This is the second post in the series I’m a New CPO; Now What?
In our first post, we discussed the importance of understanding the business culture, its priority requirements and all of the associated internal and external stakeholders with whom you will be dealing.
Now it’s time for you to assess and understand the relative maturity of the procurement function you inherited.
Areas for consideration of assessment include:
- People & Organization
- Systems & Technology (Often categorized as “enablers”)
- Strategy & Policies
The key question that you must answer in your assessment is what are the specific gaps within your organization and from what maturity level (Beginner to Best in Class) are you starting? Knowing where your team’s strengths and weaknesses are, and having a clear line of sight on the gaps and when and how to fill them is essential. You are more likely to gain investments into the gap areas if you have a clear understanding of what stage you are in.
The following five category levels will help with your baseline:
|Level 5||Best in Class||Organization is creating and driving value for the business|
|Level 4||Leader||Actively managing, controlling and continually optimizing standard processes|
|Level 3||Competitive||Standardized documents and process utilized across the organization|
|Level 2||Basic||Encouraging discipline and increasing the repeatability process|
|Level 1||Beginner||Activities are ad-hoc and performed in a uncontrolled and reactive manner|
I’ve found over the years that assembling a Procurement Maturity Assessment (PMA) tells me everything I need to know to get started down the path of baselining a procurement organization. PMAs are broadly available from procurement industry professionals. The questions below will assist you in building a framework that most PMAs will help you assess. Spending time answering these and like questions will help you build a path forward in developing your organization’s People, Systems, Processes and Strategy.
- People and Organization:
- How specifically are you attracting internal and external talent to your organization?
- What actions, development plans and opportunities are being taken to retain that team?
- Do you have a detailed succession plan across the senior and mid-level leadership and management team?
- Are you confident that you have the right people in the business today and if not, what actions need to get there in the future?
Establishing the right organization size and structure with the correct skill and capabilities is critical to achieve Best in Class maturity
- Systems and Technology:
- Describe the level of procurement process automation within your business (spanning but not limited to source-to-pay/procure-to-pay, Category Management (CM), Supplier Relationships Management (SRM), Spend Management, Spend Analytics and eRFx platforms.
- How do you ensure that you have the most up-to-date version of your third party spend, all categorized within a structured format?
- Does your team know how to evaluate and benefit from artificial intelligence in the business processes?
- Describe the steps your team has in place, and that you have taken to adopt a customer centric view and involve your customers (internal/external) in the design of these procurement processes and systems.
The availability, transparency and insights into your data is a key enablement of processes and compliance procedures.
- Processes – Spend Under Management (SUM); Supplier Relationship Management (SRM); Category Management (CM); S2P/P2P; KPIs
- How much of your spend is managed through category management (CM) and strategic sourcing processes, with a competitive sourcing process mandated?
- Describe how your key strategies per category are defined, including their specific measurable KPIs.
- How much of the organizational spend does procurement influence, and does procurement intend on increasing their level of involvement and influence?
- How are procurement benefits tracked within and across the business?
- How are the benefits captured, realized and reported within the organization (specifically in Finance)?
The existence and efficiency of support process are a must to enable on-going optimization and business impact.
- Strategies & Policies
- How is your procurement policy used to drive behavioral change throughout the organization, and how are you monitoring its effectiveness?
Your strategy is driving direction setting and governance while assuring you are meeting all regulatory requirements.
Giving thought to the above will set you up for success and will help complete your initial understanding of the business. Now that you have focused your first few weeks on understanding your way forward and assessing your team, internal stakeholders/partners and external suppliers, we will look next at how you might manage your way forward in the development and execution of your new procurement strategy.