Procurement Strategy Council

Executive Summary

Bridging the Gap

Voice of the Internal Client

BUSINESS ALIGNMENT SURVEY FINDINGS

As procurement organizations focus on new categories of spend, their skills
for engaging and serving internal business partners (such as Operations,
IT, or Marketing) become increasingly critical. This executive summary
highlights insights from Business Alignment Survey results to guide member
efforts in three critical cross-functional areas:

Understanding Business Unit and Function Priorities for Procurement

Assessing Procurement’s Internal Service Performance

Targeting Intervention Opportunities in Areas of Misalignment

© 2004 Corporate Executive Board

 Council Staff
Project Manager
Geza Garai

Procurement Strategy Council Research Analysts

Robert Bullock
Corporate Executive Board Marc Kelly
2000 Pennsylvania Avenue NW
Practice Manager
Washington, DC 20006
Brian Powilatis
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Martha Piper
The Corporate Executive Board Company (UK) Ltd.
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Telephone: +44-(0)20-7632-6000 Publications Editor
Fax: +44-(0)20-7632-6001 Lacey White
Proofreader
www.psc.executiveboard.com Tracy Banghart

Note to Members on Confidentiality of Findings

This document has been prepared by the Corporate Executive Board for the exclusive use of its members. It contains valuable proprietary
information belonging to the Corporate Executive Board and each member should make it available only to those employees and agents
who require such access in order to learn from the material provided herein, and who undertake not to disclose it to third parties. In
the event that you are unwilling to assume this confidentiality obligation, please return this document and all copies in your possession
promptly to the Corporate Executive Board.

© 2004 Corporate Executive Board Catalog no.: PRC12IH4PP

 iii

Table of Contents

Letter to the Membership • iv

Key Findings • v

With Sincere Appreciation • vii

Overview of Survey Methodology • 1

Business Alignment Survey Findings • 11

Finding #1: Old Friendships Need Tending • 13

Finding #2: A Middle Management Obstacle • 15

Finding #3: From Information to Insight • 17

Finding #4: Unrealized Potential Beyond Negotiation • 19

Finding #5: The Long Road to Advice • 21

Guide to Using the Business Alignment Survey • 25

Order Form • 31
iv

Letter to the Membership

As procurement organizations focus on new categories of spend, their skills

for engaging and serving internal business partners (such as Operations, IT,
or Marketing) become increasingly critical. Dedicated efforts to refine service
objectives and performance criteria raise several intriguing questions: What are
the attributes of an effective procurement organization? How do business partners
across the enterprise rate Procurement’s performance? How well is Procurement
aligned with business partners’ priorities?
To help answer these questions, the Procurement Strategy Council created the
Business Alignment Survey. This initiative is designed to capture cross-functional
perspectives on 32 critical attributes of procurement support to the enterprise.
Participants assess both the importance of each attribute and Procurement’s
effectiveness of delivery. To date, 27 member companies have participated in the
effort with more than 2,400 individual survey responses.
While the primary benefit of the survey is uncovering company-specific alignment
gaps and improvement opportunities, aggregated results provide guidance to the
procurement profession in three critical cross-functional areas:
• Understanding Business Unit and Function Priorities for Procurement
• Assessing Procurement’s Internal Service Performance
• Targeting Intervention Opportunities in Areas of Misalignment
The Council expresses its sincere gratitude to participating members who helped
select and define the 32 performance attributes and who responded to the
benchmark survey.
As always, we encourage members to contact Council staff with any questions,
suggestions, or requests regarding this material. For more information on
deploying the survey in your organization, please refer to the Council Web site,
www.psc.executiveboard.com, or contact Council staff directly. We look forward
to continuing the discussion of ideas and insights on this and other topics of
member concern.

