", CPOs need to hold high ethics and moral standards, have a strong sense of corporate responsibility, and make sustainable decisions regarding their suppliers. By virtue of being closely connected with so many players in the external environment, CPOs can acquire and filter the insights necessary to define a winning growth strategy. These cookies ensure basic functionalities and security features of the website, anonymously. Their views are personal and do not represent those of the companies they are affiliated with. They encompass everything from internal employees, technologies, and functions to external partners and suppliers. The answer lies in the reporting structure. As a result, theyll gain greater insights into the inner workings of the organization, have an influence on major decisions, and expand procurements offering way beyond cost savings. Today, customers and investors alike demand transparency when it comes to ESG performance, and therefore a companys reputation can be severely affected by any transgressions, regardless of whether or not the company is aware of any wrongdoings. The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". My 2 cents thought . It is the person the CPO reports to and the one who decides on priorities, key initiatives and investments in Procurement. Explore the latest episodes of The Heidrick & Struggles Leadership Podcast, Get the latest insights from Heidrick & Struggles, Heidrick & Struggles International, Inc. 233 South Wacker Drive Willis Tower Suite 4900 Chicago, IL 60606-6303 Phone + 1 312 496 1200, Chief Executive Officer & Board of Directors, Legal, Risk, Compliance & Government Affairs, Diversity, Equity, and Inclusion Consulting, The changing leadership styles of supply chain executives, Why successful digital officers dont always have digital in their title, State of Supply Chain Complexity 2020 Report, Buying into a more sustainable value chain, Global 2021 Chief Procurement Officer Survey, California Residents - Do Not Sell My Data. Ninian Wilson, CPO at Vodafone, said that the accelerated focus on ESG, and the decarbonization of the supply chain in particular, is changing who procurement is working with as a function, both internally and externally. And, indeed, the reputation of many companies today rests to a large extent on how they walk the talk on sustainability, and how transparent they are about choosing and treating their suppliers and partners. People and relationship considerations will therefore be most important, given the massive transformation that is happening., Sebastien Bals, CPO at UCB, noted that procurement will have to manage the ecosystems and play a larger role in M&A and partnership discussions and, where it is relevant to their organization, build and play an active role in broad coalitions that can lobby governmental and non-governmental institutions. Now, by the very virtue of their position at a nexus between their company and the external environment, todays CPOs find themselves more and more at the center of many of the most important strategic initiatives of their companies. The two teams will require totally different competencies.. They all agree: the traditional pyramid of value-creation drivers in the procurement function is reshaping fastif not inverting. No longer solely focussed on cost savings, it has become a strategic player by supporting long-term business goals, driving sustainability, ensuring supply chain transparency, and mitigating risk. I have seen a lot of transformation happening recently, with the procurement functions shifting from an insular, contract- and process-heavy organization to a wider, more insightful function that is connected to what is happening in the broader market, and this will only accelerate, said David Ingram, CPO at Unilever. 
This will stress the supply chain immensely, said Klaus Staubitzer, CPO and head of supply chain at Siemens. Verify Credential The appropriate reporting structures would vary by industry and be based on relative levels of maturity toward value creation (some sectors will still rely heavily on procurement organizations that focus on the bottom line), but a move closer to the CEO would likely make it easier to attract and retain top leaders. v 
To whom the purchasing function reports can be different from company to company, and thats OK. To simplify it, if the company sees Purchasings primary role as delivering cost savings, the company generally positions Purchasing under Finance, reporting to the Chief Financial Officer. So, how can companies attract, develop, and retain best-in-class CPOs of the future? It would be fine if, internally, someone with high potential is able to grow into procurement from another function, he said. How will this help assure continuity of supply? (For more, see Why successful digital officers dont always have digital in their title.), CPOs must also be able to help their organizations understand the opportunities and risks that need to be managed when scaling digital innovations and be able to advise on how to pilot and experiment with new technology. The Next Level Purchasing Association (NLPA) is the worlds leading procurement education provider.
