CFOs are intensifying their efforts to find an exceptional procurement professional capable of spearheading a procurement transformation. However, a candidate who excelled in one company may not necessarily thrive or achieve success in another organization.
When selecting the next chief procurement officer (CPO) for their company, CFOs should take into account several important qualities before making the hiring decision. The following list outlines eight essential traits that CFOs should consider when appointing a CPO to a leadership position within their team.
1. Customer-Centric Problem-Solver
An accomplished CPO should possess problem-solving skills and prioritize a customer-centric approach by tailoring their strategies to meet the needs of internal stakeholders. The most successful CPOs concentrate on developing a procurement function that places emphasis on satisfying the requirements of internal customers.
It is crucial to view procurement as a service rather than solely a compliance function within the organization. If the CPO adopts the mindset of a police officer or enforcer, internal customers are likely to resist efforts towards spend aggregation. CPOs who are capable of addressing both operational and process issues for internal customers will be able to establish a collaborative relationship with these stakeholders.
2. Well-Versed in Procurement KPIs
An experienced CPO should prioritize data, analytics, and metrics to drive their decision-making. In the modern era, CPOs must possess comprehensive knowledge of procurement key performance indicators (KPIs) and spend analytics. Proficiency in analyzing spending data enables the CPO to enhance their negotiation skills when dealing with suppliers. CFOs should discard the misconception that CPOs are solely exceptional negotiators and recognize the importance of their proficiency in utilizing data, analytics, and metrics for strategic procurement decision-making.
3. Focused on Long-Term Spend Reduction
A successful CPO should prioritize long-term progress rather than solely focusing on short-term victories associated with spend reduction. Transforming a procurement function is a gradual process that unfolds over time, akin to a marathon.
CPOs who approach it as a sprint, solely seeking immediate wins, often become frustrated and exhausted if the desired changes do not materialize quickly enough. A seasoned and effective CPO, however, will strive for both short-term wins and long-term gains that accumulate gradually over time.
4. Soft Skills are Essential
A perceptive CPO should demonstrate a strong level of emotional intelligence, coupled with exceptional empathic listening abilities. Internal stakeholders frequently look for procurement leaders who can comprehend and empathize with their challenges.
If a CPO solely focuses on promoting their own agenda, they may encounter significant resistance. It is not uncommon for certain procurement leaders to propose immediate solutions without first empathetic listening to the frustrations expressed by internal stakeholders. Therefore, it is crucial for a CPO to prioritize seeking to understand as an essential starting point in their interactions.
5. A Culture Match
A suitable CPO should possess a leadership style that aligns with the organization’s culture. It is important to recognize that a CPO who achieved success in a specific industry or sector may not necessarily excel in a different one. For example, a CPO who thrived in a fast-paced industry like technology may find it frustrating and potentially experience burnout in a company with a slower pace of change.
Additionally, sectors characterized by narrow profit margins may have a greater acceptance of a cost-driven culture, while sectors or companies with lucrative profit margins may prioritize different values.
6. Understands Direct vs Indirect Spend
A skilled CPO should recognize that spend can vary significantly depending on its nature. Direct materials spend differs from indirect spend. Manufacturers, who primarily deal with raw materials procurement (direct material spend), require a distinct approach compared to software companies or financial services firms, whose spend primarily involves indirect procurement (services spend rather than materials spend).
A CPO who has primarily focused on managing raw material spend may not thrive in an environment where the predominant spend is indirect, as it tends to be highly decentralized.
7. Relationship Builder
An adept CPO should take the initiative to conduct internal customer satisfaction surveys as part of their leadership role. A successful and dynamic change agent aims to assess their effectiveness with internal customers by utilizing customer service surveys. CPOs who welcome both qualitative and quantitative feedback will be better equipped to adjust their strategies according to the needs of internal customers and foster strong collaborative relationships.
8. Identify a Candidate’s Time Horizon
Certain CPOs actively pursue roles where they can spearhead the initial stages of transformation and establish a strategic plan to launch the organization into action. However, after a few years, these same CPOs may seek new job opportunities or even consider changing companies. On the other hand, some leaders may have a greater willingness to remain in their positions for an extended period. It is crucial to identify a candidate’s time horizon to determine their level of engagement and their intention to stay committed to the organization.
In the process of hiring a CPO, a CFO must conduct a thorough evaluation to ensure that the candidate possesses a wide range of skills required to successfully transform the procurement organization into a highly customer-centric function that aligns with the overall needs of the organization.