Like their counterparts elsewhere around a large company, corporate procurement function are in the midst of writing and finalizing their strategic plans for 2017.
Over the past few years, procurement teams have sought to go beyond their traditional remit of keeping a company’s costs down and found other ways to support their firm’s strategic goals. Six steps will help managers create and communicate a strategic plan that aligns Procurement’s strategy with business priorities and secures executive buy-in.
Those Six Steps
1. Lay the groundwork: Start by setting expectations for the planning process. Determine who will need to take part and what their responsibilities will be — or what you’ll need from them.
Typically, the chief procurement officer (CPO) will need to define and set the objectives and action plan, the CPO’s direct reports will need to build project proposals and estimate resource requirements, and category managers should conduct planning analyses and provide process- and activity-level input.
You should also note stakeholders from outside Procurement that you’ll need to work with: for instance, the CEO or executive committee will need to approve the strategy and key investments, and Procurement will need to ask business unit leaders for their input on business strategy and on Procurement’s current performance.
Procurement should also set a timeline for the strategic planning process and communicate expected outcomes to all participants.
Keep in mind that:
- Strategic plans can easily be scuppered by short-term priorities, so you’ll need to design a plan that you can actively manage and keep on track throughout the year.
2.Understand business goals and how they relate to the procurement team: Hold conversations with key executives and other business leaders to understand the goals that Procurement’s strategy should support. Ask targeted questions using business-friendly language to make sure these stakeholders engage with you. Evaluate how well Procurement’s current capabilities support business goals to determine whether there are any skills your team needs to build.
Keep in mind that:
- Your function should focus on strategic business priorities—not tactical ones.
- At the end of this step, you should have a comprehensive understanding of business priorities and challenges.
3. Identify improvement areas: Next, you’ll need to determine where your function is starting from. Evaluate your function’s effectiveness at key capabilities; then, ask business partners for their perspective for a complete view of your strengths and weaknesses. You should also benchmark procurement employees’ performance at certain competencies to identify skill gaps.
Keep in mind that:
- It’s important to look at the effect Procurement is having on corporate goals, rather than just its performance on operational metrics.
4. Determine specific actions to take to achieve procurement objectives: Translate business goals into Procurement objectives, using your understanding of the function’s improvement areas. Then, develop strategic initiatives to meet these objectives. You’ll also need to identify metrics to measure your progress, decide what resources you’ll need to put your plan into action, and assess the risks that could affect or invalidate your plan.
Keep in mind that:
- The goal here is to have a prioritized list of strategic initiatives, plus metrics to measure them.
- You shouldn’t force-fit initiatives that don’t align with key objectives.
5. Communicate your plan to stakeholders: Tailor your message to each stakeholder group. Once your plan is ready, share it with procurement leaders, business leaders, and finally procurement staff.
Keep in mind that:
- Highlighting relevant parts of your plan to different audiences shouldn’t keep you from delivering a consistent message across the company; make sure that employees don’t receive conflicting information.
6. Monitor your progress: As you begin to implement the plan, you’ll need to measure your progress against the objectives you’ve defined. Make sure to get feedback from key stakeholders along the way; you should also document lessons learned and make adjustments as you go on.
Keep in mind that:
- Business partners’ risk aversion could derail the implementation of your strategy. This can often stem from misconceptions about your plans — so use conversations with stakeholders to identify incorrect assumptions and help them understand what you’re doing to address these risks.
Jessica Kranish is a CEB analyst who tracks procurement, real estate, and quality issues. Read more CEB blogs here.