Procurement Strategy Council

London and Washington, D.C.
September 2004
 v

Key Findings

1. Old Friendships Need Tending

While Procurement strives to build alliances with a new set of business partners,
its historical core constituency, Operations, raises performance concerns,
highlighting the importance of continued investment in established relationships
(p. 13)

2. A Middle Management Obstacle

Significant perception gaps between procurement staff and business-partner
middle management could undermine cross-functional procurement initiatives;
holding expectations-setting sessions with procurement staff will clarify service
and support standards
(p. 15)

3. From Information to Insight

Efforts to improve enterprise effectiveness will require development of insights from
supplier, market, and spend data that inform and guide business-partner decisions
(p. 17)

4. Unrealized Potential Beyond Negotiation

Pigeon-holed as negotiators, Procurement can create greater value through
formal involvement in the early stages of sourcing processes and by maintaining
an active presence in supply base performance management after contract signing
(p. 19)

5. The Long Road to Advice

Building in-depth subject matter expertise and credible business cases will
enable Procurement to truly partner with internal clients through more proactive
opportunity and solutions identification
(p. 21)

Source: Business Alignment Survey benchmark data;

Procurement Strategy Council research.
vi
 vii

With Sincere Appreciation

Special Thanks
The Procurement Strategy Council would like to express its gratitude to the following
member organizations for their participation in the first Business Alignment Survey
benchmark cohort.
viii
Overview of Survey
Methodology
2 Bridging the Gap
 Bridging the Gap 3

One of the core challenges Procurement faces in interactions with business partners is overcoming potentially
significant differences in interpretation of the same information.

Most business partner satisfaction surveys focus on performance issues but fail to uncover priority
misperceptions.

Does This Look Familiar?

Divergent viewpoints create difficult interactions…

Unreasonable Expectations Shared Vision and Goals

“We need to greatly “Improve it?

We’re already “Let’s make “You read
improve spend my mind.”
best-in-class.” this happen.”
compliance.”
Aligned

Business Procurement Business

Procurement
Partner Partner
Perception of
Importance
Deep Loss of Trust Frustration and Puzzlement

“You just “Why are you

“I cannot work “He just doesn’t don’t see the wasting my time
with this guy.” have a clue.” big picture!” discussing this?”
Misaligned

Procurement Business Procurement Business

Partner Partner

Misaligned Aligned
Perception of Performance

…and raise critical questions for Procurement

1 What are the attributes of 2 How well is Procurement 3 How do business partners
an effective procurement aligned with business across the enterprise rate
organization? partners’ priorities? Procurement’s performance?

Source: Procurement Strategy Council research.

 4 Bridging the Gap

Recognizing the need to establish a common vocabulary for discussing procurement performance, the
Council undertook an extensive effort to develop a set of 32 key attributes that provide a 360-degree view
of an effective procurement organization.

To ensure that the list is comprehensive but limited to the most critical attributes, the Council interviewed
dozens of members and incorporated other functional perspectives through consultation with other
Corporate Executive Board research programs.

The Business Alignment survey and
diagnostic tool allows members to
assess performance on 32 critical
procurement attributes. This survey
also serves as a terrain map of the
procurement function, providing a
clear understanding of the central
elements of an effective organization.
For each attribute, respondents are
asked to select the grade that best
reflects the current state using the
grading scales indicated below.
1. Procurement Process
PROCUREMENT PROCESSES
Procurement runs effective and efficient
processes for sourcing and purchasing
activities
PROCUREMENT EXPERTISE
Procurement employees are
knowledgeable about sourcing and
purchasing issues and processes
Building a
I. Core Procurement Capabilities
2. Supplier Management
SOURCING SUPPORT
Procurement supports the collection of
attractive price/quote information by
assessing current supplier opportunities
and identifying new supply options
SUPPLIER NEGOTIATION
Procurement actively contributes to
supplier negotiations and contract
development
Attributes of an
3. Compliance Management
POLICY DEVELOPMENT
Procurement creates policies that
are easy to understand, are based on
a compelling business case, and are
consistent with the corporate culture
POLICY ENFORCEMENT
Procurement identifies noncompliant
users and supports management
intervention as needed

RISK MANAGEMENT EXCEPTION MANAGEMENT

Procurement proactively identifies and Procurement evaluates and

Importance mitigates supply risk (including financial,
market, and reputation risk)
accommodates justified exceptions
from policy
Extremely High Importance
Very High Importance SUPPLIER INFORMATION
High Importance Procurement proactively collects and
Important verifies supplier performance information

Low Importance
Very Low Importance
SUPPLIER IMPROVEMENT
Extremely Low Importance
Procurement partners with suppliers to
quickly resolve problems and improve
supplier performance

