For a number of CPOs, procurement is no longer their only area of responsibility. They are increasingly expected to maintain multiple identities that could cover facilities management (FM), property, corporate social responsibility (CSR), IT, sales, logistics and more.
A snapshot survey of the profession conducted by sister publication Supply Management this spring discovered an emerging trend for procurement chiefs to be given areas of the business that extend outside their regular remit, and this study is not alone in reaching that conclusion.
Kris Timmermans, a managing partner at Accenture, said at a conference last month: “High performers are being asked to do a lot more. They are being asked to drive the CSR agenda, drive down risk, help with revenue growth and manage demand to ensure cost doesn’t occur in the first place.”
But he warns that taking on additional functions or tasks only works when you have the backing of your boss: “It’s bound to fail if CPOs simply decide to add to their portfolio, but where the CEO says ‘you’ve been good at the cost agenda, now look at risk management, the sustainability agenda, or revenue growth’, you’ve got a mandate.”
Procurement lends itself to a wider remit with a view across the business and its contact with both internal stakeholders and external suppliers. Those with added responsibilities say the chance to take on a wider role is, more than anything else, about the skill set and charisma of the individual.
“I’m a change agent as well as a CPO,” says Kath Harmeston, who heads procurement at Royal Mail. Until the end of last year she was also responsible for property and FM. “A few weeks after I arrived in 2009, the rubber hit the road and I was given a new remit and it’s grown since then.”
She took on FM two months after she joined the company and property 12 months after that, which meant she was simultaneously responsible for overseeing three change programmes.
“In the end, I had a directorate of three departments with a budget of more than £600 million and 350 people – it was big. We had a management team that worked to consolidate all the synergies across FM, property and procurement, and it worked really well. Although I’m a CPO at my core, my skill set is much wider, having come from a consulting background.”
Harmeston said the three areas naturally sat very well together and adding property to her portfolio after having taken on FM made perfect sense. “FM and property have a lot of synergies. Whatever is decided upon in the blueprints for the builds has an ultimate impact on the FM budgets, so we were able to join the dots even further.”
Reducing costs
In FM, Harmeston reorganised the department, changed working practices and got investment and better visibility for the function. She also used it as a test bed to show how savings from procurement can lead to budget reductions.
“I wanted to work with the company to improve the baseline of cost. All CPOs face this issue of trying to enact zero-based budgeting – being able to zero-down budgets as a result of procurement savings each year. Invariably, what happens is that some organisations will try to maintain budgets at a constant level and use the savings to offset risk or invest in other opportunities.
I wanted to work with the company to improve the baseline of cost. And that’s what we’ve been able to do.”
And since she was the budget-holder for FM, it meant she could demonstrate to other departments first-hand that reductions were possible and not necessarily painful. “All the things they were expected to do I was also doing to myself as FM director. I was standing by what I said I would do, showing them it wasn’t hurtful and scary, but it worked quite well and made a lot of sense. I went first and showed them how it could be done. That laid the path for me.
“I was accepted as a budget-holder, a stakeholder and CPO at the same time. I was seen as quite a different animal – one that could see both sides, played a fair game and stood for accountability, traceability, auditability and transparency.”
In overseeing FM and property, Harmeston also benefited from experiencing what it was like to be a stakeholder. “It was a fabulous insight for me into being a stakeholder. Being trained in CPO land, I have a certain way of looking at the world. I was able to spin that round and ask some very technical people questions. FM was very technical, from rat catching to lift maintenance, to window cleaning, security, and so on.
“It was also a huge responsibility. For example, if an individual died on site while under my care, under the [health and safety] directive I could go to jail – that’s how important it was to be able to understand the responsibilities of the stakeholder and the myriad things they had to do in real time under service level arrangements.
“So this wasn’t an insight into what the business did, it was an insight into how important suppliers were to it. For the first time, I could see in real time what happened and how the performance of suppliers impacted on me and I was able to position those messages at the executive level.”
While managing FM and property into what she calls a “steady state environment”, Harmeston says it was key to keep a clear line of focus about what you’re there to do and having very good financial representation to ensure everything was bona fide, auditable and traceable.
Trading on relationships
FM and property are two areas that fit particularly well with purchasing. Steve Jones is procurement and property director at Biffa Waste Services. His role covers both property and FM, as well as purchasing.
“More and more we see that good procurement people are rounded business managers and, therefore, it naturally fits that procurement leadership can and will perform wider business roles as natural additions to the procurement role,” he says. “The commercial perspective, processes and structured approach that procurement brings are increasingly applicable to other business functions.”
He says a balancing force against the expansion of the CPO role in the short term is the current economic climate and resulting pressure on cost. This is leading to CPOs focused and tasked with traditional cost-down objectives and activities as an increasing part and priority of their job.
In terms of what the combined role has meant at Biffa, Jones says it’s early days, but benefits are already being realised as a result of taking a more commercial approach to property and FM. In addition to gaining synergies across the three functions, he says there has been a simplification of roles and responsibilities, especially across traditional boundaries that would previously been protected parochially.
Jones says there is now also a more structured approach to assessing and challenging traditional ways of working. Furthermore, he says they are able to “trade on the strong operational relationship developed across the enlarged function and the bigger team shares development (including training), and has a broader involvement and business perspective”.
