Our site uses cookies

I agree Our site saves small pieces of text information, called “cookies” on your device. Find out more in our cookie policy. You can disable the usage of cookies by changing the settings of your browser. By continuing to browse the site you are agreeing to our use of cookies.

Why Procurement 'doesn't need to be on the board'

Words: Pablo Borrego
A first-hand account of why, at Lloyds Banking Group, when Procurement was tasked with finding £600 million of savings, being on the board would have been a waste of time.

The value a company places on procurement clearly reflects the latter’s performance, and vice versa.

A positive relationship with senior executives and board members will allow and encourage procurement to play a full strategic role in adding value. But that level of communication is not necessarily best achieved by seating procurement at the boardroom table, explains Michael Whitby, Group Sourcing Director at Lloyds Banking Group.

Whitby joined the bank in 2011, a month before a new CEO. He was told that the entire £11 billion budget was ‘in scope’ and, of that, £5 billion was expenditure with third parties – “in other words, half the cost of running the bank could be addressed by cost management and sourcing.”

Finding the balance

Lloyds were looking for £2 billion of savings, of which sourcing would deliver more than £600 million. However, Whitby, who does not sit on the board, says that it is “a complete misnomer” that procurement needs a place in the boardroom.

“In most of the businesses I’ve worked for, procurement is a key function that adds value, but it’s never going to sit on the board.”

Whitby argues procurement has the right role at Lloyds. “We give and gain visibility each month at the Group Executive. I have interaction and clarity with each business director and we are delivering the numbers.

Clarity of delivery and significant influence on how goods and services are acquired has led to the Group making significant further investment in sourcing, at a time of pressure on budgets.

Michael Whitby, Group Sourcing Director at Lloyds Banking Group

“Clarity of delivery and significant influence on how goods and services are acquired has led to the Group making significant further investment in sourcing, at a time of pressure on budgets.

“From the start it was clear that a major part of the savings would be reinvested in new opportunities and the reduced cost base. Each of the businesses is trying to take out bad cost and reinvest in new channels and new capabilities.”

But would it be helpful to Whitby to be on the board? “It would probably be a hindrance, spending time on stuff I don’t need to. I’ve not lacked any sponsorship, and the quality of the team has opened the doors we need to walk through.”

Contact our expert

Pablo Borrego Principal

VIDEO: The CFO's role in unlocking the value in procurement
Video
VIDEO: The CFO's role in unlocking the value in procurement

As part of 'The Future of the CFO' series published by Business Reporter, Alex Klein, COO of Efficio and Carl Barnes, CFO of the Academic Publishing division at Informa discuss the role of the CFO in unlocking the value of procurement.

WANTED: Proactive CFO to optimise procurement and drive cost savings
Insight
WANTED: Proactive CFO to optimise procurement and drive cost savings

Maximising profitability, reducing costs and managing financial risks are key to the role of the CFO. Yet some CFOs are missing savings opportunities.

M&A procurement: How to achieve synergy savings post-merger
Insight
M&A procurement: How to achieve synergy savings post-merger

After a merger or acquisition all eyes are on procurement to deliver short and long-term cost savings. So how do you turn M&A promises into action?

Will private equity portfolio procurement catch on in Europe?
Opinion
Will private equity portfolio procurement catch on in Europe?

How can Europe’s private equity houses replicate the same level of success as US models of portfolio procurement?