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This guest post originally featured in Procurement Leaders Magazine Issue 51. It was written by Don Klock, former CPO at Colgate-Palmolive and winner of the Lifetime Achievement award at the 2014 Procurement Leaders Awards.
As procurement moves to focus on strategic issues, the degree of difficulty goes up dramatically. Why? One of the key reasons is internal alignment.
A good example of this is the move away from focusing solely on direct spend to looking also at indirect materials and services.
As procurement moves into the indirect space, there is an increasing requirement to ’sell the benefits’ of the function to individual stakeholders who have been ‘ordering’ these goods and services for years. They will be concerned that this new initiative will cause delays, increase bureaucracy and damage functioning relationships. But the real issue is alignment.
- Improving alignment starts at the top. Procurement objectives must be aligned to the overall business strategy. It isn’t good enough to just talk about cost savings. You need to link those to the profit and loss (P&L). Savings need to be tied to senior management objectives.
- Probably one of the most important people that you need to be aligned with is the CFO. They understand the importance of the organisation to the P&L and can add credibility to your savings and the link of those to the P&L.
- As you move into new areas such as indirects, you need to improve alignment with your key stakeholders. Do not start the conversation with them around cost savings; take time to learn about their business, what type of problems they are experiencing and how you can work together to create value. Where possible, do this face-to-face as it is important to build relationships here. Without a good relationship, alignment is very difficult.
- All procurement people believe they are great negotiators. But are they great at communication? Do they know how to manage change and are they any good at influencing people? These ‘soft skills’ are required to gain alignment. All of these skills are learned skills and if practised, will aid alignment.
As we continue the procurement journey to world-class performance and take in new areas of spend such as business process outsourcing and merger and acquisition, as well as integrating supplier innovation to aid top-line growth, alignment will become even more important.
We need to start today to improve alignment and when done, we will continue the journey to becoming a truly a world-class business function.
Former Colgate-Palmolive CPO Don Klock received the Procurement Leaders Lifetime Achievement Award