Effectiveness
SUPPLIER COLLABORATION
Highly Effective
Procurement proactively supports the
Effective development of strategic, collaborative
Somewhat Effective supplier relationships

Neither Effective nor Ineffective

Somewhat Ineffective
Ineffective
Highly Ineffective

The survey is organized into three capability areas: Core Procurement Capabilities, Business Partnering
Capabilities, and IT Capabilities.
Procurement and business partner respondents were asked to assess the overall importance and performance
effectiveness of Procurement against each attribute.
Common Language
Effective Procurement Organization
4. Service Ethic
SERVICE COMMITMENT
Procurement employees are fully
committed to providing maximum
support to their enterprise partners
ADAPTABILITY
Procurement employees rapidly adapt
to new, cross-cultural environments and
build solid professional relationships
BUSINESS UNDERSTANDING
Procurement has an accurate
understanding of business unit/functional
area challenges, specific concerns, and
priorities
ROLE DEFINITION
Procurement values and develops a
shared understanding of roles and
responsibilities with internal partners
on joint projects
II. Business Partnering Capabilities
5. Client Support
BUSINESS SUPPORT
Procurement actively supports business
unit/functional area initiatives (e.g.,
cost reduction, customer service
improvement, and revenue enhancement)
DECISION-MAKING SUPPORT
Procurement provides timely and
dependable information to internal
business units/functional areas
to support decision making
JOINT PROJECT SUPPORT
Joint projects with Procurement utilize
the necessary resources, are managed
appropriately, and reach desired
objectives
GOAL ALIGNMENT
Procurement’s plans and activities are
well aligned with internal partner/
enterprise goals and rapidly adapt to
changing priorities
STRATEGIC INITIATIVES
CONTRIBUTION
Procurement actively contributes
to major/strategic performance
improvement initiatives aimed at bettering
financial and operational performance
6. Business Advisory Skills
PROBLEM SOLVING
Procurement employees possess solid
analytical and problem solving skills to
find innovative solutions for internal
partners
IMPROVEMENT OPPORTUNITY
IDENTIFICATION
Procurement proactively identifies
business unit/function-specific
improvement opportunities
IMPROVEMENT SOLUTIONS
Procurement provides effective solutions
to improve the performance of your
business unit/functional area
SUBJECT MATTER EXPERTISE
Procurement employees have in-depth
knowledge of your business unit/
functional area
CASE FOR COLLABORATION
Procurement articulates a credible
business case for increased involvement/
collaboration in business unit/functional
areas
Source: Procurement Strategy Council research.
Bridging the Gap 5
III. IT Capabilities
7. Electronic Enablers
COMMUNICATION CHANNELS
Procurement provides user-friendly
communication channels for internal
users/partners (phone, e-mail, Web sites,
desktop applications, and forms)
TRANSACTIONAL DATA
Procurement provides electronic,
real-time, and customized transactional
data to internal partners
SUPPLIER CONNECTIVITY
Procurement provides electronic links
to suppliers to improve the efficiency
of transaction processing, performance
measurement, and information exchange
SYSTEMS INTEGRATION
Electronic procurement systems are
fully and seamlessly integrated with
other enterprise systems to enhance
information sharing
USER TRAINING
Procurement training improves user
capabilities and drives adoption of new
procurement processes and tools
KNOWLEDGE MANAGEMENT
Procurement maintains a comprehensive
knowledge management system providing
high-quality information to internal
partners and suppliers
ELECTRONIC SYSTEMS DEVELOPMENT
Procurement actively implements new
electronic sourcing and information
capabilities to increase efficiency and
effectiveness
6 Bridging the Gap

The central objective of the Business Alignment Survey is to gauge the level of alignment between
Procurement and its business partners by answering two critical questions: Is Procurement working on the
right activities? Is Procurement performing well on the attributes that matter the most?

To simplify the analysis of alignment, the Council developed a “Strength” score— it is the Effectiveness score
weighted by the Importance score. Strength scores form the basis of most findings in this study.

Measuring (Mis)Alignment
The Business Alignment Tool Facilitates Activity Prioritization

Misalignment\ mis'a· lign'ment : 1) Procurement is spending its time on the wrong attributes (i.e.,
attributes deemed to be of lesser importance by business partners). 2) Procurement is underperforming
or is perceived to be underperforming on important attributes.

