From CPO to CVO: The expanding role of the procurement chief

chief value officer

The title chief procurement officer has only really formally existed in the way we know it today since the 1980s, when competition between suppliers increased and procurement was professionalised.

 

The job has since evolved and changed significantly. New technologies have begun to automate processes while businesses demand the function deliver more than just incremental cost savings.

 

That change – and demand for value – is set to intensify and so, as the focus of the function widens, it is natural to question whether CPO is the correct title. Savings are always going to form part of the role, of course, but such metrics are likely to become less central to the role, rendering this title outdated.

 

It could be more appropriate for procurement chiefs to hold a title that better reflects the job they carry out – one that will be a better fit for the future. Furthermore, it could also help procurement shake off its outdated reputation with both internal and external as a mere cost-saving function.

 

About time

 

Advocates for such a change say it is long overdue. “It is very last century to say that the role of a CPO is just about price reduction,” says Allison Ford-Langstaff, head of procurement-focused consultancy Rightsource Solutions.

 

But there is still a tendency for procurement chiefs and their functions to find themselves ignored or dismissed by others within the business because they continue to talk about “cost reduction… which feels out of kilter with other objectives”, she argues.

 

Ford-Langstaff says any change in job title needs to be driven by CPOs, who must make the sale and demonstrate to the wider business the need for a new title and a formally expanded mission.

 

But given the expanded remit of the CPO, what should the title change to? Some have suggested chief value officer (CVO).

 

Constant evolution

 

Michael Shaw, founder of the Global Council for the Advancement of Women in Procurement and author of an article on the demise of the procurement chief, The CPO is dead, sees the role moving towards that of a value officer, but believes it is part of an evolution that has been going on since the professionalisation of the function.

 

“The job responsibilities and title have been evolving constantly since the 60s and 70s,” he says, recalling the days when the responsibility of purchasing belonged to an expediter, who sat in an office surrounded by numerous supplier catalogues.

 

According to Shaw, the second phase of the evolution began with mainframe-based automation, followed by the development of the personal computer and the internet.

 

Procurement was then in a position to do more, so more was expected, but the function was still viewed as largely tactical.

 

Today, procurement chiefs find themselves in the third phase. This started around the turn of the millennium, says Shaw, with the vast proliferation and wide adoption of procurement and supply-chain technology, processes and people. During this period, CPOs have assumed more responsibilities and a wider span of control over other areas of spend, such as real estate, facilities and risk management, and have been heavily involved in developing product and process innovations.

 

The CVO phase, he argues, is the next phase and will take place over the next five to seven years.

 

As previously, the shift will primarily be driven by developments in technology, more specifically big data, AI, blockchain and predictive analytics.

 

As such technologies are adopted and become more mainstream, they will enable procurement teams to automate a greater number of administrative, as well as repeatable tasks and provide an

unprecedented level of insight, Shaw says. This will allow today’s CPOs to increasingly focus on value.

 

“The purchasing focus will fade and it will be clear to all that the CPO role is not just about saving money but rather creating strategic value everywhere in the organisation,” he says, before adding that the label of the CPO is simply too limited in scope to be useful in the future.

 

Make change happen

 

Larry Giunipero, professor of supply management at Florida State University, agrees with Shaw, saying there will be an evolution in terms of job titles, but emphasises that those who embrace

technology will benefit most from this evolution.

 

“How CPOs adapt to technology developments and how it will affect the field, no one knows precisely, but procurement is ever-more strategic in its focus,” he says.

 

Tarek Alaruri, cofounder of Fairmarkit, a software platform that helps companies manage tail spend, believes it may be better to think beyond just CVO. “I’d suggest that instead of CVO it should be chief transformation officer, [because] almost every company has a digital transformation initiative,” he says.

 

The CPO is typically asked to lead this charge, given their role within every aspect of the business and its internal systems and processes, he suggests. “They tend to have a high-level view of how the company can change for the better.”

 

Saying that, Alaruri is not too wedded to the title, more to the idea that the role is actually evolving. “These two titles will go hand in hand to evolve into a role that is tasked with innovation and change for the business,” he says.

 

Obstacles and opportunities

 

While the job title might change and that may help change mindsets, what will ultimately decide whether a CPO or CVO focuses on value over cost is what factors they are measured on and, indeed, who they report into.

 

At the moment, many CPOs report into the CFO, while some report into the COO or CEO. Procurement chiefs who report into the CFO tend, perhaps naturally, to find themselves more focused on costs. Unless that changes, nothing else will.

 

The Global Council for the Advancement of Women in Procurement’s Shaw, says that top-down corporations tend to have a number of objectives in common. Publicly held businesses focus on things such as shareholder value, revenue generation and profitability.

 

Cost savings tie into these, he argues, but adds that there are other very important considerations, such as customer satisfaction, competitive advantage, innovation and even diversity and sustainability, that form the overall value picture.

 

“Fortunately, procurement is in an almost unique position to contribute to every one of those value-adding measures,” says Bill Adams, director of audit, advisory and accounting firm SC&H Group.

 

In some cases, CPOs are seeing their key performance indicators change, according to Lawrence Kane, senior leader of strategy at Boeing.

 

“Traditional procurement metrics, such as spend under management, cost savings and the like, are being augmented and occasionally replaced by measures such as supplier innovation, partnering for success and value creation,” he says.

 

“But, at the moment that is more the exception than the rule,” he adds.

 

Shaw agrees with Kane, but says CPOs are actually going out to their businesses and their bosses and saying they can contribute more. “They are saying: ‘We can address all those things; we can create revenue opportunities and ideas that lead to greater profitability; we deal with regulators on a regular basis, we deal with diverse suppliers and with sustainable practices, too’,” he says.

 

Beat your own drum

 

He makes a good point. In order to drive this change, CPOs have to be their own loudest supporters, says Sean Bliss, vice president of business development, indirect spend and material handling at Corcentric, a technology provider that specialises in indirect spend.

 

“The more prominent role of the CPO includes calling out procurement as a key value-add to the organisation, shepherding that discipline and not letting it linger as a secondary role,” he says.

 

“Ultimately, the important thing is to be recognised as part of a strategic function, at the C-level, along with the chief information officer and the chief finance officer,” says Shaw. “I don’t think it is going to happen overnight or across the board. Those who are good at selling the business case will make the change first,” he says.

 

Adams is less sure whether a change in job title is likely to happen, but he is certain that new responsibilities – and with them, greater respect – are on the horizon.

 

This article is a piece of independent journalism, written by an experienced journalist and commissioned exclusively by Procurement Leaders