How Diageo built a 'One Procurement Community'
Former Diageo CPO Thibaut Eissautier discusses leveraging scale with local market agility, recruiting a diverse workforce and building a single global procurement community.
Diageo was formed in 1998 following the merger of corporate giants Guinness PLC and Grand Metropolitan PLC
This brought together a diverse collection of fast-moving consumer brands including Häagen-Dazs, Burger King, Old El Paso, Pillsbury, Guinness, Johnny Walker and Smirnoff.
Over the last 17 years the company has honed its offering through multiple disposals and acquisitions, and now sells its products in over 180 countries and has offices in around 80 countries, employing 36,000 staff.
Scale and agility
Crucial to operating in a complex global multinational business, which is now decentralized into 21 markets, has been combining the benefits of leveraging global procurement scale with the agility of the market-facing business units that connect locally with consumers.
Thibaut Eissautier spent three years at the helm of the company’s structured global Procurement function, where he sought to balance scale with agility though a Procurement Operating Model and a ‘One Procurement Community’ concept.
Category strategy development, supplier negotiations, and supplier relationship management are led at a global level to leverage Diageo’s scale, enabled by global decision rights.
To maximize agility, the definition of requirements, the delivery of supplier agreements and supplier performance management are led by the market procurement teams, who report locally into the 21 market Managing Directors.
Diageo’s Procurement in numbers
- Manages approximately $7bn of annual spend, including all 3rd party expenditures
- 400 staff
- 30% of staff are based in the global procurement team and manage approximately 80% of the spend
- 70% of staff located across 80 countries in market roles.
Doing the right thing
To operate effectively in a large global business, Thibaut says it is necessary to:
- Have a clear vision and direction of travel.
- Develop an effective Procurement Operating Model that is synergistic with the company operating model and strategy.
- Establish clear governance and develop strong functional capability.
- Build a strong lead team, inspire and challenge the whole organization, and really connect with internal stakeholders and external supply markets.
Integrity and having staff that do the “right thing” is important to Thibaut. “We are a large player in many markets, and with that come a responsibility to work with suppliers to achieve both our goals and a mutually sustainable success.
“This requires working together with our more strategic suppliers to create the most value possible for both companies and having clear plans regarding collaboration, product development and innovation.”
One of the principal challenges in this business is that people just didn’t know what procurement do, and didn’t therefore understand what we could do to help them achieve their objectives.
One Procurement Community
The ability to work as a single global community has been a key success factor, says Thibaut, speaking just prior to his departure from the company in 2015. “We have worked hard to establish the concept of One Procurement Community, or OPC for short.
“This is really important to ensure we all work in a seamless way regardless of where we sit so that, as a function, we enable the markets to win in the marketplace.”
Global category planning is generally done on a five year basis, with plans aligned with markets on a rolling annual basis, Thibaut explains. “The goal is to create the right balance between scale and agility – this is the key to success in procurement.”
One key to establishing One Procurement Community is regularly rotating staff through roles, encouraging staff to work in different countries, and experience multiple categories, Thibaut says.
“We are willing to take risks with people, and we have had some great successes, with people moving categories and bringing a broader perspective and fresh energy. Importantly, it takes them out of their comfort zone and strengthens their leadership skills.”
The initial challenge for Thibaut and the function was to establish credibility and ensure that procurement targets and results were understood and recognized across the business.
“We have worked hard to build a strong relationship with Finance, and now targets and results are all signed off by the local Finance functions in each market. This has also improved the degree of alignment with markets: our success is now their success,” says Thibaut.
Building strong stakeholder relationships is another challenge in such a diverse global business, where there are frequent acquisitions and changes.
“One of the principal challenges in this business, like many others, is that people just didn’t know what Procurement did or understand what we could do to help them achieve their objectives,” says Thibaut.
To tackle this Thibaut and his leadership team have developed a clear mission statement, which helps stakeholders across the world understand what Procurement are focussed on, and how they align behind the core company purpose. This has been a great tool for envisioning and energizing the whole procurement organization around focused goals. “We have boiled this down onto a single page, so we can explain in no more than five minutes the essence of what Procurement is trying to achieve.
“This clarity in communication is critical to gain traction with internal customers around the world.”
The function has had three strong years, with “top benchmark performance”. However, Thibaut is determined to ensure that the performance is sustainable over time, and that they keep on working proactively with suppliers to identify new areas of value and innovation.
The future will involve increasingly focusing on how procurement can contribute to the top-line, not only margin growth opportunities.
Two years ago, Thibaut appointed one of his leadership team members to be Director of Sustainability, in order to accelerate momentum in this area and ensure best practices are successfully transferred throughout the company.
As Thibaut has built his leadership team over the last three years, he has adopted a scientific and structured approach to ensuring the right blend of skills and personalities in his team.
“I am passionate about diversity. Not the tick-box kind, but diversity of thought, style, personality and culture. I have chosen my leadership team to be deliberately different from me.
“Whilst we have a strong set of common values and attitudes, we have really strong debates around key issues, and from this come better and more thought-through ideas, and a stronger sense of ownership.”
Thibaut Eissautier left Diageo in September 2015.