Three Measures of Alignment

Importance Effectiveness Strength

Definition Respondent rating of the importance Respondent rating of the effectiveness of Calculated measure of procurement
of each attribute to the success of the the procurement function at delivering performance against business objectives
respondent’s own business unit or on each attribute based on quality, based on weighting attribute importance
functional area delivery, and impact of service received by effectiveness

Scale 100: Extremely High Importance 100: Highly Effective 100: Clear Strength
50: Important 0: Neither Effective nor Ineffective 0: Neither Strength nor Weakness
0: Extremely Low Importance (100): Highly Ineffective (100): Clear Weakness

Primary Use • Identify business partner priorities • Calculate strength score • Measure procurement performance
for the Analysis • Calculate strength score

Attribute Example
Illustrative
Extremely High Highly Effective Clear Strength
Importance
80.4

Effective Significant Strength

Important 46.8
37.6
Somewhat Effective Moderate Strength

Extremely Low Neither Effective Neither Strength

Importance Importance nor Ineffective Effectiveness nor Weakness Strength

Somewhat Ineffective Moderate Weakness

…

Attribute Strength Calculation

Importance x Effectiveness Attribute Source: Procurement Strategy Council research.
=
100 Strength
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Deriving the most insightful findings from thousands of responses required a thorough analysis and

Constituency/Attribute “Deep Dive”

comparison of overall procurement and business partner responses, as well as “deep dive” exercises on
Bridging the Gap

Source: Procurement Strategy Council research.

7
8 Bridging the Gap
 Bridging the Gap 9

The survey respondent pool of 27 Council member companies is statistically significant and broadly represents
the Council’s membership, covering a wide range of industries, geographies, and job titles.

The survey yields a unique enterprise-wide snapshot of procurement impact. Eighty percent of the more
than 2,400 individual responses came from employees working with, not for Procurement, representing most
corporate functions.

27 Companies, 2,445 Respondents, 1 Expansive Base

Sample Spans a Variety of Industries, Geographies, and Managerial Levels
Industry
Consumer
Utilities Products
11%
18%
Chemicals Financial
12% 26% Services
Pharmaceuticals
3% 19%
11%
Manufacturing High Technology
Respondent Geography Respondent Level
Africa and Senior Vice President
Middle East and Above
2% 4%
Asia/Pacific Vice President
11% Staff/Other
11%
23%
Europe 20% Director
64% North America 21%

Latin 41%
America Manager
3%

Procurement Versus Business Partner Business Partner Function

Procurement Other
Sales 10% Operations
21% Marketing 8% 26%
7%
Legal
79% 2% 13%
IT Engineering/R&D
Business 8% 13%
Partners HR
6% Finance
General
Management
7%
= 2,445. Source: Business Alignment Survey benchmark data;
Procurement Strategy Council research.
10 Bridging the Gap
Business Alignment
Survey Findings
12 Bridging the Gap

Serving Procurement Constituencies

Analysis of business-partner strength scores reveals two surprising insights:

1. Procurement’s core constituency, Operations, provides a below-average assessment relative

to others, implying potential concerns with Procurement’s performance, particularly in the
survey attributes of Problem Solving, Adaptability, and Strategic Initiatives Contribution.

2. IT management greatly values Procurement’s efforts to provide sourcing and transaction

support and rates its performance highly.

A key challenge for Procurement lies in meeting the continually evolving needs of business
partners by upgrading support services. Leveraging transferable skills developed in successful
business-partner relationships, such as IT, is also emerging as a focus area.

Methodology Note
The research team segmented all non-procurement responses by functional area and created
a peer-to-peer senior management perspective by including responses only from Directors
and above.
 Bridging the Gap 13

Finding #1: Old Friendships Need Tending

What Have You Done for Me Lately?

