But I have always believed that challenges are not put in front of people who don’t have the ability to conquer them. A good CPO is an economist / analyst / strategist / negotiator / true communicator and all those qualities account for a lot. I’ve written about how leadership, strategic digital tools and collaborative mindset can mitigate risks in this oftentimes chaotic environment.
I remain a firm believer that such a shift in perception can reduce those giant windmills so they can fit in the palm of your hand as you push forward with grit and confidence.