The role of the CPO, the chief procurement officer, is changing. Although many CPOs still have narrowly defined functional roles that emphasize cost savings and compliance, today’s modern CPOs are business leaders who are associated with revenue growth, innovation and a closer, more strategic proximity to the supply base. As a consequence of this new expanding role, the influence of the new CPO has increased significantly and CEOs are now starting to pay attention to procurement in a way they never have before.
So, what are the attributes of a great CPO? What separates these procurement role models from the pack? Matthias Gutzmann, Founder of Digital Procurement World, talked to three highly regarded experts who should know this better than anyone else: executive search consultants.
Brad Berke, Global Managing Partner, Supply Chain & Operations Officers Practice, Heidrick & Struggles
Driving transformations. The role of the CPO has transitioned from one about costs and transactions to enabling growth through margin enhancements and reallocation of capital to drive growth initiatives. Thus, more and more CPOs find themselves reporting not to the CFO but rather to executive committee leaders responsible for driving enterprise transformations.
Acting strategically and beyond the function. It isn’t that companies no longer need a functional expert in this role, but those skills have become table stakes. Now more than ever, CPOs should possess a number of other capabilities, including the ability to develop relationships with key parties internally and externally. It is essential that they have a strong customer orientation and a genuine commercial focus. They must engage strategically and understand the organization as a whole, creating a center-led strategy that can be executed across business lines and geographies.
Having the mindset of a general manager. The best CPOs think and act like general managers rather than functional experts. They understand operations from an end-to-end perspective. They demand a seat at the table so that they can collaborate with the entire executive team, and they earn it by bringing strong strategic, business, financial, and commercial acumen.
Having a strategic business outlook. These leaders understand that procurement can help the organization develop a sustainable competitive advantage. They promote top-line growth and create a culture and supply chain that are hyper-responsive to the company’s customers.
“Strategic, tactical, and customer-focused: Features of a great CPO”
Supply chain expertise. CPOs have the experience and knowledge to create and manage a resilient supply chain that meets the ever-changing needs of both internal stakeholders and customers. They see suppliers as enablers of business execution and analyze their competitive strength to ensure continuous improvement.
Ability to influence and inspire engagement. The best CPO candidates understand the importance of building relationships throughout the enterprise. Just like a CEO, they have an aspirational vision for procurement and understand how to communicate this vision within procurement and beyond. In doing so, they can inspire those around them to meet the needs of the enterprise and customers in a highly volatile world.
Enabling acceleration. The best procurement leaders understand that, above all, their job is about enabling the company to increase the rate at which it can respond to a changing business landscape and identify new opportunities. At Heidrick & Struggles, we have done extensive research that highlights how companies can accelerate growth by mobilizing, executing, and transforming with agility (META). The best CPOs have a vital role to play in preparing and empowering their organization along these capabilities.
In my experience, only about 10 percent of CPOs are capable of meeting all aforementioned criteria and being true business partners to the CEO and the rest of the executive leadership team. Only the companies that understand the role of procurement in unlocking their potential will be able to attract the best candidates.
Lucy Harding, Partner & Head of Global Procurement and Supply Chain Practice, Odgers Berndtson
Getting the basics right – every time. Top-performing CPOs get the basics of procurement right. In simple terms, they build a function that sources fit for purpose goods and services, delivered on time, in full, and at the right price to meet their business needs. To do this successfully and to be seen as an expert, they need to build a career that demonstrates leadership, international experience, breadth across industries and categories of spend and a strong commercial acumen. These basics cannot and must not be overlooked or lose focus in the pursuit of “sexy” technology solutions or the latest fads and buzzwords that confuse the business and present procurement as “a black art”. Doing the “simple stuff” well every time is the foundation for delivering greater value.
Demonstrating credibility. Simple but true, the business needs to believe you on the financial numbers. You must be credible. Once these foundations are embedded, CPOs have the opportunity to shine as genuine business leaders who clearly understand and demonstrate “business first, procurement second”.
