Don’t just talk about how much you saved last quarter; show them how procurement contributes to the organization’s long-term success with these metrics every CPO should be reporting to the C-Suite.
There’s nothing more uncomfortable than realizing that somebody’s eyes have glazed over while you’re talking to them. It could happen at a social function, on a first date, or (in procurement’s case) while you’re trying to explain your team’s value to a member of the C-Suite.
You know the feeling: you’re passionately discussing your procurement metrics, and suddenly, you can see their attention drifting.
Purchase Order Cycle Time. Cost Per Purchase Order. Contract Compliance.
From Tactical Savings to Strategic Value
Yes, these metrics might get your blood pumping if you’re a true procurement aficionado, but for the C-Suite? We’re in eyes-glazing-over territory. They want insights that align with broader business goals, not just the nuts and bolts of procurement processes.
The main point I want to get across in this article is that the performance metrics you’re feeding upwards to the C-Suite should reflect your wider effort to shift the narrative from tactical savings to strategic value.
In other words, don’t talk about how much you saved last quarter; show them how procurement contributes to the organization’s long-term success.
Before diving into the metrics, it’s crucial to understand your organization’s high-level goals and priorities. Knowing what drives your business allows procurement to stay agile and adapt quickly when priorities shift. This flexibility is key to maintaining influence and relevance.
For more insight on elevating procurement’s influence, take a look at this article: How to Elevate Procurement's Influence Across the Business.
Additionally, dropping the procurement lingo is essential. Nobody outside of the procurement team wants to hear about tenders, RFPs, and RFQs. Instead, focus on how procurement can facilitate and enhance the work of other departments. Learn how to speak the language of the business; or, more specifically, to speak the language of the C-Suite member you’re reporting to.
Remember, the C-Suite isn’t a single amorphous mass with a single set of priorities, pet projects, likes and dislikes. It’s made up of very different roles, all of which have their own set of focuses. Typically, the CPO will report either to the CFO, directly to the CEO, or in some cases to the COO.
This matters, which is why I’d urge you to check out this article on the subject: Where Does Procurement Belong In The Organizational Hierarchy.
CPO Metrics for the C-Suite
OK, let’s begin. Here are 8 metrics every CPO should be reporting to the C-Suite if they intend to position the function as more strategic than tactical.
1. Procurement ROI
Calculating the return on investment for procurement initiatives is essential. Show how much value procurement brings to the organization compared to its costs. This metric helps shift the perception of procurement from a cost center to a value-generating function, which is critical for C-Suite buy-in.
2. Contribution to Growth
Highlight how procurement contributes to overall business growth. This could include metrics related to new product development facilitated by supplier collaborations or enhancements in service delivery through strategic sourcing. Demonstrating procurement’s role in driving revenue can resonate well with the C-Suite.
3. Risk Reduction Metrics
Risk is a red-hot priority for CEOs and boards, particularly in today’s volatile business environment. Procurement plays a crucial role in identifying, assessing, and mitigating risks across the supply chain. Metrics that evaluate supplier diversity, geographical risk exposure, and the robustness of contingency plans are vital. By illustrating how procurement manages risks, you reinforce its strategic importance to the organization.
C-Suite leaders want to know that procurement can prevent disruptions and safeguard the company’s reputation. In times of crisis, strong procurement strategies can mean the difference between a resilient organization and one that struggles to adapt.
4. Innovation Contributions
Demonstrating procurement’s role in fostering innovation can set your team apart. Metrics that track supplier-led innovations or new technologies sourced through procurement can illustrate how the function drives the company’s strategic objectives and enhances competitive advantage.
For more on this topic: 3 Steps to Spark Supplier Innovation.
5. Sustainability Metrics
With a steadily growing emphasis on corporate social responsibility, showcasing sustainability metrics is essential. Highlight your initiatives that contribute to sustainability goals, such as the percentage of sustainable suppliers or reductions in carbon footprint. This aligns procurement with the values of the C-Suite and broader organizational goals, such as a Net Zero target.
6. Spend Under Management
Spend Under Management shows the percentage of total spend that is actively managed by procurement. It offers an at-a-glance dashboard view for the C-Suite to understand how much of the organization’s spending is being effectively controlled.
7. Compliance Rates
Highlighting contract compliance rates provides insight into how well the organization adheres to negotiated terms. This is crucial for risk management and can prevent costly penalties. The C-Suite will want to know that procurement is minimizing risks associated with non-compliance.
8. Stakeholder Satisfaction
Finally, don’t underestimate the power of internal feedback. Metrics that gauge stakeholder satisfaction with procurement services can provide a window into how well your team is meeting the needs of other departments. This is particularly important for fostering collaboration across the organization.
Looking for a way to move the dial on a broad range of procurement KPIs as efficiently and effectively as possible? Connect with Una to learn how the power of group purchasing can change the game for your procurement function.