Business Partner Responses Highlight the Importance
of Maintaining Focus on Evolving Functional Requirements
Business Partner Overall Average Strength
Moderate Senior Management*
Strength

Neither
Strength Nor
Weakness Finance IT Engineering/ HR General Operations Marketing Sales Legal
R&D Management

Forgotten Friends?
Many early procurement wins were
An Emerging Ally? with Operations in the direct materials
Almost perfect alignment on strategic categories; It is possible that Procurement
factors indicates IT is a source for best has moved on to other categories and failed
practice relationship models to keep up with emerging Operations needs
Moderate including supply chain risk mitigation
Weakness

Hypotheses
• In its efforts to serve new constituencies, such as IT and Marketing, Procurement has failed
to keep up with evolving Operations needs
• Many of the quick-win opportunities in Operations have been exhausted leaving more
controversial trade-offs between cost and performance
• Cost pressures and commoditization in IT have opened new doors for Procurement

* Defined as Director and above. Source: Business Alignment Survey benchmark data;
Procurement Strategy Council research.
14 Bridging the Gap

Uncovering Potential Sources of Resistance

While procurement senior management and their functional executive peers view
Procurement’s performance similarly, as evidenced by the small difference between overall
Strength scores, comparison of mid-level management responses reveals a high degree of
misalignment:

• Procurement staff and mid-level managers rate their function’s performance considerably
higher than do their senior managers, especially in the areas of supplier management and
electronic enablers

• While agreeing on most priority areas, business-partner mid-level managers rated

Procurement’s effectiveness significantly lower, partly driven by concerns around service
and support capabilities

Greater alignment of procurement mid-level managers with business-partner peers

and procurement leadership is essential for increasing implementation success. Member
conversations on the topic indicate that the problem is more rooted in “skill” than “will” and
requires focused efforts for improving partnering capabilities and expectation management.
 Bridging the Gap 15

Finding #2: A Middle Management Obstacle

Trouble in the Ranks

Inflated Procurement Staff Perceptions Inhibit Execution
Overall Procurement Strength by Management Level1

Procurement Business Partner

Senior Management2 Senior Management2

Supplier Management
and IT Capabilities
Alignment Gap: 5.0
Attributes with largest gaps:
• Supplier Management Average Strength Score: Average Strength Score:
• Electronic Enablers 25.2 20.2

Alignment
Gap: 9.9

Procurement Business Partner

Mid-Level Management Mid-Level Management

Alignment Gap: 15.6

Average Strength Score: Average Strength Score:
35.1 19.5

A Possible Service Problem

Largest gaps include
• Service Commitment
• Business Support
• Problem Solving
• Adaptability
• Goal Alignment

Hypotheses
• Senior management expectations exceed current procurement staff capabilities
• Mid-level procurement management underestimates business partner service and support
requirements
• The mid-level management alignment gap is rooted in differences in perceptions of
Procurement’s effectiveness rather than misperceptions of priority
• Involving mid-level procurement managers earlier in the buying cycle will reduce the
mid-level management alignment gap

1
Alignment gaps are defined as (procurement Source: Business Alignment Survey benchmark data;
score minus business partner score). Procurement Strategy Council research.
2
Defined as Director and above.
16 Bridging the Gap

Revealing Lagging Performance

Survey responses on electronic capabilities appear to be at odds with the steady stream
of member interest in the topic—Procurement and business partners both rate them as
relatively low in importance and effectiveness, resulting in the lowest Strength scores among
all 32 attributes:

• Business-partner concerns center on the limited (and often unproven) benefits of

digitization, coupled with the perception of limited process flexibility and timeliness

• Substantial efforts notwithstanding, to date Procurement’s expectations of dramatically

increased efficiency and effectiveness remain largely unfulfilled

As better data transparency and enhanced supplier connectivity are within reach for
many procurement organizations, current efforts should focus on developing advanced
data analysis and reporting capabilities and identifying the most effective ways to inform
business-partner decision making.
 Bridging the Gap 17

Finding #3: From Information to Insight

Dead Last
Both Procurement and Business Partners Rate
Electronic Enabler Attributes the Lowest in Performance

Significant
Attributes Ranked by Strength
Strength

Moderate
Strength Electronic Enabler attributes rank
Neither
in the lowest quartile for both
Strength nor
Weakness
Importance and Effectiveness
Supplier Negotiation
Business Support

