In the second part of this series on CPOs, we look at what Boards look for in their CPOs.
Read the first article on expectations of CPOs here.
The successful procurement leader today is expected to establish credibility by embedding the basics. Good financial data consistent with the reporting model of their business, robust controls across a lean supplier base, and well negotiated contracts that are fit for purpose. They must build a function that operates across international boundaries and divisional corporate structures.
Comments from Board level executives in the last three months include:
- “I want someone smart, quick and innovative. In my business if we can make a 1 per cent saving on our cost base we will increase profit by 50 per cent. I will judge success by the MDs wanting to spend time with the CPO”
- “I need someone who can sit with my Divisional MDs and help them create a profitable business. Procurement is absolutely critical to the operating model of our organisation. We are in turnaround, and its success is linked directly to the cost base”
How Do You Compare?
When you are invited to interview for a CPO role, be it an internal promotion opportunity or an external process, remember you are not operating in a vacuum. Assume your competition is the highly respected, experienced CPO in your direct competitor and ask yourself, “How do I compare?”.
It is most likely that an executive search firm would have been engaged to identify the best possible talent in the market and competition will be fierce. At this level, everyone is good. So, what makes the difference at the margin?
1. Business first, procurement second
This point was stated clearly in a recent discussion with a CFO of a global Consumer Packaged Goods (CPG) company and experienced Non-Executive Director. When you get close to Board level, everybody is expected to know their “job”. The differentiating factor becomes what else you can contribute to help the company achieve its goals or solve its problems. The ability to understand the business strategy and its challenges, and align procurement to it, is essential and execution is non-negotiable.
The ability to build and lead a diverse, global team is vital to being a successful CPO. Generating energy, creativity, ambition, commitment and loyalty amongst the broader team are key attributes of a successful leader. This is particularly relevant in a complex corporate environment. Leadership amongst peers is also critical. Being seen as a credible and well respected leader by colleagues in other functions across your business is vital for your individual success and that of the function that you lead.
3. International Experience
Many organisations operate in a global environment, from its operations to its supply base and customer markets. Those with experience of living and working outside of one region (Europe, US, Asia) will be more desirable than those who have not.
Procurement can be viewed as quite a narrow skill set and, therefore, gaining experience across all elements of spend (directs and indirects) will be viewed positively. Exposure to pre- and post-merger acquisition work, integration and delivery of synergy benefits would be another tick in the box. Outsourcing is also on the list, along with experience gained in more than one industry sector.
5. Commercially Astute
To be respected internally it is vital that your reported numbers and achievements are accurate. Many times, in discussions with CEOs and CFOs, they state that the reported numbers bear no resemblance to their data. They joke that if procurement saved as much as they said year on year, their spend would be zero in three years’ time.
You must be able to build a function that is aligned to the way the business measures and reports its numbers. They need to believe you. A recent McKinsey study stated, “Companies that have invested in developing best- in-class purchasing capabilities have nearly double the margins of those that have not”.
In a recent NED appointment, we specifically targeted the global procurement and supply chain community. The press comment from the FTSE 100 Chair on the successful appointment was “…their extensive expertise in driving efficiencies in manufacturing processes and procurement in global organisations will be of real value to us”.
The good news is that the momentum is building and procurement is getting on the Board agenda. Having been a headhunter in the procurement marketplace for the last 13 years I can confirm that the quality of talent at the top has improved significantly.
The reality however, is that expectations are higher than ever and competition is tough. If you want to reach the CPO role, it’s worth taking a little time to reflect how many boxes you can tick and take steps towards closing any gaps.