by Alexander Arsath Ro’is
Many people talk about aligning procurement with the board, but few have succeeded. With the rise of the CPO in the past decade, the importance for procurement’s strategy to match the director’s goals has increased. As has the need to create value at the core of the business through procurement. But how can this change be incorporated into and reflected across business?
Those CPOs who aspire to it have little guidance to follow. However, research by Benefit – a procurement consultancy based in the Netherlands– and two Dutch universities has resulted in a methodology that can help.
The tool (www.benefitboardroomalignment.com) measures the degree of alignment between the organisation’s procurement goals and corporate strategy.
Benefit drafted in a number of ex-CPOs as well as academics. Our starting point was to recognise that it’s important both to do the right things and to do them in the right way. With this in mind, the degree of “alignment” was measured against nine variables: cost reduction, agility, innovation, service orientation, risk reduction, core competences, corporate social responsibility, expansion and internationalisation.
Next, these scores were measured against a series of questions: How does the board perceive procurement within the company? How can procurement contribute to the board’s priorities? What are the ambitions of procurement when it comes to these priorities? And where does procurement stand now with regard to them?
The outcomes were charted and used to establish long-term dialogue between boardrooms and their CPOs. Having carried out several alignment programmes in practice, we concluded CPOs should follow these points.
1. Tell the board first
Make your board aware of the challenge before you start the assessment. More than anything, the method is used to put the board and procurement (via the CPO) on a par in terms of communication.
2. Be absent from assessments
As CPO, you must make sure you are not present during the assessments. Although being absent might make you feel uncomfortable, it will allow your CEO, CFO or COO speak out freely about their expectations on the various topics.
3. Put your view across
Although the board will have its own views on what the added value of procurement is, you don’t have to agree with their conclusions. You can use the verification and dialogue sessions to your advantage. Initiate dialogue with your board to challenge views in a positive way and talk about opportunities. See it as a way to strengthen your mutual relationship.
4. Remember – it’s a start
Alignment isn’t a precise measure. What you will get is a measure of the perceived alignment so you can start a long-term dialogue. With this knowledge, you will be able to turn around perceptions of procurement by shaping opinion.
5. Ascertain what others want
Use the boardroom and business alignment process as stepping stones for professional account management. Make sure you know what your board expects, but also what your most important internal clients want from you and actively manage the alignment (and misalignment).
6. Create understanding
Effective alignment largely depends on a cultural fit. Carrying out a boardroom alignment programme won’t bring perfection on its own. However, it will help a CPO to create understanding between themselves and the board.
7. Ask: are you ready?
One Dutch CPO said: “I’m glad we didn’t carry out this exercise three years ago. It would have been too soon, but now that we have completed the boardroom alignment programme, we’re ready for our board and their sometimes unpredictable expectations.” You have to be ready for boardroom alignment, you have to have your procurement act together and must be able to really bring something to the table.
Alexander Arsath Ro’is (alexander.arsathrois@benefit.nl) is managing partner at Benefit, based in Amsterdam, and former CPO for Heineken in the Netherlands