Ever get the feeling you’ve been barking up the wrong tree? Let’s cut out the second-guessing and focus on the four essentials that Chief Financial Officers want from procurement.
Andrew Porter values having a good night’s sleep. As CFO of the Australian Foundation Investment Company (AFIC) and President of the G100, the peak body for Australian CFOs, Porter knows that the presence of dark circles under the eyes of C-level executives are linked directly to how the business is tracking.
“The CFO’s job is to help the CEO – and the Board – to sleep well at night”, he says. This concept also applies to the relationship between CPO and CFO, and the people reporting to the CPO, and so on all the way down the organisation.
“I’ll pay a little bit more for security of supply knowing that our strategic suppliers are happy, reliable, and we’re not going to be exposed as a business with a supplier that feels cheated”, Porter says. “I want to know where the supplies are coming from, and know that they’re quality, and know that it’s not going to come back and bite the business later on.”
So – what exactly do CFOs want from their CPOs in order to help the business grow?
They want to trust that everything is under control
CFOs, says Porter, worry about keeping three succinct groups happy: investors or shareholders, customers, and employees. It’s a delicate balance, because an initiative that benefits one group can have a detrimental effect on the others unless it’s been carefully thought through. Procurement practitioners have the ability to help maintain this balance, not in the least by keeping customers happy through the timely sourcing of goods and services. “If the job is being done well, it’s one less thing for the CFO to worry about”, says Porter. “But if procurement tries too hard and is seen to be screwing down the supplier, then you’ve undone all that hard work, shifted the balance, and suddenly the investors are unhappy.”
As all CFOs know, you can’t improve margins and grow your business without first being sure that you can rely on your bottom line. “In order to grow, you’ve got to have trust in your subordinates – and that cascades all the way down.”
They want to be kept informed
“What CFOs really want is a crystal ball that works 100% accurately all the time”, says Porter. CFOs need to understand all sectors of the business – what’s firing, what isn’t firing, and (importantly), they need to know about roadblocks and other issues in advance. If procurement becomes aware of an upcoming issue, the CFO, CEO and the Board need to be informed of it before it happens, and be presented with a list of solutions.
“The board doesn’t want to see problems – they want to see solutions”, says Porter. “A good CPO should be putting themselves in the place of the person they’re reporting to. What does he or she need to know? What are the questions they’re going to ask, and how am I going to get those answers to them before they have to ask?”
They want their CPOs to think outside the box
What does disruption actually mean in terms of supply for your organisation? Where will this disruption be coming from? Are there different, innovative ways of sourcing goods and services? Porter comments that although innovation isn’t always an immediate priority, the C-suite will inevitably ask what procurement is doing to drive innovation.
Part of thinking outside the box means broadening your field of vision. “Look globally as well as domestically for best-practice, and ensure you’re part of a good forum where you can share information with your peers.”
They want to see purpose-led strategy
Are the procurement team’s KPIs in accordance with your organisation’s purpose-led strategy?
“A nightmare scenario involves the CPO chasing the wrong KPIs”, says Porter. “Ill-chosen KPIs can sometimes be at odds with the purpose and strategy of the business, and fail to align with the KPIs of the wider organisation. They need to be parallel all the way down. Everyone needs to absolutely understand what their role is in the company.”
But, Porter warns, you need to have sensible targets. “If CFOs start forcing CPOs and their teams into impossible targets, that’s when people get disenfranchised – and suppliers get hurt.”
Andrew Porter is the CFO of Australia’s largest Listed Investment Company, Australian Foundation Investment Company, known as AFIC. He is also CFO for Djerriwarrh Investments Ltd, Mirrabooka Investments Ltd and AMCIL Ltd, all other Listed Investment Companies. He is the current President of the G100, the peak body for CFOs, and the current Chair of ASIC’s Standing Committee on Accounting and Auditing. He was formerly a non-executive Director of the Royal Victorian Eye & Ear Hospital.
Porter will deliver a keynote presentation at The Asia-Pacific CPO Forum, the region’s premier procurement event dedicated to accelerating commercial leadership at the highest level. Held at Melbourne’s Crown Conference Centre over two days, it is a once-a-year opportunity for leading Chief Procurement Officers to engage with peers and like-minded business leaders in an intimate and interactive setting. Click here to learn more.