Benefits of Procurement sitting on the board
At waste management company Biffa, Procurement has moved beyond a transactional function to deliver broader business management.
Should procurement professionals be representing their function directly at boardroom level?
The answer ultimately depends on the nature of your company and its industry. There may be a need for the CPO to be on the board, or at least to have ad hoc or regular exposure, if, for example:
- you are a manufacturing company in which the supply chain is crucial for your ability to do business
- your production fully relies on receiving raw materials and assemblies from your suppliers
- your external spend represents the biggest part of your total spend.
Steve Jones is Group Procurement and Property Director at waste management company Biffa. He counts himself fortunate to have started his procurement career at Black & Decker, an acknowledged leader in developing procurement into a front line role.
At Biffa, Jones has taken an ‘old style’ transactional purchasing department buried within the finance function and built a new strategic team with a seat on the executive board.
Building upon the initial procurement success, he was given the property team with responsibility for some 250 properties where, he says, “we did a great job at the traditional technical things like planning, and keeping everyone compliant, but they didn’t have a commercial dimension to property management which we have now added”.
My being on the board gives my guys more of an open door – it’s harder if you have to rely on the chief financial officer to open doors for you.
The inclusion of property in a procurement portfolio illustrates one of Jones’s firm beliefs. Far from being a narrow transactional function, his procurement team offers a much broader perspective.
“Yes, we develop and execute procurement strategy, but we also operate as broader business managers, dealing with multifunctional and multidimensional aspects of the business relationship with internal and external stakeholders,” says Jones.
“We are involved at all stages to achieve quality and value and to ensure the company understands the total costs and risks of ownership.”
Cash is king
Burying procurement one or two functional levels down perpetuates the idea that it is all about price. Interestingly, Jones maintains that oft-criticised venture capital owners may be more attuned.
“They are all about stakeholder value, and that creates an inherent mandate for procurement. Alongside cost reduction, one of their key priorities is cash generation, which, by its very nature, places procurement and what we can deliver high on their list of priorities.”
Jones acknowledges, however, that many companies are trying to build smaller, more dynamic boards, which can make it difficult for procurement to break through.
But procurement needs stakeholder – including board – engagement, says Jones. “My being on the board gives my guys more of an open door. It’s harder if you have to rely on the chief financial officer to open doors for you. We’ve convinced people that we are there to help them get more value from their budget, not to take it away.”