Procurement Pays Attention to Younger Generation

As reported below, the ROSMA Performance Check Benchmarking Study collects the financial performance of procurement as reported by participating CPO organizations.

A.T. Kearney began ROSMA Performance Check benchmarking in 2009.

The study’s authors also note that procurement organizations have the opportunity to attract millennials if the profession is willing to make changes regarding performance tracking and accountability.

Millennials are a generation that prefers to join organizations with value-management practices, specifically where there is transparency, accountability, and recognition of their achievements.

Procurement offers millennials the opportunity to learn the business from end-to-end, secure executive access and exposure, and have a significant impact on business performance.

But the study also has its skeptics. Supply Chain Management Review columnist Robert A. Rudzki, who is President, Greybeard Advisors LLC, says benchmarks may not be that critical at this point:

“The fundamental question is this: do we really need another framework, or do we just need to do a better job connecting to the financial metrics that are already being used by the CEO and CFO to manage the business?”

“In our experience,” says Rudzki,, CPOs can dramatically improve their internal credibility with the executive staff by relating their proposed agenda (including the need to transform supply management) to the metrics that the senior staff and the Board of Directors already monitor.

According to Rudzki, such key metrics as ROIC, cash flow and EPS, are highly visible and relevant metrics.

“ Rather than having Procurement introduce a new metric for itself (which may come across as self-serving), we have generally found it to be more productive - and quicker at achieving credibility - to relate the proposed CPO agenda directly to the particular metrics currently in use by the company’s senior management,” he says.

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Top Procurement Organizations Continue to Deliver Financial Benefits
Seventy-one percent of CFOs report that procurement lags most other functions in terms of rigor and depth of performance tracking

The 2015 Return on Supply Management Assets (ROSMA) Performance Check Study, “Building a Bolder Legacy: The Procurement Mission is Under Way,” found that top performing procurement organizations improved their performance versus the 2014 report results with most delivering 10 to 15 times returns.

Top performers were also found to deliver 7.5 times the costs and investment base in procurement and are expanding their advantage. These leaders generate about $1.25 million in financial benefits per procurement employee per year.

The second annual ROSMA Performance Check Study is once again a collaboration between A.T. Kearney, the Institute for Supply Management (ISM), and the Charted Institute of Procurement & Supply (CIPS). The joint initiative’s objective is to build the brand of procurement and encourage the profession to embrace advanced value-management practices and stronger CPO-CFO partnerships.

Joe Raudabaugh, A.T. Kearney partner stated, “Procurement faces a transformational period, similar to other corporate disciplines over the past 30 years. Beginning with manufacturing in the 1980s, and moving on to supply chains, research, engineering, and more recently sales and marketing, the mission for procurement organizations is underway – whether procurement is ready or not.”

ROSMA Average and Standard Development by Industry

Source: A.T. Kearney ROSMA Benchmark Database 2011-2015

Although top-performing procurement organizations are already delivering substantial financial benefits to their companies, the second part of this ROSMA research, which surveyed 226 senior financial executives from Australia, France, Germany, the UK and the United States, found that 50 percent of financial executives believe that bottom quartile procurement organizations return less than 1.5 times their cost in value.

CPOs from these bottom-quartile teams validated this perspective, reporting dilutive performance results with financial benefits insufficient to cover their activities.

Download Building a Bolder Legacy: The Procurement Mission Is Under Way