And the gap between the true ambition of Procurement and the expectation of the board continues to increase. Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet. endstream
endobj
630 0 obj
<>stream
By building that kind of acumen, they can become obvious advisors for strategic decisions involving digital innovation, as Jane Liang, CPO of British American Tobacco, said: The CPO can become a key partner to many parts of the organization by bringing digital innovation to the businessfor example in the form of platform buying and advanced data analytics. Because many organizations still dont have designated chief digital officers, digital has become part of some leaders remit, and CPOs now have the opportunity to share some of those responsibilities. The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. So the question is: how can we change this? It will provide you with a comprehensive view of the whole organization and also allow you to grow your external network. Indeed, companies have a huge opportunity to make procurement leadership roles more attractive by framing them in a more appealing way for ambitious, talented, up-and-coming executives. Copyright 2020 Next Level Purchasing, LLC. ", We see internally that boards are requesting sessions directly with the CPO on supply risk and are more concerned and involved in topics relating to the supply chain. When procurement is aligned with finance, the overriding focus will be on driving savings for the organization. The fundamental changes identified in the procurement function center around the emergence and acceleration of newer, more sophisticated drivers of value creation: These new strategic drivers are rendering the traditional ones (cost reduction, process efficiency, and compliance) less differentiating going forward, but not less essential for the organization; these historical drivers have been evolving to keep up with both technology and the broader business context. Dirk Spijkers is Managing Director ofCPOPartner Coaching & Advice. endstream
endobj
632 0 obj
<>stream
In most organisations the Chief Financial Officer or CFO is the key decision maker if it comes to Procurement. The role will also be instrumental in how companies as a whole respond to changes in the ecosystem, in terms of agility and resilience. In truth, I cant think of a better place to form a future CEO than procurement, said UCBs Bals. Its difficult to overstate the complexity of most large companies ecosystems. The organization at large wouldnt trouble itself too much with the profession because it didnt appear to be delivering a huge amount of value. As a result, we see a new breed of procurement executive that is externally focused, able to bring the outside in and advise the CEO on how to win better.. Digital platforms are easy to connect and can create new value for the organization. In terms of organizational hierarchy, this reporting line is significantly less influential than other organizations where procurement reports directly to the CFO or CEO. Both roles require superior influencing and networking skills. Indeed, companies such as Diageo and Givaudan went as far as rolling supply chain, procurement, and sustainability into one executive role. But this is nothing new for CPOs who have been on the front line of implementing sustainability measures, as Cyril Pourrat, CPO at BT, clearly explained: When it comes to ESG implementation, it is often down to procurement to make it happen with suppliers, which involves significant effort and resources.. They also wish to thank Nick Parfitt for his contributions to this article. 629 0 obj
<>stream
Why does it matter whether procurement reports to the Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operations Officer (COO), or somewhere else within the organizational hierarchy? The CPOs we interviewed suggested the following approaches. They need to excel at orchestrating and embedding sustainability in complex ecosystems, catalyzing digital innovation across the broader company, and capturing value from innovation at speed and scale. Over the past five years, we have tracked a marked change in the leadership styles most often used by supply chain executives. 4Ryan Bulkoski and Kristin van der Sande, 2021 Europe and US Data, Analytics, and Artificial Intelligence Executive Organization and Compensation Survey, Heidrick & Struggles, forthcoming on heidrick.com. Consider developing a simple, at-a-glance dashboard showing key metrics for the CEO. How is your organization aligned? While the COVID-19 crisis provided a clear picture of how supply chain disruptions can affect everyday life, corporate leaders should recognize that the changes that have been underpinning the transformation of the procurement function are more fundamental in nature. We also use third-party cookies that help us analyze and understand how you use this website. As a viable alternative to competing for existing talent at other firms, companies should also focus on designing effective succession planning processes that are complemented by tailored development opportunities. Wr$S&: Does that mean the CPO should report directly to the CEO? There are of course exceptions, but for most companies the key reports and CPO surveys confirm this role. Our conversations with leading chief procurement officers helped us consolidate our thinking around four major themes: orchestrating the ecosystem, embedding sustainability, becoming a catalyst for digital innovation at the corporate level, and providing strategic business insights. Next Level Purchasing Association, 2222 Sedwick Road, Durham, NC 27713, We use cookies to make your experience better. Fundamentally, the CPO is evolving into a chief value officer, a partner and co-leader to the CEO who is able to generate value through business partnering, digital and technology, and sustainability, which are new sources of profitable growth in a shift toward a future-proof