Business Understanding

Supplier Information
Service Commitment
Procurement Expertise

Supplier Improvement

Supplier Collaboration
Sourcing Support
Risk Management

Adaptability
Procurement Processes

Role Definition

Problem Solving
Strategic Initiatives Contribution

Goal Alignment

Joint Project Support

Subject Matter Expertise

Case for Collaboration

Improvement Solutions

Exception Management
Policy Development

Policy Enforcement
Systems Development

Systems Integration
Improvement Opportunity Identification
Communication Channels

Systems DevelopmentUser Training

Decision-Making Support

Transactional Data
Supplier Connectivity
Knowledge Management
Moderate
Weakness

Integration

Knowledge Management
Data

Supplier Connectivity
Transactional
Electronic
Systems
Moderate Procurement Average
Strength

Business Partner Average

Neither
Strength Nor
Weakness Electronic Systems Systems Supplier Transactional Knowledge
Development Integration Connectivity Data Management

Moderate
Weakness

Increasing Efficiency Increasing Effectiveness

Procurement
Procurement continues to struggle with adopting Enhancing analytical capabilities for supplier
Business electronic sourcing solutions and integrating performance and spend information improves
Partners existing systems to accelerate procurement Procurement’s ability to support business-
processes and improve cost performance partner decision making

Hypotheses
• Efficiency efforts help Procurement more than business partners; electronic systems
introduce rigorous processes potentially limiting flexibility and increasing workload
for business partners
• To date, procurement systems often achieve only limited impact on efficiency and have not
measurably increased business-partner effectiveness
• Procurement data remains a largely underused information asset as the quality of analysis
fails to keep up with the rapidly increasing quantity of data
• Limited success educating business partners on spending trends and supply issues impedes
Procurement’s ability to actively inform decision making

Source: Business Alignment Survey benchmark data;

Procurement Strategy Council research.
18 Bridging the Gap

Focusing on Core Strengths

Supplier management stands as a clearly recognized competency for most procurement

organizations, yet it also represents several improvement opportunities:

• While Supplier Negotiation is the top-ranked Strength attribute by business partners, the
lower rating for Sourcing Support reveals continued challenges with securing Procurement’s
early involvement in sourcing activities

• Post-contract supplier management activities also receive close to average ratings,

indicating potential procurement disengagement once the contract is signed

As more procurement organizations demonstrate the strong correlations between the level of
procurement involvement in sourcing/supplier management activities and economic benefits,
Procurement should step up efforts to expand its span of coverage beyond negotiation support.
 Bridging the Gap 19

Finding #4: Unrealized Potential Beyond Negotiation

After the Deal Is Done

Business Partners Suggest Serious Drop-Off After Negotiations Are Completed
Supplier Management Attributes
Business Partner Strength

Business partners rate this attribute Business Partner Overall

Significant as the highest of all 32 attributes Average Strength Score
Strength

Moderate
Strength

Neither
Strength nor
Weakness Sourcing Supplier Risk Supplier Supplier Supplier
Support Negotiation Management Information Improvement Collaboration

Moderate
Weakness

Making Early Involvement the Norm Beyond Price Benefits

Formal procurement involvement during the initial
stages of sourcing enhances negotiation results
Most sourcing savings can disappear without
rigorous contract management, yet analysis of the
procurement function reveals that only 18 percent
of supplier-facing time is spent on development and
collaboration*

Hypotheses
• Progress in and benefits of early procurement involvement in sourcing activities remain
only partially realized
• Development of standardized templates for proposal and bid assessment have lead to
improved sourcing and negotiation capabilities
• Resource constraints and unclear roles between Procurement and business partners confuse
supplier management efforts
• Unit price savings metrics dissuade Procurement from ongoing supplier management
• Heavy resource investment and lack of tangible benefits cause both suppliers and
Procurement to shy away from collaboration initiatives

* PSC Member Survey, 2003. Source: Business Alignment Survey benchmark data;
Procurement Strategy Council research.
20 Bridging the Gap

Providing Proactive Support

The Business Alignment Survey assesses three areas of business partnering capabilities:
service ethic, client support, and business advisory skills. While procurement and business-
partner assessments of service and support are well aligned, business advisory skills—an area
of increasing importance to most procurement organizations—receives lower ratings:

• Efforts to develop subject-matter expertise and convince business partners of the benefits
of internal collaboration continue to represent significant challenges

• Procurement achieves only partial success in the ultimate objective areas of identifying
improvement opportunities and solutions

