Media News Group Chief Procurement Officer Jeff Ball discusses how to elevate procurement strategically in the enterprise through Zero-Based Budgeting, Driving Cash Flow, Strategic Sourcing, and Partnering with the CFO. 

Jeff Ball is the Chief Procurement Officer of private equity backed Media News Group (also known as Digital First Media), one of the largest publishers of locally based print and online media in the U.S., and the third largest newspaper group in the country.   Jeff has deep experience in supply chain, procurement and strategic sourcing from his time at 21st Century Fox, News Corp, KPMG and Mitchell Madison Group.  Heis a strong advocate for zero-based budgeting as a critical component to a tactical procurement and sourcing strategy.

The following interview with Jeff Ball was conducted by Nikesh (Niki) Parekh, CEO of Suplari, the leading spend analytics and insights platform for modern procurement teams.

Nikesh Parekh: Tell us a little about your journey into procurement and why you’re so excited about “elevating the procurement function?”

Jeff Ball: I took a circuitous path into procurement. I had worked for a strategy consulting firm called Mitchell Madison, which was founded by some former McKinsey and BCG partners. That firm had a strong focus not only on strategy consulting, but on cost takeout reengineering — something called “latent value engineering” and a lot of strategic sourcing. So, above and beyond the typical strategy consulting projects one might find themselves participating in, there was a strong cost reduction effort to source a procurement component to a lot of the work I had done. So, as a result, I was introduced to a client, namely Rupert Murdoch at News Corporation, who would ultimately become my employer. My firm was asked to help them with the freight and distribution of global freight and distribution cost study, which led into some similar work looking at all the companies I spend across the globe, which in turn led to my helping to come build out a procurement capability, along with another individual named Joe Burke.We created the strategic sourcing and the global sourcing function at News Corp that ultimately was responsible for some five or six billion dollars in annual spend and revenue.

Nikesh: How would you differentiate your approach to procurement from the typical CPO?

Jeff: I emphasize the “and revenue” part because that’s where my approach to the function tends to differ from, I think, a lot of folks that are in this space and work in procurement or purchasing in that I have for many years now been involved in as many revenue generating activities and investment activities as I have been in what one might call a pure play for experiment work like strategic sourcing or supply chain management. 

I very much endorse the view that elevating the procurement function means creating a Venn diagram of sorts in which you map your companies or your employers’ strategy onto the strategies of vendor ecosystems and key strategic partners. And in that process, you identify unique and diverse opportunities to grow revenue in an ancillary manner, to look for investment opportunities and to cultivate joint ventures and broker key relationships between their respective companies. 

When you do that and you work in that capacity and you grow the top line, in addition to performing your job very surgically, very analytically and in a very data driven manner — those elements taken together are what get you a seat at the table, and that is what elevates the procurement function.

I’ve always believed that getting goods and services quickly, cost effectively and efficiently into the customer’s hands at the right moment is one’s day job as a CPO. That’s what you’re supposed to be doing. Those are the tactical elements of the role, increasing quality and product attributes. Those are all well and good and an important part of the role. But those are just expected. 

What gets you a seat at the table? What gets you noticed at the board level is exploiting the fact that as a CPO, you are uniquely positioned in the company because you touch more internal and external constituents in your position than anyone else in the organization to drive those latent opportunities. Those revenue opportunities that you might not have even thought existed before. So, that is what continues to excite me about procurement. And I proselytize about this at the various Marcus Even summits and other other types of venues. 

But what excites me about the function every day is something is always different, something is new. One day you’re talking about something very tactical. The next day you’re talking about something very strategic. And that really keeps me energized.

Nikesh: Where do CPO’s fall down? How does a CPO go from being process oriented or transactional savings oriented to actually being strategic and a true executive at the company?

Jeff: I think you get the seat at the table by taking advantage of your position and working with the vendor and leveraging the vast amount of spend that you command and brokering those relationships, writing contractual clauses that actually stipulate that you will have meaningful escalation contacts across different functional areas, not just in the supply chain or in the account management team. So that helps you elevate the strategic sourcing function to a large degree.

I think CPO’s stumble not only because they fail to exploit the opportunities I just outlined, but because in many cases folks are unable to draw a direct line from their activities, their projects, their studies into the company’s financials. And when I say direct, I mean direct. When I undertake a project, I make sure that project is reflected in our company’s financials. If it’s an opex project, then it is getting reflected in the income statement if it’s related to cash flow. That’s reflected in the cash flow statement. If it’s a capex project that gets reflected in the balance sheet, then it gets reflected in everybody’s budgets. So we’ve been undergoing a zero based budgeting initiative across our company. Any time we do a project, if we say that we’ve done X, Y and Z and reduced someone’s operating expense by amount A, B and C, then it’s immediately recorded and reflected and part and parcel of the overall zero based budgeting process. So what is going to get directly translated into the financials? 

A lot of folks, I believe, will want to study a sourcing event and say, “I just saved the company 10 million dollars. Isn’t that great? Look at these vendor projections based on historic spend that are very retroactive or backwards looking. And can’t you see how I’m going to attain this economic benefit?” Many times that economic benefit is never manifested in the financials because there isn’t that linkage, because folks have taken a backwards looking approach, relied on vendor data or historic information to make assessments about what future savings projections are going to look like. You have to zero base the efforts and zero base the projects. Yes, historic spend is important to understand what the price (P) looks like in the total (P x Q = total cost) equation. But at the same time, you can’t just say that on a run rate basis based on historical spend. I believe I’m going to save 10 million dollars and get anybody to really believe you until it’s ultimately reflected in the financials. So those two things taken together, I think, is where folks have a tendency to stumble in elevating.

