‘A seat at the table’ – the ongoing procurement dilemma

tonyenglish

Getting a seat at the table is industry code for the debate on whether procurement and supply chain managers should have a seat at board level to gain acknowledgement and respect. As companies are becoming increasingly strategically savvy, procurement has evolved from being a way to help companies cut costs – particularly during the recession in 2008 – into being a critical business function where businesses can reap major benefits.

After 30+ years working within the procurement sector it’s intriguing to see that the same question was being asked then, as it is today. In this article we investigate why the procurement profession is fighting to overcome an inferiority complex, and if a C-level seat really is necessary to influence strategy.

Positive impact on the bottom line

Procurement is fundamental to a company’s revenue. As a Chief Procurement Officer, Head of Sustainable Procurement or Category Managers you can have a major impact on a company’s profitability, whether the emphasis is on cost reduction, strategic sourcing, vendor consolidation, or impactful suppliers.

Purchasing professionals must now add value in a number of different ways for a business to stay competitive; responsibilities have increased. However, if procurement managers spend their time policing processes rather than building relationships, strategies and negotiating appropriate contracts, they might be considered more an expense rather than a value added.

Insight into the business is essential

Procurement and sourcing teams can’t work in isolation, they need insight into the entire enterprise strategy and goals to be able to prioritise and deliver to its fullest potential. According to Carlos Mena, a supply chain expert at Cranfield University, most organisations’ procurement spends more than 50% of the business revenue. If that’s the case; how are they supposed to make decisions without full insight into the business?

 

Should the CPO be a board level position?

Rich Weissman states in a recent article that “The unending pursuit of a seat at the table as a definition of success and respect is folly… you gain respect the old-fashioned way: through performance”. We agree.

Whether procurement merits a board level presence or not there are generally two factors that need to be considered. Firstly, the individual character must align with the board members. Team chemistry is important and equally a respect for the contribution that procurement can and will make is essential. The general consensus is that procurement is currently lacking depth of talent and that has a direct impact on the inability to step up to board responsibilities.

In addition, it is crucial that procurement can exhibit the value to a board beyond the function and contribute to the broader group discussion. Rarely do board members not understand the contribution that procurement makes, but beyond this it is key that the function can continuously exhibit an insight into advanced supplier strategies, innovation and relationship management.

Any aspiration for a board level appointment should be backed by a continual personal development programme and a keen interest in a broader strategic exposure. Sometimes a role in another function is as insightful as a firm understanding of general management, systems and processes that make the organisation tick.

However, a recent piece of research by The Journal of Marketing looked at 84,086 bios of directors of S&P 1500 companies only 2.6% of those board members had any marketing experience. The problem isn’t only with procurement.

Does your business have the right people in place to tackle future challenges? Take a look here to see which areas we can help you find top talent in.