Upgrading Procurement’s understanding of business and function economic drivers and

developing cases for collaboration based on benefits beyond savings are critical for opening
the doors to deeper engagement.
 Bridging the Gap 21

Finding #5: The Long Road to Advice

From Direction Taking to Direction Setting

Business Advisory Capabilities Represent an Emerging Opportunity

II. Business Partnering Capabilities

4. Service Ethic 5. Client Support 6. Business Advisory Skills

SERVICE COMMITMENT BUSINESS SUPPORT PROBLEM SOLVING

IMPROVEMENT OPPORTUNITY
ADAPTABILITY DECISION-MAKING SUPPORT
IDENTIFICATION

BUSINESS UNDERSTANDING JOINT PROJECT SUPPORT IMPROVEMENT SOLUTIONS

ROLE DEFINITION GOAL ALIGNMENT SUBJECT MATTER EXPERTISE

STRATEGIC INITIATIVES
CASE FOR COLLABORATION
CONTRIBUTION

Business Partner Moderate Moderate Neither Strength

Assessment of Strength * Strength Strength nor Weakness

Business Advisory Skill Attributes

Business Partner Strength Business Partner Overall
Moderate Average Strength Score
Strength

Neither
Strength nor
Weakness Problem Subject Matter Case for Improvement Improvement
Solving Expertise Collaboration Opportunity Solutions
Identification
Moderate
Weakness Success in these two areas is highly correlated with
raising business-partner Improvement Opportunity
Identification and Improvement Solutions Scores

Hypotheses
• Building subject-matter expertise and improving the case for collaboration will improve
Procurement’s credibility and open doors for deeper engagement
• Thorough understanding of economic drivers and operations of the organization is a more
critical element of building business-partner credibility than functional expertise
• Traditional procurement business cases based on savings fail to reflect broader business-
partner objectives
• Poor information availability may be interlinked with lackluster advisory performance scores

* Grade closest to column average. Source: Business Alignment Survey benchmark data;
Procurement Strategy Council research.
22 Bridging the Gap
 Bridging the Gap 23

The Council’s aggregated findings point to alignment gaps that are likely present at many member organizations.

In an effort to make this material actionable, the Council has identified six immediate steps that Procurement
can take to improve its business partner alignment.

Monday Morning
Responding to Business Partner Feedback
Member Action Steps
Business Alignment Survey Aggregate Response

Six suggestions for improving procurement effectiveness based on

the Business Alignment data and suggestions derived from member
conversations

1. Develop a common language across business partners for assessing

importance and performance of critical procurement capabilities;
redefine performance evaluation criteria and metrics to reflect
these standards
2. Create a communication channel to engage business partners on recent
changes in priorities and emerging challenges; reallocate procurement
resources to swiftly tackle them
3. Ask managers of key spend categories to create priority lists of their
top-five concerns (excluding price) that define supplier quality; embed
synthesized results into source identification, negotiation, and ongoing
supplier management processes and metrics
4. Revisit IT initiatives; evaluate emerging low-cost solutions and vendor
capabilities that could improve the economics of spend analysis and
end-to-end transaction automation
5. Hold an expectations-setting session with procurement staff to clarify
cross-functional service and support standards
6. Develop tools and training for procurement staff to cultivate business
unit and spend-category-specific knowledge and to build a credible case
for procurement involvement

Source: Business Alignment Survey benchmark data;

Procurement Strategy Council research.
24 Bridging the Gap
 Guide to Using the
Business Alignment Survey
26 Bridging the Gap

Supporting Your Organization

Understanding and Closing Gaps with the Business Alignment Survey

1 2
Deploy the Business Alignment Survey Navigate Council Library Via
Across Your Organization Business Alignment Tool Structure

Identify and prioritize areas of highest opportunity Find proven solutions from Council research

3 4
Use Organizational Alignment Toolkits and Track Metrics Over Time to
Existing Research to Bridge Functional Gaps Measure Improvement Efforts

