Observations from EVP, Europe – Ed Winterschladen
The role of the Chief Financial Officer has grown in recent years. Long gone are the days when their role was restricted to accounting and forecasting – they are now pivotal to setting business strategy and in many cases act as the ‘right-hand’ of the Chief Executive to ensure procurement savings.
For procurement leaders, finance leaders are often a key stakeholder or indeed the person they directly report to. But do finance leaders value the performance of procurement? That’s just one of the questions we set out to answer when we developed the Proxima Finance Leaders Outlook 2020, a research report which surveyed finance leaders on both sides of the Atlantic.
The good news is that 55% of finance leaders in the US and 54% in the UK said that good procurement practices are imperative to the financial success of their businesses. A further 44% in both the US and UK described good procurement practices as ‘quite important’, with only 1% and 2% respectively saying they were not important. This clearly demonstrates that the vast majority of finance leaders already see how important good procurement is to their company.
But what do they value most? The research found that finance leaders were most likely to describe procurement as a ‘savings delivery function’ for their business. This reflects what many in the procurement industry have seen in recent years where procurement has increasingly been seen by the C-Suite as a way to drive down costs.
It could be argued that some of the turmoil we have seen in recent months in the business world comes back to this point. For too long many finance and business leaders have focused relentlessly on costs, at the expense of having supply chain visibility and resilience. This has been shown by the COVID-19 pandemic to be short-sighted.
While finance leaders told us they would describe procurement as a ‘savings delivery function’, they said that procurement should in fact be measured against ‘revenue generation’. This suggests that the mindset is certainly there among finance leaders for views of procurement to shift.
It’s up to procurement leaders to seize this opportunity. In many organisations that will have already started. In our industry conversations in recent weeks it has been notable how business leaders have admired how procurement has really stepped up to the table in helping manage the impact of COVID-19.
While the immediate business survival period is beginning to subside in many organisations, there are new challenges that procurement is at the heart of tackling. This includes how to manage risk around the uncertainty of how the coming months will unfold. But in some cases it will also mean supporting major changes to how a business operates or launching entirely new workstreams in an extremely short period of time.
This all means that collaboration between finance and procurement leaders has never been more important. For companies to make the most of the opportunities that the coming months will bring then a new relationship, which is based on understanding how procurement can add value and not just cut costs, will need to be forged between finance and procurement.