Delivering business outcomes. The role of procurement continues to evolve at pace. Successful CPOs are able to manoeuvre themselves and their teams across their organizations and use critical supplier relationships to negotiate, collaborate and ultimately add value way beyond a price and cost based transaction. They understand the value of relationships, internal and external, and harness them to drive innovation and bring invaluable market and competitor insight to the table. They are able to speak the language of the business and link procurement strategy and deliverables to the corporate agenda. A CPO needs to have humility – it’s not about “procurement delivery” in isolation but about how procurement can facilitate the delivery of the business strategy.
“Top-performing CPOs are able to speak the language of the business and link procurement strategy and deliverables to the corporate agenda.”
Being transformational. In a constantly changing world, the CPO needs to excel at leading transformation. This starts with people, then process and then the ensuing program of embedding change. They need to drive the agenda, aligning people, teams and behaviors to generate enhanced performance at pace. The ability to build and inspire a diverse, global team is vital to being a successful CPO. Leaders need to attract new talent and develop existing potential, which may also mean letting them go to learn and develop elsewhere in the business or even outside sometimes. They need to trust their people, stretch them, support them and challenge them. Despite being on show 24/7, the CPO needs to demonstrate self -awareness and humbly invite and accept feedback.
Adapting to change and exploiting it to create competitive advantage. And what of the digital revolution? Must a CPO be a digital wizard? Whilst I believe AI will change the shape of procurement functions and the roles within them, I don’t believe CPOs need to be masters of cognitive technologies. However, they must understand what technology can do for their function and how to use it, again to deliver business rather than procurement outcomes. They need to adapt their talent strategy to ensure their function as a whole has the right mix of skills fit for the future that will allow their function to deliver competitive advantage. That’s just leadership, not procurement.
Lorena Keough, Partner/Managing Director & Global Supply Chain Practice Leader – Diversified Search
Being a business leader. There is a new type of CPO with a strong track record of both people and innovation leadership. They communicate effectively beyond their own team to fellow top executives and even board members. They tell the board what truly matters to help them steer the business. Great CPOs have strong business acumen and a track record of contributing to business outcomes. They have the ability to participate in and contribute to cross-functional teams. In the digital age, a basic understanding of new technology offerings is important, but even more the willingness to learn from younger subordinates who may be better versed on the subject.
Being a relationship-builder. The most effective CPOs recognize that there is a business case for trust and that building trust-based relationships with stakeholders up and down the value chain “pays off” and leads to superior performance. Those CPOs typically have a high degree of EQ (emotional intelligence) and know that a focus on “we” and less on “me” is needed in order to build those relationships. They know how to connect people by creating an environment that fosters the development of trust. They are inclusive and have highly developed interpersonal skills.
“Modern CPOs are less about being functional masters of procurement. They are more of enterprise leaders who manage the business.”
Taking supplier relationships from competitive to collaborative. Highly collaborative CPOs understand that creating significant value for the business requires tapping into the energy of their suppliers. They recognize that there is a time for hard one-on-one negotiations on cost reductions but also know that by truly collaborating with their strategic suppliers and making them part of their extended team, they can deliver long-term competitive advantage for their company. They move away from zero-sum (we win if they lose) to mutually beneficial supplier relationships. If certain suppliers have not “grown” with the company, how can they be “brought up to speed”?
Alternatively, there may be other suppliers that have invested in technology at a faster pace and have surpassed one’s own company. Great procurement leaders take the initiative to “learn” from suppliers or even “learn together”.
Building high-performing teams. Leading CPOs build cross-functional procurement teams and include strong players from various functional backgrounds. They know that diversity fosters innovation. Hiring people from the business not only brings subject-matter expertise into procurement, it also builds more credibility with that group than procurement would have on their own. This new general manager looks closely at employee engagement, ongoing education and identification of high-potential employees.