The new CPO: A roadmap for the first 100 days
To say new CPOs are under scrutiny in their first 100 days would be a gross understatement. They’re expected to bring costs under control, manage process change, and revamp dated technology. This kind of complexity needs a thorough roadmap.
Between evaluating the inherited procurement team, filling gaps, and drilling down on analytics, it’s imperative to have a plan up front. The Hackett Group’s latest report, “The New CPO: A Roadmap for the First 100 Days” address this need. Below are a few key takeaways but be sure to download the report for specific action items from seasoned analysts that can make or break your migration to a better procurement practice.
Make coffee, shake hands with the team, and then get to work. Consensus and buy-in are going to be key in any procurement overhaul. The Hackett Group doesn’t specifically recommend it, but if trust isn’t an issue it may be worth sharing the outline below with stakeholders.
Improvements should be tightly aligned with–and cascade from–the business’ overall strategy. When getting stakeholders on board, probe their needs, perceptions of procurement and company culture. Illustrate how your team has credible subject matter expertise and can be a trusted advisor by researching their needs, plans, spending behaviors, and objectives.
The Hackett Group suggests highlighting where procurement will add value:
While useful, the model may be oversimplified. Traditional procurement typically shoots for optimization, not innovation. Consider the bottom rung of the pyramid. If you’re saddled with legacy technology, the odds of truly being able to buy the right goods at the right price are nil because you can’t buy from any supplier and getting up-to-date information isn’t guaranteed. The internal resource costs alone will eat up any tactical gains. If you want to run your procurement organization in 2016 like it’s 2026, not 1996, technology should come much earlier than the first graphic indicates.
This is when the Hackett Group suggests defining an organizational structure that promotes visibility and points of influence. A few models are laid out below:
Once again, a new CPO will be bound by technology when making this decision. The more flexible and usable your P2P platform is, the more agile the business will be able to be. In this case, spend is easier to bring under management and there’s no need for command-and-control policies. We feel this is imperative and you should consider what technological changes will be needed before committing your department to any sort of new structure.
The Hackett Group recommends reviewing your team’s human capital at this point. It’s true that CPOs should identify strengths and weaknesses early on. But consider the cost of bringing in additional overhead. What can be automated?
As at other points, technology should be front of mind when considering scaling. If often proves more flexible than an employment contract. Hackett analysts advise to consider soft skills as well as essential procurement functionalities. If you’re following up on earlier initiatives to get external departments to buy in, it’ll take employees who are excellent communicators and consensus builders.
The Hackett Group advocates using Day 45 to analyze spend. The authors encourage new CPOs to, “Conduct spend analysis to identify supplier consolidation and savings opportunities… Only then can the new CPO begin to create opportunity models of areas to explore with the business.”
The next step is to identify–the inevitable–gaps and work to fill them and explain those that remain mysteries.
This exercise should be about more than cost savings. Going with the cheaper supplier isn’t always advisable. For example, a more expensive supplier may also be more nimble because of a built-out factory network or higher capacity. Considerations like this should play a role in spend analysis. Collaborative ability in up there with cost in terms of importance.
This is where the Hackett Group introduces the technology piece (although we’ve advocated making this a priority early as it will be related to your first objectives). Below is their graphic depicting the various areas a CPO will want to consider as existing technology is evaluated and potentially upgraded.
Important questions posited in the report include:
- Is there a repository for existing contracts for principal suppliers?
- Does procurement have the tools to handle an audit?
- Can procurement show they take precautions with company assets and reduce overall risk?
- Is there a tool to track down savings?
A new CPO comes aboard full of vim and, hopefully, institutional support. This makes the first 100 days an ideal time to embark on a technology transformation initiative.
This is when new CPOs start bringing it all together by designing their Future Services Delivery Model. By now, a CPO will have recognized which tasks can be outsourced and how effective the pre-existing model was. Where are the team’s strengths and weakness? Should these be filled in with personnel, technology, or both?
Transforming the Delivery Model will take time, but now that the evaluation period is over, it’s time to define what it will look like.
The first 100 days of a CPO’s time at a company are their greatest opportunity to affect change. This is not an opportunity to be squandered. The Hackett Group includes a quote in their report that sums it all up well.
“A lot of procurement executives have been molded and developed in their careers to become optimizers, but we need innovators.”
To get your copy of The New CPO: A Roadmap for the First 100 Days, simply click the link and fill out the form!
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