In 2019, the duties of the Chief Financial Officer (CFO) continue to expand, straddling the traditional areas of financial stewardship and the more progressive areas of strategic and business leadership, while frequently including direct responsibility for certain business functions. This significant, role-based expansion is perhaps best-evidenced by the “CEO-in-Waiting” status that many CFOs now appear to hold. However, the CFO’s ascendancy to the top role is far from guaranteed. CFOs must possess more than just outstanding financial acumen and an ability to deliver consistently strong financial results; they must be able to match their financial prowess with strong strategic and operational management. To gain standing in the public and private markets, CFOs must be able to shape and communicate the enterprise’s strategic vision and clearly link it to overall performance numbers and results. For them to establish trust and credibility with line of business executives as both an operational and strategic leader, the departments under the CFO’s own purview must be well-oiled machines that drive value and support key business objectives. In this context, procurement can play an important role in aiding the CFO’s efforts.
The CFO-CPO Alliance
The role of the Chief Procurement Officer (“CPO”) in the average enterprise, like that of the CFO, has evolved substantially over the last fifteen years, gaining greater influence over a wide range of business processes, business relationships, and business results. And, while the role will continue to rise in strategic importance in the years ahead, the fundamental priorities and duties of CPOs today make them natural allies of the CFO in the battle to control costs and protect profit margins. The CPO-CFO relationship is also strengthened by the fact that the CPO reports to the CFO (32%) more frequently than any other role.
Best-in-Class CPOs and procurement teams manage more enterprise spend than their peers and they do it more efficiently and more effectively. These leaders think about their processes more holistically and utilize technology to a much greater degree. As a result, they are able to drive superior visibility, collaboration, compliance, and performance. They have also shown that investments in improving their internal systems, processes, and staff, and enhancing external relationships with key partners are proven paths to better performance. CFOs would be wise to strategically partner and align with CPOs and their teams to leverage the value that procurement can provide to the organization, as a whole, and to finance teams, in particular. The value that procurement drives may not always been seen, but it can be felt; and it should be maximized for superior gains.
Recommendations
For CFOs interested in helping procurement optimize spend management, Ardent Partners offers the following recommendations:
- Offer clear and direct support to the CPO in a way that empowers the procurement organization to fully engage the business and execute its strategic plan.
- Meet regularly with the CPO to ensure that procurement’s priorities and investments are aligned with those of the executive team.
- Support and sponsor investments in technology solutions that enable the procurement organization to scale its expertise and operations across the enterprise and improve its overall performance.
- Collaborate with the CPO to develop a balanced approach to evaluating the procurement department’s performance that incorporates a broad range of clearly-defined and regularly-reported metrics.
Final Thoughts
The benefits from a high-performing procurement or spend management operation are constrained without a strong partner in finance to validate results and help bring the fruits of procurement’s labor to bear. Likewise, leading CFOs cannot reasonably stake a claim to their own department’s operational excellence if they leave an important function like procurement to its own devices. CFOs that invest in automating and generally enabling procurement departments to improve performance do themselves and their enterprises a serious favor, and stand to consolidate financial and operational gains made by CPOs and their procurement teams across the enterprise. Separately, they are powerful and influential business leaders; but together, they are stronger and have greater potential to take their enterprises to the next level of performance.
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