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Pragmatic procurement at WPP (part 2)

Aug 15, 2011 12:20:00 PM

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In the first part of our interview Tom Kinnaird [TK], Head of Commercial and Procurement Service at WPP concluded with a lengthy discussion around talent management. We now delve deeper into the procurement life cycle, stakeholder engagement and being seen as a value adding operation.

CG: What do you think the life cycle of a typical procurement professional is?

TK: Looking at my global leadership team, I would say the average tenure is probably between five and seven years, although we have a couple with close to 10 years. In terms of the wider procurement team we are probably nearer an average of three to 5 years.

We can go long periods without anyone leaving our procurement organisation which is both a good thing and bad thing. In general, in a business that’s as complex as ours, it can take quite a long time to build close relationships with the agencies, so longevity of tenure in a procurement role is very useful. Having some stability at the centre of any business is also important because the centre then becomes the organisation’s memory in many ways, and certainly that’s the case with  the current procurement team.

I tend to recruit seasoned professionals, people with previous experience either as a procurement leader or in terms of category specialism. The challenge for these new recruits is to quickly get to know our complex organisation. My usual advice to anyone starting is to spend the first 90 days just talking to people. Meet as many people as you can in that first 90 days and work on those relationships, because you won’t get anything done without it. Don’t worry too much about delivering projects until you’ve done this, because it’s going to be very hard to achieve anything if you haven’t.

Overall and thinking about my 10 years here, I’d be counting on one hand the amount of people that have left WPP Procurement within two years of starting, so we generally get it right in terms of recruiting the right people with the right skills.

CG: Do you think all procurement teams should take this approach?

TK: Always a difficult question to answer and I would never presume to prescribe that the way we do things here is the answer for all procurement organisations. I think every procurement team in every organisation is different. The procurement team can and should be built to mirror the organisation in which it exists. I think where some procurement leaders have had problems is trying to build a procurement team which actually is counter-culture i.e. starting with what they believe is the answer and building a  team to fit that answer, which can end up with a procurement team being mis-aligned with either the business objectives or the culture, or both. Not a happy place to be.

In that situation what you tend to see is a spike of activity where procurement is supported by a senior sponsor – usually the CEO or the FD. Then the sponsor changes, or gets bored, and procurement loses the executive support, which often results in the procurement team unravelling very fast. Disappointingly, I’ve seen a lot of this over the years in many organisations.

I often talk about us finding creative ways of us being commercially useful to the business, and that requires having a very broad definition of what the word procurement means. We live with quite high levels of ambiguity around the scope of the work that we do, and that can be uncomfortable for people with a very traditional view of what procurement is or isn’t.

CG: I guess  the flip side of that coin is once you’ve found ways to be useful then you need to communicate that back to people, that it was of value not just it was a win therefore we’re going to shout about it in the procurement team, and that’s it move on.

Even better get the stakeholders talking about it. People are very distrustful of individuals or functions who beat their own chests and fly their own flags too much. I’m much happier when one of our stakeholders tells others what a great job procurement have done.

But, it also depends on the pace of change you have to deliver as a procurement leader. If you’re expected to deliver big savings numbers very fast, you probably have no alternative but to be very up-front, beating your own drum. But that’s got to change at some point in procurement’s life cycle. The white charger has got to disappear, and procurement has got to become an embedded part of the business and the way that it’s managed.

We’re back to the old chestnut about procurement only being measured on savings. If that’s the case,  you’re going to run out of ideas eventually, because savings will flatten or go into decline, and will get harder to deliver. Even worse, procurement can run the risk of destroying value by focussing on delivering short-term savings which end up costing the business more in the long term. If all you’re known for as a procurement leader is delivering big savings numbers, you’re going to be in trouble at that point. There has to be more to procurement leadership than just talking about savings.

CG: So how does one build up an army of vocal advocates?

TK: When it comes to assessing how well my team have done over the year in meeting their objectives, my boss is as much interested in what stakeholders are telling him about the value that we’ve delivered, as he is in reading the numbers that I report on a quarterly basis.

It’s especially the case in indirect procurement, that making savings real is hard – there are so many assumptions that have to be made. Also, as we all know, there are many different ways of measuring what is a saving, so it can be hard to tie savings into budgets. Our goal in WPP is to publish numbers which are as robust as possible, and we are putting a lot of effort into being able to report meaningful numbers linked into our spend management implementation. We’re also working very hard to make the reports that we publish fully relevant to the business leaders who receive them.

But, savings number should only be part of the value story. If you’ve really done a great job for your stakeholders, those stakeholders will talk positively to other stakeholders. Referring back to my previous comment, the more useful you are, the more people will talk about you, so it becomes positively re-enforcing.

In WPP, we have achieved what we have in an environment where the business has been patient enough to let procurement develop in a value led way. That’s not to say that savings are unimportant to WPP. They are. But as part of a balanced value picture. If you’re a procurement leader in an environment where you’re being pushed and pulled to deliver big savings in two years or three years, then you have less time to let things grow and develop organically.

CG: So we are now talking about developing communication tools and feedback loops which can be published within the business (something like a case study of your successes, which has had stakeholder to sign it off) sent around the business?

TK: Absolutely, whatever works - we publish newsletters , run web casts, hold formal meetings or even just take people for a beer after a meeting.

We hold steering group meetings in each country once or twice a year, in which 15 to 20 senior stakeholders from each of our agencies come in. We talk to them about the work we do and the successes we have had. And we talk about the future projects that we want to do. In effect, our Steering Groups give us permission to work on the categories, because they own the budgets.

