Global research reveals procurements internal comms crisis
The international study explores the attitudes and opinions of procurement decision makers across four main themes The New Role of Procurement, External Threats, Procurement Technology and The Future of Procurement.
The first set of results released looks at internal challenges and the new role of procurement, covering misaligned KPIs, lack of internal engagement, capacity issues and skills gaps.
Despite the now wide ranging responsibilities of procurement decision makers, 47% name & lsquo;cost savings realised’ as their number one KPI. The top four KPIs listed are all cost related. CSR/Sustainability impact, by comparison, is ranked as the least important at just 1%.
Chirag Shah, executive director of Xchanging Procurement, commented, “These results strongly indicate that there is a problem with the current KPI structure. Procurement teams are responsible for many business critical functions. From risk management to sustainability impact, procurement is engaged in activities that far surpass its cost-cutter legacy. The metrics against which organisations track procurement’s performance do not line up with what procurement actually delivers.”
Lack of Internal Engagement
63% of procurement decision makers globally identify & lsquo;internal stakeholder engagement’ as a challenge, with 14% claiming it is as an extreme challenge.
Shah said, “Procurement’s strategic capability isn’t being understood and because of that, it isn’t appropriately valued. Not only is this causing problems for procurement performance, it is also restricting business success by not engaging with the procurement team and fully understanding what it can deliver as a strategic partner, companies are limiting their potential for growth.”
CPOs clearly feel more internally valued than procurement middle management 60% of CPOs feel that porcurement is a C-level priority in their organisations compared to 37% of procurement middle managers.
Shah added to the research findings, “There is a perception gap between those doing the day job and those representing procurement at an executive level. It’s up to CPOs to cascade what is being discussed among senior stakeholders down to their staff.
“To improve internal engagement, and properly communicate the value of procurement, procurement departments need to consider tactics such as introducing governance boards, using score cards to track deliverables, leveraging analytics and reporting tools to demonstrate results and even re labelling team members with non-cost centric job titles that relate to their roles, for example & lsquo;Risk Manager’ or & lsquo;International Consultant’”.
80% of procurement decision makers identify & lsquo;procurement team time pressures’ as a challenge, and 20% as a major challenge – implying that the majority of procurement departments are facing major capacity issues.
Surprisingly, in comparison, & lsquo;talent shortage’ is considered an operational challenge by far less respondents, with 59% citing it as a challenge and only 12% as a major challenge.
The number citing talent shortage as a concern drops to less than half (40%) when asked if it’s a problem for the industry as a whole.
On these findings, Chirag said, “If you were to go by media headlines and conference topics over the past few years, you might well think that talent shortage was the only problem plaguing the procurement function. Whilst our study confirms it’s still an operational challenge, there is a much bigger issue found in the form of & lsquo;team time pressures’. The main problem isn’t lack of available talent but rather insufficient capacity within procurement.
“As the procurement team’s role within the organisation expands, its resources are stretched thinner. This issue is once again caused by the general lack of understanding of procurement activities. Not comprehending all that procurement does means companies are not providing the right level of resource. CPOs need to get better at communicating their growing remit to the wider organisation in order to gain access to additional resources. They also need to look at outsourcing non-strategic procurement tasks to free up time and improve productivity, or use flexible offerings like PaaS to manage short-term capacity issues.”
The skills considered most important for procurement professionals are & lsquo;relationship management’ (88% consider important, 59% very important) and & lsquo;negotiation skills’ (88% and 58%).
Significantly, these are also the areas where procurement decision makers identify the greatest gaps in skill set provision around a quarter cite & lsquo;relationship management’ (26%) and & lsquo;negotiation skills’ (23%) as areas with the greatest gap in skill set provision. 23% also name & lsquo;project management’.
Chirag commented, “As procurement evolves, and responsibilities broaden, the procurement professional must adapt. New capabilities are required of modern procurement teams, which has caused a number of gaps in skill set provision.
“Acknowledging that there is a skills gap is the first step in filling it and identifying relationship management as the most crucial gap – four places ahead of & lsquo;financial acumen’ and seven places ahead of & lsquo;category management’ – signifies the shift in procurement’s role. Procurement decision makers understand that the function is moving away from solely cost saving tasks and toward a more strategic partnership model, and realise that they may lack the skills required to make that transition.”
Surprisingly, & lsquo;aptitude for technology’ only ranked as the sixth greatest skills gap.
Chirag said, “This is most likely due to the fact that procurement decision makers do not yet realise how imperative being able to use these new tools will be to the success of the industry. The US is ahead of the curve in terms of recognising where procurement is headed and planning for that future.”
US procurement decision makers are almost twice as likely, compared with their European counterparts, to identify & lsquo;relationship management’ as an important skills gap (31% versus 17%), and more than twice as likely to list & lsquo;aptitude for technology’ as a skills gap (55% versus 23%).