Redefining procurement series: Relationships and building trust
May 26, 2011 6:10:00 AM
Up to now, our Redefining Procurement Series has looked at procurement's trajectory towards a leadership role within an organisation and touched on the who, what, when and why. Now we will look at the how - how can procurement be seen as a leader, an influencer, an advisor and a trusted/respected strategic business partner?
Procurement, as we have mentioned previously, is a hub within the business - with the power to influence expenditure at any level of the organisation, and access to every element of the business from front to back.
The problem is, in most cases, procurement doesn't actually have any mandate or budgetary power over any other function outside of procurement (and what's more, if the procurement function is looking after indirect expenditure, they don't actually have any budget of their own).
So how the flipping heck can we influence something we can't get close too?
The lack of mandate within the business poses somewhat of a barrier for your average procurement chap - who has traditionally spent the majority of his time looking into the supply market in search for the best deal. Traditional procurement folk have always been measured on savings targets - usually Purchase Price Variations (PPV) or other similar year-on-year annual savings - which is reported back to the respective stakeholder. It is widely known and talked (within the procurement community) that these comparative (i.e. functional and tactical) savings metrics aren't representative of procurement's true potential - yet in almost all cases the PPV is still the number one metric reported back to the business.
Andrew Collopy, Global Procurement Director, Downstream at British Petroleum (BP) during a recent interview* talks about BP's gradual move away from this 'functional driven agenda' towards a P&L results oriented one "over the last 18 months we [BP] have worked tirelessly to take that good procurement activity which is ongoing and actually do the wiring diagram which says how that actually shows up in the results of the corporation. This forms the basis for the annual plan which we then revisit on a quarterly basis through our forecasting, and now that is getting recognised through finance because we're doing it in terms of what they would recognise as key cost buckets you would find in a P&L - things like gross margin and total cash cost, working capital and capex, and all our results turn up against these.
The key to all of this, as we mentioned in the 'Becoming a Great Leader' post is understanding your stakeholders needs and drivers and adapting your outputs and key success factors to these.
Trust will naturally form over time if you are seen to be working towards a common agenda, and with trust comes the ability to influence your stakeholder.
Over to you, what are some other tactics you currently employ to build trust with your stakeholders?
*Click here to read the complete interview with Andrew Collopy, Global Procurement Director, Downstream at BPProxima Group