It’s just basic good communication stuff If your stakeholders are not enjoying working with procurement, they won’t do it, they won’t come to meetings, and I can’t force them to come to meetings. It’s about making procurement fun and people wanting to be part of it. Actually, there’s no reason why it shouldn’t be fun.

CG: How do you communicate savings and bottom-line impact to senior executives?

TK: Lots of procurement organisations publish different kinds of dashboards with lots of different measures - which is fabulous if you have the systems to support it, but it’s often not the most exciting reading to the rest of the business, or even that relevant. Procurement’s challenge is that, no matter what measures we publish, your average business executive thinks about procurement as only delivering saving, and I don’t think we’ll ever change that.

My advice would be, publish sensible numbers which are as close to the truth as possible and can be defended robustly, and if you can tie them to budgets so much the better.

It’s tough, but I think Procurement has to find other ways of adding value beyond the measureable For example, my leadership team do a lot of commercial training and coaching across WPP agencies which is something that the agencies asked for and clearly get a lot of value from. We find that by working the commercial agenda at the revenue end of the business, our agencies are much more positive about working with us on the cost end of the procurement agenda.

It comes back to if you’ve got a small team of highly performing people who know what they’re doing, who are business people first and procurement people second, they will find ways to be useful.

Ultimately it is a combination of delivering value through the non-saving related activities that we do,  plus delivering numbers that are robust enough to convince the CEO that he’s getting a sensible return on investment. We have to remember that procurement is an overhead which the business can chose to do without. I’m not big on measuring everything. If you’re doing a good job people will talk about it,  the business will know and procurement will become self-sustaining.

CG: In your opinion are you saying that CPOs should potentially be looking to build smaller teams of strategic thinkers, with view to potentially outsource the lower level, administrative stuff which ultimately doesn’t deliver value (to the business or stakeholder)?

TK: Do we have forty strategic thinkers in the WPP procurement team ? No we don’t, but we have 40 seasoned professionals who know how to do procurement well. Of course, within that 40, there’s a range of people, talent and capabilities. I don’t think this business needs 40 strategic thinkers in procurement, it just needs people who get things done, do it well, do it professionally and add value to the businesses that they are working with. Procurement has a tendency to over-complicate what is essentially good commercial spend management, and it’s unnecessary in my view.

I think there’s always a temptation, from a CPO’s point of view, to see building a big team as a goal. Of course, it’s good for the ego if we’ve got hundreds of people working for us and we want bragging rights in the bar after the procurement conference. But here’s a challenge for CPO’s, I think you have to look at your operation and ask yourself, is this team really, truly adding value or is it simply getting bigger, pushing paper around and interfering rather than inspiring ?

Another challenge - there is a tendency in the profession to assume that only procurement are qualified to deal with suppliers professionally.

I actually think that’s fundamentally incorrect. In my experience, there’s an awful lot of business leaders and budget holders in WPP agencies who are very good at dealing with suppliers and realising value from those supplier relationships.

The way I’ve tried to build procurement at WPP is to ask the question ‘can procurement add clear value to this particular supplier challenge?’ If the answer is no, then we shouldn’t be doing it. I think it’s wrong to insist that all supplier communications must go through procurement. It’s about getting the balance right and learning to trust the value of good stakeholder and supplier relationships, a skill that I think the profession has somewhat lost sight of over the years, particularly with the trend towards use of eProcurement tools and processes. A good procurement process should help cast a spotlight on decision making, but the best decisions are made by people, not process.

Ultimately, I would rather have a team of 40 people who I think are doing the right things than eighty people who are adding marginal value by running the best procurement process in the world.

CG: It’s an interesting concept in that you’ll step back from something if you don’t feel that you’re able to value. How do you know where you can or can’t add value - do you just go off and compete with the stakeholder doing it and say ha we did better, or in the case they are clearly better, how do you leverage this in such a way that you can replicate their success  across the business?

TK: If you look at the majority of indirect spend in our business, the challenge for WPP is about scale. When you get a business like ours with over 200 companies, and thousands of different buying points, it doesn’t take a huge amount of insight to realise that you can leverage volume if you add those 200 companies together in an effective way.

Outside of those obvious areas of leverage, you get much more into the subtleties of strategic supplier relationship management where, for example, one of our agencies may or may not have the capabilities to do it well.

So, the challenge for my team, is to identify where the significant spend areas are, with which agencies, and with which suppliers (which can do now as we are implementing a spend management system across our major markets) and then identify where and whether we can add value- is it just about leveraging scale, or is it about managing the suppliers for value in a more effective way ? However, you need to have earned your spurs and built trust with the stakeholders and business leaders before you can start that conversation. - If I go in and say “I’m from procurement I’m here to help you, I want to talk to your biggest supplier”, then that’s likely to be a very short conversation.

Instead,  the conversation should go more along the lines of “tell me how this supplier relationship works, talk to me about the value that’s in your existing contracts, talk to me about risk, talk to me about what value you’re not getting, tell me if you had your wish list how could you make the supplier do better?”

Through that sort of process, you will build a better relationship with the key people in the businesses and come to a sensible conclusion as to whether procurement can truly add value to that relationship or not.

Again it comes back to the question – “does procurement have a right to own supplier relationships in the business”, and no, I don’t think we do. There’s some obvious areas where procurement should get involved, but beyond that, it’s up to procurement to earn the right to do so, by the way that it interacts with the business and the value that it delivers.

In our marketing communications sector, there’s an old saying that people buy people, and that pretty much sums up my philosophy of procurement and how I aim to lead the team.

Proxima Group

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