business model, said Herv Le Faou, CPO of Heineken. Within the scope of a procurement team, there are several broad functional areas: Purchasing Manager, Supply Chain Manager, Enterprise Solutions Manager, Marketing Manager, Supply Chain Analyst, Engineering Manager, Financial Manager, Documentation Manager, and Support Services Manager. A procurement team is a specialized team of professionals that provide a multitude of services to all involved or interested parties involved in procuring goods and supplies necessary for project execution. Cyril Pourrat sets the stage by referring to real digitizationnot implementing e-sourcing tools, for example, but instead moving the function toward new ways of working, and from managing processes to connecting more deeply with the businessfor example, through disseminating procurement-originated tools in the company for broader use. Executives in your organization will have subtle (or not-so-subtle) differences in focus whether its cost reduction, risk mitigation, or brand reputation. What does this decision mean in terms of risk? The organization at large wouldnt trouble itself too much with the profession because it didnt appear to be delivering a huge. We need to create our own shell to think the Procurement way for business. And yet the transformation is far from complete. Accentures Nowosel said, The CPO of the future should work with start-ups, sit on select boards, scout new talent, and influence the technology development road map. Heinekens Le Faou added: While the chief technology officer (CTO) would also participate in introducing new technologies, the CPO supports him or her in the sourcing process, helping validate solutions., As the topic of supply chain risk management moves up on the executive leadership and board agendas, CPOs need to be able to help inform any relevant strategic decisions. aNf UyS2=-I@u+x0'CR,PN"Hxt=(0jw^}v$%_D^A_`:c59%_dfcHc/zvX)A1:E._c. Suppose the company sees Purchasings primary role as supporting operations (by assuring supply continuity, reducing risk, etc.). In fact, the leaders we talked to predict that the future CPO will become increasingly embedded in the business and viewed as a peer to the C-suite executives in terms of responsibilities and influence. Filling their talent needs will therefore require leaders to not only completely rethink the competencies and associated talent development strategies for the role but also pave a future career path for CPOs who will have reached the top of their game. This legislation would force companies to identify, prevent, mitigate, and account for how they address human rights and environmental impacts along their global supply chains. Not quite. Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors. In any given sector or geography, the configuration will look different and will be changing continuously as various companies enter and exit markets, come up with breakthrough innovations, or are affected by geopolitical events. Rethinking the focus and structure of the chief product officer role will help asset management firms better connect with customers, innovate more effectively, and operate more nimbly. No matter who you report to, the top priorities of procurement will always be to save money, time, and effort. ", The CPO can become a key partner to many parts of the organization by bringing digital innovation to the businessfor example in the form of platform buying and advanced data analytics. (Many of these leadership capabilities are consistent with those identified in a global study of chief supply chain officers. This will be managed only through collaboration in the ecosystem. It is self-organized and self-motivated and generates ideas that are evaluated by the procurement team. %PDF-1.7 % endstream endobj 631 0 obj <>stream It's likely that pressure on CPOs will only further increase after the European Commission releases its human rights and environmental due diligence policy, which is expected in 2022. Businesses need to look for young talent with expertise where they are, which can be in unconventional spaces like start-ups. Indeed, according to a recent Deloitte survey of chief procurement officers, only 6% of organizations have fully deployed predictive analytics systems, 15% are scaling them, and a further 36% are piloting such tools.3 Getting an edge on data use throughout an organization can prove a critical competitive advantage, and the procurement function sits in the right place to facilitate that learning. Alan Holtz, managing director of the turnaround and restructuring practice at AlixPartners, discusses the role of the chief restructuring officer and the operational challenges hes been working on through the pandemic. Blog A logical next step in the evolution of the role could arguably be a move into the drivers seat when it comes to embedding sustainability into the broader company strategy. Please read our, The Procurement Promotion That You Lost (But Didnt Even Know That You Were Considered For), Improving Your Procurement Teams Skills Requires This Commonly Forgotten Element. For example, the ability to procure masks had a huge impact, and procurement has earned a bigger license to act. No, not exactly. It helps the CPO to finally fulfil its ambition to deliver true business impact and move beyond savings. This strengthens the imperative for CPOs to understand in detail the long-term components of their suppliers engagements toward sustainability. After all CFO priorities will be &, COO priority is productivity and Supply Chain is Distribution and Logistic, thus Procurements are the BP for Finance, Production and Supply Chain. Any unethical or unlawful shortcut will lead to long-term damages of a companys reputation and market position. ", CPS will need to be able to cut through complexities to identify opportunities for improvement and help other leaders find innovative solutions to challenging problems. The future