For all the angst that has been part of the nearly four years of economic misery many businesses in the West have suffered, one comforting development has been the increasing stature of and reliance on procurement as the corporate function best positioned to help companies survive. From finding hidden savings and efficiencies to digging deeper into supplier financial health as a risk-management strategy, CPOs and their staffs have met the expectations CEOs and directors have set, and then some. And, as the economic crisis lingers, there is opportunity to do more to improve corporate balance sheets, as Procurement Leaders Editor David Rae has pointed out.
But, there is one non-financial area in which procurement can also play a leading role: corporate ethics.
Ethics - or lack of them - within a corporation have not received much attention in public dialogue. Maybe they should get more attention. The Ethics Resource Center’s 2011 National Business Ethics Survey revealed that 42% of employees surveyed believed their companies had a weak ethics culture, the highest percentage since the year 2000. Procurement can lead the effort to change that perception. It’s a natural extension of procurement’s role in corporate social responsibility (CSR).
Usually CSR refers to sustainability, worker health and safety, and ethics within the supply chain. Procurement should help ensure that ethics within the company itself meet the same high standards that corporate officers expect of suppliers.
This isn’t to suggest CPOs should be policemen. But where they have influence, they should use their knowledge, experience, and position to ensure that their companies make decisions in all areas that are based on good, fair business practices that further corporate goals and objectives, and nothing else. Three obvious examples: fighting the award of contracts to favored suppliers whose main attraction is that they have friends in high places within the organization; resisting finance demands for draconian and ruinous cost cutting by suppliers; and ensuring that extending the time to pay suppliers doesn’t unfairly endanger supplier health. CPOs, of course, work hard on those areas all the time.
A less obvious area could be decisions on outsourcing. Harry Moser, retired president of GF AgieCharmilles and founder of the website www.reshorenow.org, says that some CEOs push for outsourcing because they assume, without much research, that it will save a lot of money and therefore justify bonuses. By emphasizing a total-cost-of-ownership (TCO) approach, which includes an analysis of such things as freight, duties, carrying costs of materials in transit and in warehouses, and compliance costs, rather than just parts and labor costs, procurement can help them see if their assumptions are right.
Perhaps CPOs should encourage development of bonus plans that reward executives for TCO analyses that save money. Would that be ethical? You bet.
Paul Teague is US contributing editor of Procurement Leaders. To subscribe to the magazine, click here.