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PL Singapore: Finding the metrics to support transformation.

Cost and Cash ManagementBlog

In order to win the business over for transformation, procurement needs to ensure that it has objective key performance indicators which have the support of the wider organisation.

 

Kinnar Ghiya, from HP, outlined his approach of transforming the function from a back-office role to a business partner that can add deeper value to the organisation. This transformation moves from purchasing as a largely irrelevant department, to an institution which is consulted with finally in a role as a full partner.

 

At the heart of this lies the ability to quantify the verifiable benefit of the procurement function. The main challenge, aside from establishing an agreed metric, is the consequence for the team. As Ghiya explained the attitude: “You’re going to save this money and finance is going to take it away. So what’s in it for me?”

 

The answer, for HP often would lie in reinvesting the savings back into the business. Although the business would not see the saving, by finding investments for a stakeholder, it is more likely that they will agree to work with procurement as an effective partner in the future. “If you figure out how to save a dollar,” Ghiya stated, “figure out how to stretch the dollar.”

 

Brian Bancroft, CPO at Kellogg Company, outlined another problem in savings. “When we deliver results, no one believes us. No one believes purchasing,” he said. This is the oft-heard line from CFO, that savings are not figures that can be incorporated on to the profit and loss.

 

In an interesting approach to tackling this issue, a team of financial controllers were attached and made accountable to procurement. This team is embedded into the function and can vet all the internally reported savings, prior to their communication to the wider business. The audited savings can then be reported to others in full confidence.

 

Similar to learnings from the earlier presentations, which emphasised the need to win hearts and minds, but also, we heard from both HP and Kellogg Company, you need to win the minds of finance.

Jon Webb
Posted by Jon Webb