CPOs profile emphasizes strong business acumen and leadership competencies rather than technical skills or depth of procurement experience. ", Klaus Staubitzer, CPO and head of supply chain, Siemens, CPOs must live up to the values of care, respect, and humanity. Chief Operations Officers are laser-focused on business continuity and efficiency. In order to improve our understanding of how these changes are redefining the role of the CPO, we interviewed 11 highly respected procurement leaders across various industries in Europe and Asia. Many organizations have thousands of suppliers in their networks, which makes scrutinizing them a challenging but necessary task. New skill sets and leadership approaches are required to best navigate the challenges and opportunities emerging as a result of the pandemic. NLPA Learning also includes learning resources, including live and on-demand webinars, publications and reports, articles, templates, white papers, and more! The role is more and more anchored in connecting networks and ecosystems rather than in running processes and competitive tenders., Geopolitical events and tensions act like wild cards on ecosystems. The value proposition of a well run, technologically enabled Procurement team is usually buried to deemed nonexistent in an environment where most spend is Indirect. We help leaders develop successful teams and we give professionals the tools to build rewarding careers. Questions like these have led us to write the article, What Is Supply Chain Management, Anyway? ", Now, board members and business CEOs ask procurement for their view on the supply situation ahead of talking to investors. The ones that succeed in making Procurement a more strategic function understand that a CPO should therefore report to the Chief Operating Officer (COO). PYiZCcR`]72+,##3b'f5_6B#?4qYA"?pH!>M{7jRj&R1h.S]dJ!toAuhArpK9}Sf17J="PfT W|Xn`UK}sBF'%4oK*0OYu7H, # 9t` j^XWO5~vYG^-YX$^u[5BOYw5N\p4@,yT(d7,zQZ Qs}XlD[?luG=Fz AY@aKvWrc> v;pwQ x>a$R"pT{*I='Hk{+f?bL,L0{Xb-e38 Analytical cookies are used to understand how visitors interact with the website. I have seen a lot of transformation happening recently, with the procurement functions shifting from an insular, contract- and process-heavy organization to a wider, more insightful function that is connected to what is happening in the broader market, and this will only accelerate. From our extensive client work and conversations with the 11 CPOs we interviewed for this article, we have distilled four leadership characteristics critical to success: There is a war for procurement talent today, said Heinekens Le Faou. As procurements overall strategic importance has increased significantly in recent years, it is essential for companies to fundamentally rethink the role of the CPO. As such, CEOs and boards need to ensure that they take the full measure of the value that a future-proofed procurement team can bring to their companies and challenge themselves to look at their CPOs through a much more strategic lens. discuss how a Group Purchasing Organization can help you meet these goals. Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. How to Take Charge of Your Procurement Career, Measuring The Impact of Procurement Training, Procurement Leader vs. Purchasing Manager. Contact You nailed it. As procurements status within the organization grows, its reporting alignment becomes all the more important. Qualified to Handle Your Companys Logistics? a4~OuzD:TfiJ2t,JR}Jh! In our case, that includes knowledge of the supplier network in terms of sustainable aviation fuel and environmentally friendly technologies, products, and services, as well as global trends on supplier market consolidation, among others., Siemens Staubitzer said he has seen a move in the right direction, prompted in part by the pandemic: The COVID-19 crisis brought an enormous push for the function. ", [Good internal succession] will happen if the existing CPO is already embodying the ideal new profile and has invested in developing internal talent., CPOs, by virtue of their close connections with key stakeholders of the business, are custodians of the companys brand. Fabrice Lebecq (flebecq@heidrick.com) is a partner in the Brussels office and the regional managing partner of the Industrial and Supply Chain & Operations Officers practices. We at NLPA have commonly gotten questions like To whom should Purchasing report?. I believe that a CPO should report to Operations in Manufacturing, but to the CFO in a non-manufacturing (Services) organization. Z Pt^!3FJ As orchestrators of the business ecosystem and relationship builders with suppliers, CPOs canand mustacquire a comprehensive understanding of emerging technology trends and be able to provide informed views on which companies offer the best solutions. Now, board members and business CEOs ask procurement for their view on the supply situation ahead of talking to investors., UCBs Bals added, Procurement has a fully transversal view of the rest of the organization and is geared to provide the best insights and services to all stakeholders, without any selfish ambition or agenda. The CPO and the function can also directly improve performance, as Heinekens Le Faou pointed out: The CPO needs to shape his or her team into an enabling function, one naturally integrated in the business, that acts as a performance accelerator of every other function and a 360-degree, end-to-end value chain federator from suppliers to customers. Lynn De Proft, Solvays CPO, added: Commercial acumen needs to be there, as well as the fundamental understanding of the P&L., Henkels Conquret summarized the complexity of the underlying evolution of the CPO role well: While traditional skills will become less important for the CPO, they will still remain important for the procurement organization as a whole.. Take, for example, the decoupling of China and the United States. It's leading to friction and disappointment