In this smoking hot economy, workers are moving to greener pastures extremely quickly. \u00a0And procurement leaders are no exception.<\/p>\n
It\u2019s been a great time for procurement professionals to climb the corporate ladder into CPO-level roles. \u00a0But the uncomfortably fast pace of this upward mobility means that a portion of CPO positions are being filled with individuals who are perhaps a little less awesome than a board of directors would like.<\/p>\n
This is apparent when one evaluates the procurement priorities of the newly-minted procurement leaders. \u00a0Too often, executives-on-the-rise enter their new leadership positions with procurement priorities already in mind a couple of weeks before they take the helm. \u00a0While one may admire the fires in their bellies, there\u2019s a rule that they violate by predetermining their procurement priorities.<\/p>\n
That rule is: \u00a0Procurement priorities should mirror organizational priorities.<\/p>\n
And, sometimes, it is impossible to get a true feel for organizational priorities in the recruiting process alone. \u00a0One has to be on the job. \u00a0In strategic planning meetings involving the organization\u2019s highest-level decision-makers. \u00a0At the hip of the CEO.<\/p>\n
And while one may believe that any good procurement work is generally good for business, the truth is that good priorities in one context may conflict with other priorities in a different context.<\/p>\n
Let\u2019s take a look at some different types of organizations and what their typical organizational priorities are\u2026<\/p>\n
For-Profit, Privately-Held Companies.<\/strong> \u00a0In for-profit, privately-held companies, the priority is usually profit. \u00a0Maximize profit and you are serving the company. \u00a0Even if the owners of the company have the long-term goal of having the company be acquired, acquisition offers are often calculated as a multiple of profit. \u00a0However, be aware that there are exceptions. \u00a0Sometimes, a company is not acquired for the profit that it can add to the new owner\u2019s portfolio, but for the capabilities<\/em> it can add to the new owner\u2019s portfolio. \u00a0Whether it\u2019s a industry-best technology or intellectual property or some other acquisition bait, be aware that maximizing profit is not always the owners\u2019 priority. \u00a0Sometimes, the only way to know that is by working with the owners over a period of time. \u00a0They are unlikely to trust interview candidates with the secret that they are looking to sell the company.<\/p>\n Publicly-Held Companies.<\/strong> \u00a0The organizational priority for publicly-held companies is usually maximizing stock price. \u00a0Owners\u2019 and Investors\u2019 net worth is either increased or decreased by the direction that stock price is going. \u00a0Because executive compensation in these types of companies is partially comprised of stock and stock options, how much the CEO, CFO and other executives earn is dependent on stock price. \u00a0Therefore, employees must work towards the goal of increasing the stock price. \u00a0Stock price\u00a0can be based on profitability. \u00a0But, in some circumstances, it can be based on other things that can wildly range from website visitors to number of app downloads to registered users to whatever. \u00a0So, it is important for the new procurement leader to understand the organization\u2019s view of what drives stock price. \u00a0Only then, can the leader set appropriate procurement priorities that support stock price maximization.<\/p>\n Not-For-Profit Organizations.<\/strong> \u00a0In \u201cnon-profits,\u201d priorities are much different than in other types of organizations. \u00a0Doing the best job possible at fulfilling the mission is the measure of success. \u00a0I mentioned conflicting priorities earlier. \u00a0Non-profit procurement represents the most extreme opportunities for conflicting priorities. \u00a0Imagine a non-profit dedicated to serving veterans. \u00a0One of the core components of this organization\u2019s mission would be to purchase goods and services from\u00a0veteran-owned businesses to the greatest practical degree. \u00a0So, if you\u2019ve been used to working in an organization where cost savings was the modus operandi<\/em> of procurement, you may have a hard time digesting a decree to spend 20% more than market price simply to use a veteran-owned business. \u00a0But doing so is part of the mission. \u00a0The only argument that you may have may be that the money saved could be used to more robustly fulfill other parts of the mission, such as feeding homeless veterans. \u00a0But, then, you may hear an argument that so many veterans wouldn\u2019t be homeless if there were more organizations that mandated that a certain percentage of spend be directed to veteran-owned businesses. \u00a0I know that\u2019s a lot of detail for an example. \u00a0But I think it truly illustrates the complexity of organizational priorities and how aligning procurement priorities isn\u2019t as easy as it may sound.<\/p>\n When you have a firm grasp of organizational priorities and then set procurement priorities accordingly, the next step is to ensure that you carefully select metrics that guide procurement behavior properly. \u00a0I hope to elaborate more on that aspect of procurement priorities in a future post.<\/p>\n","protected":false},"excerpt":{"rendered":" In this smoking hot economy, workers are moving to greener […]<\/p>\n","protected":false},"author":12,"featured_media":4032,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3584","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"\n