He adds that the procurement team see it as recognition of the role and the contribution they make, which enhances their profile and standing within the business.
Patrick Dunne is group property and procurement director at Alliance Boots. He manages more than 300 staff who cover both the acquisition and the fit-out of all Boots stores, maintenance, engineering, facilities management for all UK locations and the procurement of everything but the products for sale.
He says his role is not one of a typical CPO, but is one that promotes and leads commercial transformations of the functional or company cost base within Alliance Boots. “In my world, I tell my procurement teams that their secondary role is to procure products and services and deliver best value for money.Our primary job is to promote and deliver positive change management to our existing cost base for our stakeholders across all of our companies.
“There are more than 2,500 procurement-led change initiatives that have been delivered or are under way within our procurement programme across all businesses in the group. We have dedicated people that track performance using tools we’ve created in-house. They report back to all stakeholders and the financial directors on a monthly basis and see that every improvement delivered hits the bottom line and has stakeholder support.”
He says his model is simple: “When taking over a new function like property, I look at the people and processes and develop a programme of positive change to drive greater efficiency and value, the four ‘Ps’ - positive people, processes and programme. My previous years of experience allow me to be able to do this in any function or company.
“In most businesses, property is seen as a bit of a black art. I’ve been able to integrate procurement and property and we’ve been able to make substantial improvements in the way we’re organised, and the value we’re achieving in our group.”
Dunne is also of the opinion that the opportunity to diversify is very much down to the performance of the individual and the team he or she has around them. “A number of CPOs have demonstrated their commerciality in recent years and their ability to drive positive change to support their business, which has allowed them to take on other challenges, but I believe they’re still in the minority. In my case, transforming the cost base of Boots impressed the board to the point where I was asked to take on the group property role and understand how I could improve the operation there.”
Leading on CSR
As the issue of sustainability in all its guises – be it environmental, economic or social – rises up the corporate agenda, there is an increasing number of procurement heads asked to take the lead on this in addition to their existing responsibilities.
At Siemens, for example, Barbara Kux is head of supply chain management and chief sustainability officer, and sits on the managing board. Meanwhile, at Clarks, CPO Matt Turner was asked to improve the company’s CSR programme after proving himself in a number of other broader roles, such as implementing an ERP system and looking after shoe care.
“We set up our social responsibility programme in 1998/99 when there was a lot of concern over production moving from Western Europe to the Far East,” says Turner. “It hadn’t evolved in nearly 10 years, so I was handed something that was very effective, but that hadn’t really moved on.”
Turner says that while CSR was a separate team to procurement, purchasing staff set about making improvements that have brought about benefits.
“We sat down with procurement and said this doesn’t directly affect you, it’s a separate team within the department, but relatively quickly they just did stuff and now they’re looking at the new British Standard for sustainability. They’ve looked at the next three years and they know what’s happening with CSR because they sit in the same office.
“With CSR – and this is a real change for procurement – we have really opened our doors and begun to collaborate. So in some factories we are now beginning to run joint audits [with competitors], which has made a big impact.”
So are there any disadvantages to having this broader remit? “The advantages massively outweigh the benefits,” says Jones, “but could include procurement being pulled into more property and FM operational day-to-day issues and thus diverted from more strategic programmes.”
Dunne agrees there are more positives than negatives, but says clearly a bigger job means more demands on your time. “You need to be passionate, committed and, above all, have good people on the team,” he says.
And how about future trends? “In the next five years, I am convinced we will see more CPOs with broader responsibilities taken on either as permanent structural changes in organisations or as extended secondments and role alignment,” says Jones. “More and more traditional functions will be seen to benefit from the commercial management and strategic procurement approach and skill sets."
Turner concurs it’s very much about change management and believes procurement is well-placed to pick up more areas of responsibility over the next few years. “The CPO role does have room to be an incubator position, so when new requirements or departments even, need to become effective quickly, the strength of a good procurement team with influence is often used to make rapid changes.”
Dunne thinks there will be more CPOs taking on greater responsibility in future but he expects it will only happen slowly. “It’s a trend that’s created by individuals who have reacted well to the challenges over the past two to three years in the global economic supply markets and those that have reacted well to driving positive procurement change in businesses are raising the profile of the function.”
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Rebecca Ellinor is managing editor at CPO Agenda’s sister magazine Supply Management
Checklist
Advice for CPOs who want more areas of responsibility
• Patrick Dunne: “There are two types of CPO. One needs to know how they will
achieve the business plan before they’ll sign up to it; the other lays down a mission
and an ambition without knowing how to achieve it. Those that do bold things and succeed will come to the attention of the board. Anyone who wants to take on a
wider role has to constantly be looking for the next big challenge rather than
reflecting on what they’ve achieved.”
• Luca Guzzabocca, director of procurement, logistics, health and safety, environment and security, at Gruppo Montepaschi: “It’s about individual skills and managerial attitude. Those who have the 360° vision, strong problem-solving and team-building skills, leadership, charisma and good relationship skills have more chance to extend their responsibilities beyond procurement.”
• Kath Harmeston: “Some of it is about being able to really cut through the information and see the salient points and hone in. The other is doggedly wanting to represent your team and departments and not taking ‘no’ for an answer, and having the right facts, data and case to fight the argument with.”