of Procurement leaders, eager to make a difference. He supports Procurement executives around the world in defining their strategic agenda and helps them successfully implement change and improvement initiatives. Their strategies for the procurement function must reflect and support the positioning of the brand in the market.". So businesses need to look for young talent with expertise where they are, which can be in unconventional spaces like start-ups.. If not directly to the CEO, the CPO could very well report to a chief transformation officer, providing a new orientation to the role, one outside of the traditional links to either supply chain or finance officers, suggested Solvays De Proft. endstream endobj 633 0 obj <>stream How can we shift the focus towards added value beyond savings? In that case, the company generally positions Purchasing under Operations/Supply Chain Management, reporting to the Chief Operations Officer or VP of Supply Chain. On top of new functional skills needed to handle these new strategic value drivers, future CPOs will also have to demonstrate a more complex set of leadership competencies to succeed. In organizations where supply-chain continuity is a major priority (and we can expect to see more of this after the Covid-19 supply shock), procurement may find itself reporting to the head of Supply Chain (who reports in turn to the COO). 3 Jim Kilpatrick, Jennifer Brown, Ryan Flynn, Aaron Addicoat, and Pierre Mitchell, Global 2021 Chief Procurement Officer Survey, Deloitte, April 23, 2021. _=M|WF1dm9\Tpi"]2O%`1]`}0bc|MfWU If Procurement want to be a Strategic BP to Business, I believed Procurement are not suppose to report to CFO nor COO nor Supply Chain, but really to the CEO. Meet the Team A procurement team that reports directly to the CFO will be expected to understand and communicate in financial metrics. We help our clients change the world, one leadership team at a time. Typically, procurement leaders will report to one of three C-suite executives: Reporting lines are determined by several factors, including: There is no overall consensus as to whom procurement should be reporting, though. Copyright 2022 Next Level Purchasing, LLC. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc. If you have just graduated, procurement is the best place to start. Learn more about Una and contact us to discuss how a Group Purchasing Organization can help you meet these goals. Necessary cookies are absolutely essential for the website to function properly. This might make sense for procurement teams that are managing a huge spend, for example, because it enables comprehensive spend management strategies to be established, driving procurement efficiency and compliance across the organization. Not only is this a key indicator of how the organization perceives the profession, but the person (or department) to whom a procurement leader reports will influence major procurement decision-making and the strategic direction of the business. How much do you understand about the roles in a purchasing Team? This means that if it comes down to a decision between the lowest cost and a stronger supply chain, they will choose the latter. But opting out of some of these cookies may affect your browsing experience. We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. Surely the role of procurement is the same, no matter who your Chief Procurement Officers (CPOs) boss is, right? Each of these areas has its unique purpose and requirement to execute a companys overall objectives properly. As such, the candidate pool does not need to be from within procurement itself. Procurement needs to evolve into a more agile function to make sense of the wider ecosystem within which it operates. }W6`dV}diA#?eaALDJ3tj33'2TKH&KwN]+7j0,aP0V. Instead, it can broaden both internally and externally to a wider set of profiles and functional backgrounds. Prior to CPOPartner he was Head of Procurement Advisory at PwC Switzerland, New York and Amsterdam. No matter who you report to, the top priorities of procurement will always be to save money, time, and effort. To view or add a comment, sign in It is usually a separate department that reports directly to the project manager or business owner. Fast forward to the present day, and procurement has a much more significant influence on the organization. Just found this article.because I have been thinking along these lines. Management Boards should therefore have a strategic discussion about the potential that Procurement can deliver; for the organisation as a whole and for the end customer. If not directly to the CEO, the CPO could very well report to a chief transformation officer, providing a new orientation to the role, one outside of the traditional links to either supply chain or finance officers. This cookie is set by GDPR Cookie Consent plugin. CEOs are ultimately responsible for brand reputation. Construction Delays Analysis Un-understandable Question. All rights reserved. This means two things for procurement: CEOs tend to be time-poor, which means procurement can help by keeping their communications and reporting as concise as possible. Among the many organizational challenges stemming from the extraordinary events of the past couple of years, considering the future of the procurement function is one that should definitely move higher up on the corporate agenda. How to Communicate the Value of Procurement to the C-Suite, How to Use Group Purchasing as a Cost Reduction Strategy, Group Purchasing Organizations vs. Purchasing Cooperatives. BTs Pourrat added that the most challenging combination to find in terms of skills is the right balance between category expertise and the ability to see the big picture. Additionally, some of the CPOs suggested that future procurement organizations may end up being split into two sub teams, as UCBs Bals explained. ", Companies will need to rebalance the talent pool with more explorer types.