Nikesh: Can you just walk through just at a high level what is zero based budgeting?

Jeff: There are a lot of different definitions out there and a lot of different consulting firms that will try to sell you different types of engagements. There are two ways to look at it. You can say zero based budgeting is looking at every single line item in every single budget across your clusters, across your functional areas, your properties, and scrutinizing them. And we’ve done that. Believe it or not, it’s very painstaking. But I posit there’s another way to look at this. And the way that you do that is to, I don’t use the phrase blue sky, but to step back and you say, “Okay, if I were (in my case), building a newspaper company, newspaper, holding company and digital advertising agency, what would it look like? What should it look like?” And then from an outside-in perspective, that fresh perspective starts to build up your budgets. And we did the former approach and we saved, I think, some 36 or 37 million dollars on our first go around. So now we’re zero basing the organization, not just budgeting zero, but basing revenue, supply-chain, organizational structure, vendor ecosystems, everything. And that means stepping back and saying, “Okay, what is the ideal state? Where is the company headed? Where does it want to head? What are its sustainable, competitive advantages that can be exploited? What are the impacts on the customers?” And then tracing the answers to those questions back into building out a budget and actually building a company from the ground up. That is true zero based budgeting. 

It reveals amazing insights. It’s a hard process, to be sure. But again, it gives you that fresh perspective instead of just saying, “well, I’ll benchmark myself against my peers or I’ll put myself in the top quartile or the top quintile.” That’s great. That’s just so far. That’s not going to take you to the next level.

Nikesh: Tell me a bit about how you and the CFO got involved? How do you, in procurement, get involved in budgeting across the company?

Jeff: I sit in every budget meeting with every cluster and every functional area. And, to the extent that I’m co-leading the zero based effort with the CFO, we actually break down all the company’s expenses into 14 different categories and provide targets to the category owners in the clusters so they can build out their budgets accordingly. Now, despite everything I said about revenue before, I don’t really help build the revenue portion, the toppling portion of anyone’s budget unless I’m working on a project and I have input into that top line budget from a zero based budgeting perspective. I’m involved in the expense side and the cost side of everyone’s budget. We provide guidance on what we think newsprint spend is going to look like,  what IT spend is going to look like, what legal spend and so on and so forth in every category. And then we sit down in the budget meetings and review every single line item to make sure that input is reflected in everyone’s budget. So, I’m probably more involved than I even want to be, but I would say that in jest. I’m glad that I have that seat at the table, because otherwise you’re going to miss opportunities if you’re not in the budget meetings.

Nikesh: I can imagine that many budget owners do not want procurement involved in their budgeting.  How do you manage that dynamic?

Jeff: I think it goes back to your question before about how the function gets elevated. If you can show your value, if you involve all your stakeholders in the strategic sourcing process and you show them the tool kit that you’re bringing to the table, your negotiation skills, your ability to build a synthetic bid or reverse engineer an industry’s cost structure — that’s adding to value and you’re helping them understand the industry from which that widget comes and create transparency in that industry so you can get the best product at the best price for all the attributes you want. That’s point one. And then point two is helping those teams understand the economic tradeoffs of the decisions they’re making about said product and service attributes. 

Everybody wants the Cadillac product and I understand the need to scan the horizon and look for new and exciting companies to stand a reasonable chance of becoming de facto standards and industries in which they’re participating. But you can’t get distracted from the message, from the ROI and putting an ROI on those attributes so that you can show the team that, you know, if you want the Cadillac, it’s going to cost you ten thousand dollars more than the Volkswagen. And what are you going to get for that? Ten thousand dollars in the Cadillac in return? How is that going to manifest itself again in our economics? So do you help them in that way? You involve them along the way and that way you become a part of the management team.

You convince them with data, you convince them with facts and a logical approach to the function.

Nikesh: Let’s talk a little bit about your relationship with the CFO or with the COO. What is the division of labor between you and the CFO, and how have you gone about really developing that relationship where procurement and Jeff Ball are the people to call on when there’s no savings needed or cost takeout or cash flow optimization required?

Jeff:  Seriously delivering value and showing the CFO and all the divisional CFOs how value is delivered and how it’s tracked and showing people the results of my methodology and showing them that if you take a measured approach and analytical approach, a data driven approach to managing the function, you’re going to get in many cases double digit returns as opposed to this three bid and buy approach to procurement purchasing, which is anathema to me. You can do that in certain areas that are not strategic or you just don’t have the time or the bandwidth to source this event properly.  But if you’re talking about a multi-million dollar spend category, then you need to take a very measured analytical approach to that particular study. So that’s the division of labor. Certainly, you know, I manage from a vendor perspective and expense perspective. The CFO has FP&A,  tracking revenue, and financial reporting to worry about. So I manage expenses for him.

See how you can implement Jeff’s strategies and elevate procurement in your organization using Suplari’s state-of-the-art spend analytics and insights platform. Reach out now for a free demo!