How to Get Your CEO to Care About Procurement
Learn how to get your CEO to care about procurement by engaging the C-Suite to help increase the function’s impact and value.
By Hugo Britt | February 7, 2023
According to research by Harvard Business School’s Michael Porter and Nitin Nohria published in Chief Executive.net, CEOs spend only one percent of their time with suppliers. By default, this means that CEOs spend just one percent of their time thinking about the procurement function as a whole.
“Given that spending on suppliers—the job of procurement—accounts for more than half of a typical company’s total budget, this makes no sense,” the authors argue. “In effect, it means that CEOs spend next to no time either thinking about or being actively involved in how their companies spend more than half of their budgets. That’s a mismatch with potentially existential consequences for companies.”
Below, we explore why this is an issue and what practitioners can do to get their own CEO’s to care about procurement.
Why is CEO disinterest a problem?
For those unfamiliar with corporate-speak, “existential consequences” is code for bankruptcy. The meaning is clear – if CEOs fail to support the procurement and supply functions, spend may soon overwhelm business profits.
Other consequences include:
- A lack of investment in the function will mean procurement will not have the opportunity to innovate and evolve.
- Poor support from the top will mean others in the company are less likely to get on board with procurement initiatives.
- Disinterest from the CEO may harm relationships with strategically important suppliers.
- A lower profile and reduced influence in the organization leads to procurement being left out of strategic decision-making, ultimately leading to fewer opportunities to generate value.
CEOs only spend one percent of their time thinking about procurement. This means CEOs are neglecting how their companies spend more than half of their budgets, which makes no sense at all.
How to get your CEO to care about procurement
Below, we explore some ways procurement can raise its profile and engage the CEO to help increase the function’s impact and value.
Avoid the trap of only getting noticed when there’s a problem
It’s happened to all of us: procurement only gets noticed when something goes wrong, but as long as things are going well, the function is invisible to the C-Suite.
The answer? Put more effort into celebrating success. Whether you’ve achieved significant cost savings, smashed a challenging target, or found an innovative way to reduce waste, make sure you bring it to the C-suite’s attention. In large companies, the CEO will often have someone (perhaps their Executive Assistant) whose job includes gathering together news of important milestones and achievements in the organization to include in CEO updates or internal comms. Reach out to them and start a conversation about raising procurement’s profile.
And in the event that a procurement problem or error catches the attention of the CEO, make sure you come to the table with effective solutions and learnings to mitigate its impact and reduce risk in the future.
Align procurement’s efforts to your CEO’s priorities
One of the reasons CEOs pay little attention to procurement is to do with relevance. The team may either be focusing on issues that are irrelevant at present to the CEO, or failing to communicate to the C-Suite that procurement can help them with their priorities.
In an episode on this topic, Art of Procurement’s Philip Ideson explained the challenge:
Invite the CEO to visit more suppliers
Planning on visiting a strategic supplier soon? Don’t be shy – send an invitation to your CEO to join you. Suppliers love being visited by their customer’s CEOs because it demonstrates that the relationship is valued and likely to continue. They will often roll out the red carpet, ensuring their own CEO is available for the event. It’s often treated as a great PR exercise by both companies.
And who knows? Your CEO might even enjoy spending some time out of the office.
Become your CEO’s go-to problem-solver
Leaders often have a shortlist of go-to problem solvers for dealing with the latest challenge facing the organization. Position the procurement function as agile trouble-shooters who know how to leverage the power of procurement and supply to address whatever needs addressing.
It’s not just about cost-cutting. Need to slash carbon emissions? Call procurement. Need to build social license? Call procurement. Need to show a commitment to diversity? Call procurement. You get the picture!
Chalk up some wins
As Phil Ideson writes above, one of the most effective ways to get procurement onto a CEO’s radar is to deliver results that get their attention. How about generating 18% to 22% cost savings and putting that money straight back into the budget through the power of group purchasing? Una’s sourcing advisors can help quickly connect you to savings that will impress even the most disinterested CEO.
Contact us to learn more.