When asking the question ‘Are procurement objectives, aligned to those of the business, critical to the success of any organisation?’ you may be inclined to think the answer is ‘no’. The reason for this is the significant number of organisations that either have no clear procurement objectives or, at best, have some, but their procurement functions are siloed and distinct from the core business.
Our research in the Transformative Procurement Survey demonstrated that only 6% of organisations had a developed procurement vision and strategy which was fully aligned to all short and long-term business objectives. This may seem alarmingly low, but when you separate functional objectives from those specific to the business, think about your business – do you actually have procurement functional objectives that are aligned to the vision of business itself? If you do, recent data including our own research suggests that you are in a minority of UK and European businesses.
Perceptions do differ in relation to the appropriate approach to formulate and align corporate direction of travel. These do however largely coalesce around the facts that your functional vision and strategy must align to the corporate vision (which should align to the corporate mission and values) and must also drive functional objectives and, subsequently, functional tactics.
So what can an aligned procurement vision and strategy ultimately do for your business?
The simple answer is that it provides the guiding ‘north star’ for procurement activity and directly and positively impacts an organisation’s profitability. However, it is much more than that.
Having a procurement vision and strategy aligned to functional objectives will help:
- proactively bridge the present and the future,
- establish a standard of performance for the function,
- define the unique selling points of a business,
- motivate and empower employees,
- drive aligned goals and objectives throughout the function ensuring everyone within the team is engaged and pulling in the same direction,
- team members decide ‘what to do’ and ‘what not to do’ and mobilises them into action,
- paint a picture of the future organisation,
- and very importantly, it can help create a strong team ethos.
With these benefits being attained, it will not come as a surprise that organisations who are able to link their vision, strategy and objectives generally are more operationally and commercially successful, with a stronger leadership and workforce, than those that don’t. In so doing, the organisation is able to instil a clear focus and ultimately a sense of achievement that, in turn, motivates and consequently enables their people to continuously seek to achieve more and more.
This is supported by the research in our Transformative Procurement Survey, which highlighted that a significant proportion of organisations possessed a procurement vision and strategy with no or limited alignment to business objectives. While these organisations all achieved very low levels of cost savings and value benefit, those with full alignment of vision and strategy to short and long-term business objectives all achieved well over 10% savings.
So is it possible for a procurement function to deliver its objectives without a procurement vision and strategy?
Well, yes in theory it is. This can be achieved by focusing on and delivering high standards in the individual fundamental components of a procurement function e.g. supplier management, category management and cost management. Assuming that the function also has the support of its key stakeholders (who are aware of and deliver against their roles and responsibilities), that they are leveraging appropriate technology and gathering and proactively analysing procurement data, then it is likely that objectives can be delivered.
This, however, does not mean that the objectives delivered will not be at a tangent to those required by the business vision, should one be in existence e.g. procurement objectives focused on cost reduction whilst the business vision is seeking product/service innovation, requiring higher cost creative solutions in the supply chain. Should this be the case then, at best, the efficiency and commercial effectiveness of the department will be compromised and, more often than not, the department can create meaningful drag against the positive forward movement of the organisation.
As a general rule, where strategic direction and clarity of vision exist within an organisation and are aligned throughout its functions, then that business is far more likely to outperform those where they are not. Of course, there are other factors that will help drive this output, but consistent clarity of vision and strategy can act as the rallying point to enable many other factors to come into play. Its importance in today’s business climate, therefore, cannot be overstated.
So if you are one of the significant majority of European businesses that do not have procurement objectives that are aligned to the vision of the business itself or you simply do not have a business vision and strategy, we can help.
To be successful, a vision and strategy must be tailored to the unique needs of an organisation. That’s why 4C Associates approaches every project with a flexible and customised methodology, working closely with our clients to understand their goals and challenges. A well-designed corporate vision and strategy is essential for an organisation’s success, and we are committed to helping our clients develop and implement strategies that drive impact and deliver results.
In a highly uncertain world, looking retrospectively to improve procurement functionality will not be sufficient. If you would like to understand more about 4C’s transformation services and/or want to review our 2023 Procurement Annual Survey on The Case for Change, please contact Jonathan Williams or Paul Ireland.