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How to 'right-size' a company’s procurement value

TransformationTalent and Leadership
conrad size

We’ve all seen pictures of the business maturity S-curve. The startup stage is filled with innovation and adaptation. Gradually, the business progresses into the rapid growth stage and takes on many new functions, processes, controls and employees. Over time, this stabilises into the maturity stage – at which the business has two choices: start to innovate, adapt, and acquire new capabilities (and as a result ascend the next upward stretch of the curve), or begin to die.

 

Procurement leaders should align with their business’s current position on the maturity curve – and keep adapting as the business’s maturity level changes over the years.

 

If procurement fails to be aligned with the business’s current stage of growth, this can be problematic to both the function and the rest of the organisation.

 

One size doesn’t fit all

 

Over the early years of my procurement career, I worked my way up in a fairly large, sophisticated organisation. From there, I moved to a much younger company, which – while it had more than 1,000 employees – still operated very much with a startup culture. Instead of wading through complex compliance forms and approval chains, I suddenly found myself under pressure to "clean up the mess, and get out of the way”.

 

Now imagine if I’d made one of the greatest mistakes of my career, and tried to build and impose processes and practices from my earlier, advanced procurement department on this lean, young organisation. It would’ve been a total disaster. In the startup phase, every employee is tied up in very busy day-to-day work. If I’d tried to take all the rigorous structure and bureaucracy from the larger organisation and impose it on the startup, I could have negatively impacted its business goals – or, more likely, gotten myself fired in the first week.

 

While few of us would make a mistake so drastic, it does point back to a crucial principle: “best in class” isn’t a one-size-fits-all proposition. In procurement, “best in class” means aligning with what the business actually needs.

 

If you’re working for a startup, simply “cleaning up the mess, and getting out of the way” may very well be the best approach for your small team. By the same token, if your company is rapidly growing, and needs more value from its procurement chain, the best approach is to begin to establish scalable processes, systems and controls and to develop more automation. By understanding the true needs of the business, you can anticipate and prepare your procurement team to support and lead rather than hinder business success.

 

Finding the correct alignment will require building trust, listening to understand and anticipate the business’s emerging needs, and executing strong stakeholder engagement.

 

Serving up success

 

I hear far too many procurement executives bragging about how specific and ambitious their goals are.

Say, for example, your procurement team goes to the marketing team and declares, “We’re going to save you $10m this year”.

 

It sounds like a noble goal – but what if it has nothing to do with the marketing team’s actual needs and objectives? What if marketing has actually just received a budget increase this quarter so it can scale up the business’s advertising campaigns? Maybe what the marketing department needs most is to help push agencies for better talent, innovation and capacity. A simple focus on savings would likely disenfranchise the marketing team as well as the suppliers and may actually work against the needs of the business.

 

Now consider that the marketing team comes to procurement and says, “We need to save $10m this year. Can you help us?” That’s a completely different conversation. You’re still driven by the same goal as in the first example; in fact, many of the controls you put in place will be identical. But, instead of working against the needs of the marketing department, you’re working to get them what they need most.

 

Procurement departments must establish and maintain a reputation for directly supporting business leadership and their goals. Remember, procurement only exists to make the business successful. The moment we start creating and putting our own goals ahead of the business’s goals, trust begins to break down. It’s only when we understand and support the business’s top priorities that we enable success and true business value.

 

The ’chameleon’

 

A procurement department takes on a whole new level of complexity when the business crests its first big wave of maturity, and begins to acquire other, smaller companies. In far too many cases, mature procurement departments impose standards, processes and policy from the mature company onto the small startup it acquires.

 

The mature company begins the process of integrating the small company into its own typically heavy structure. This effort puts tremendous risk on the primary purpose of the acquisition in the first place, that is often talent and innovation.

 

What can be done?

 

The answer is simple: adapt procurement’s approach. This is why the most mature procurement departments actually evolve beyond the ’sophisticated and mature’ stage, into what I call the ’chameleon’ stage. These procurement experts can listen, understand the needs of the business and appropriately adapt. They can identify and create value at scale for their own IT department in the morning, then “clean up problems and get out of the way” of the newly acquired startup in the afternoon.

 

Mature procurement functions should help lead the acquired company through its own lifecycle from start-up through to growth, scale, and stabilisation.

 

As I said, one size doesn’t fit all. And in the end, it may not be possible to stay precisely aligned with the needs of every business. The very nature of the maturity curve means the business (and what it needs from procurement) is changing. You will need to choose between anticipating and leading the business forward or holding it back. Without doubt, you should lead forward. Part of procurement’s job is to put a little pressure on the business’s leadership to spend more thoughtfully, and evolve toward scale and growth.

 

The goal, as always, is to enable the business’s overall success.

 

Conrad Smith is senior director of procurement at Adobe

 

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.

Conrad Smith
Posted by Conrad Smith