From under finance's wing to a seat in the boardroom: how procurement has and must continue to change

By Joe Rabolao

Procurement's ambition as an organisational function is aimed at earning importance and influence within organisations. Procurement wants to be trusted and given a platform to deliver. However, this requires an acceleration of organisational maturity towards procurement as a function.

No longer a financial function
Procurement has evolved beyond a transactional and back-office support function. The reason why procurement reported to finance in the past made perfect sense: it was a function fixated on reactive buying - its focus was on spending. Savings were a no-brainer, but green contracts eluded procurement.

Contracts used to primarily be based on price negotiation. Procurement was thus working with 'low-hanging fruit'. It was all about Rands and cents. In this scenario, a finance professional was required to calculate savings and budget amounts saved or not utilised. Money saved, in the view of finance staff, is a great achievement.

I myself was an Accountant for more than 20 years and can attest to the difficult task of transforming 'finance' thinking into procurement thinking.

But it must be done: all the low-hanging fruit has been picked and our focus must now fall on picking fresh fruit, hanging higher up the tree. As such, organisations must begin to focus on evaluating their maturity levels as well as working towards improving the professionalisation of procurement.

Having evolved beyond its transactional and back-office roots, procurement has now become a strategic player. Consequently, it needs practitioners who can calculate risk, make informed decisions, evaluate markets and understand market trends. The focus is now on proactive procuring, cost transparency, cost avoidance, procurement risk mitigation and management, and efficiency improvement.

Procurement also focuses on the total value delivered, including supporting revenue goals, reducing total cost of ownership (TCO), and improving quality and integration of supply. These elements will not necessarily translate into cost savings for a finance professional, nor make perfect sense to a person in any other department for that matter.

As a result, the development of Chief Procurement Officer (CPO) positions should be taken seriously. CPOs should be given the opportunity to align procurement strategies with organisational strategies. CPOs can unlock value, maintain stakeholder relationships, improve policies to address procurement compliance, and automate processes to move knowledge to systems.

CPOs should report directly to the Chief Executive Officer (CEO) because a CPO's mandate will always have the organisation's interests at heart.

Developing the right talent and skills
To enable procurement practitioners to achieve the above, earn the trust of other business functions, collaborate with suppliers and internal clients, and position themselves as organisational influencers, they must develop sharp soft skills. Influencing people will not be successful through procurement's 'hammer'.

Of course, developing soft skills should be over-and-above the development of academic or professional qualifications, which, too, must be accelerated in organisations so that current employees in buying positions can understand why they should be transforming from reactive buying to proactive sourcing and an understanding of TCO.

There are many soft skills that will make procurement's hammer more personable and will encourage stakeholder engagement and collaboration. Some of the important soft skills include:
- Design thinking refers to forming your judgements about procurement solutions through the lens of technology. Technological advances move knowledge from individuals to systems. This improves efficiencies and replicates solutions effortlessly.
- Accelerated thinking means allowing yourself to think fast, develop and test hypotheses, fail fast and consider failures as a learning curve. In this regard, procurement is too process-driven.
- Listening and interrogating actively even during negotiations. Sometimes customers offer a little more but procurement professionals fail to pick that up quickly enough to adjust to a win-win situation.
- Negotiation skills have changed from merely focusing on price reduction. Price reduction might equate to compromising on quality. Learn to not bully suppliers. Get the best from a supplier whilst offering the best of yourself to optimise value as well as the relationship.
- Imagination and innovation mean that not everything should be an RFx. Procurement professionals need to start thinking deeply and start understanding clients and suppliers.
- Relationship management asks that you treat suppliers like real stakeholders and understand supplier capacity and capabilities. Choose strategic suppliers and nurture them.
- Financial acumen is the ability to apply a broad understanding of financial management principles and other quantitative information to ensure that decisions are fiscally responsible and based on your procurement budget.
- Analytical skills refers to a set of abilities used to visualise, articulate and solve complex as well as uncomplicated problems. It is the successful use of available information to make informed decisions and is vital when evaluating and selecting reputable vendors.
- Technological thinking is the ability to apply and improve on extensive or in-depth specialised knowledge, skills and judgement, by assessing and translating information technology into responsive and effective procurement solutions.
- Results-motivated refers to an ability and drive to achieve and surpass targets set against internal or external standards of excellence. This is about showing a passion for improving the delivery of services with a commitment to continuous improvement in your procurement process.
- Professionalism is the ability to think carefully about the likely effects on others of your words, actions, appearance and mode of behaviour. Professionalism always delivers the desired results.

Procurement's history flows from business operations. However, today it has evolved into a collaborative function that enables businesses. Some businesses see this, others don't. If procurement pushes an organisation to see it as a collaborative partner, then it must be ready for the organisation's expectations to change to supply chain innovation and to assist the organisation to understand demand as well as the market.