Business Partner Score on Procurement’s

Procureme

gy Counci
l
nt Strategy
Council
Supplier Improvement Efforts
nt Strate
Procureme
Procurement Strategy Council
Procurem
en Align -
Illustrative
menttTo ratetgyStrategy Align
oc u re men Stols -
Pr Th e Use of Bu
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Procurementol sin Strategy
ess
ment To Unit Service Level Ser
Unit Agree me nts
vice Lev el Agreement
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e of
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ThUs
The Use of Business Unit Service Level Agreements 2004

Setting

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enting Goals
and Defining

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Processes SELE CTE
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and Defining

Capturing

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Cadbury Schweppes
NiSource

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FirstEnergy
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Capturing Feedback for Continuous Improvement Rio Tinto NiSource
Commonwealth Bank of Australia
Rio Tinto
FirstEnergy

NiSource

Rio Tinto

20 30 40 50
Business Partner Supplier Improvement Score

Improve cross-functional effectiveness Measure success of continuous improvement initiatives

 Bridging the Gap 27

Driving Value
Usage Stories from Early Adopters of the Business Alignment Tool

Provoking Constructive Discussion Setting Procurement Strategy

Procurement

Finance Sales
Priority 1
Priority 2
Priority 3

Human
Marketing
Resources

Situation: Procurement executives and cross-functional
business partners require a starting point for discussing
alignment issues and perceptions of operational performance
Action: Use the Business Alignment Tool results as a
framework for advancing beyond the “hard” conversations
with functional peers and into constructive discussions
Situation: Limited visibility into current procurement
performance and priorities of business partners hinders the
allocation of operational resources to the most pressing issues
Action: Inform executive decision making by using Business
Alignment Tool results as a “report card” to influence
strategic priorities

Launching Improvement Projects Identifying Performance Barriers

Business Partner Strength

Illustrative

Situation: Organizations struggle to prioritize the vast array
of potential improvement opportunities
Action: Launch improvement efforts to address the greatest
opportunities identified through the Business Alignment
Tool survey
Situation: Strategic initiatives often reach critical roadblocks
when cascaded through the procurement organization
Action: Deploy the Business Alignment Tool survey deep into
the procurement function to identify perception gaps that
lead to false assumptions

Source: Procurement Strategy Council research.

28 Bridging the Gap

Survey Participation Checklist

Step One: Survey Kickoff
(Week One, Day One)

Appoint a point person responsible for day-to-day coordination with Council staff

Appoint a champion to steward process and to gain any needed up-front organizational buy-in
Step Two: Participant Selection
(Week One, Days Two–Five)

Establish a respondent pool with:
More than 100 respondents from mid-level management and above
Approximately 20 percent Procurement/Purchasing/Sourcing respondents
Approximately 80 percent Internal Business Partner respondents

Identify business partners within:
Operations
Supply Chain (non-Procurement)
Information Technology
Corporate Finance
General Management
Engineering/R&D
Marketing
General Counsel
Human Resources
Sales
Step Three: Survey Invitation
(Week Two)

Customize e-mail invitation provided by Council, highlighting benefits of participation to respondents

Send e-mail from a senior (Procurement) executive’s mail box
Step Four: E-Mail Reminder Campaign
(Week Three)

Discuss response rate with Council staff and receive current list of respondents

Send pre-scripted e-mail reminder to individuals who have not taken the survey
Step Five: Survey Close and Reporting
(Approximately Week Four)

Close survey once desired response rate has been achieved

Review Alignment Report with Council staff and develop steps to utilize Council resources in addressing identified
improvement opportunities

Participation at a Glance
• Elapsed time (survey launch to delivery of findings): 12 weeks
• Average time per respondent: 20 minutes
• Time investment required for internal advocate: 4 to 5 hours
 Bridging the Gap 29

Frequently Asked Questions

Q: How did you decide on the attributes of a well-aligned Procurement organization?
A: The Business Alignment Tool attributes were developed based on previous Council
research, member interviews, and feedback from a group of progressive members
representing a variety of industries and geographic regions. The Council also
gained cross-functional perspective from its sister programs within the Corporate
Executive Board that work closely with functions representing Procurement’s key
internal business partners.

Q: How will the Business Alignment Tool help me identify and improve my performance and
priority gaps?
A: Your results will be analyzed against those of dozens of other companies who have
already participated to identify areas of significant improvement opportunity.
Council staff will then pair these opportunities with the Strategic and Short Answer
Research Archive to identify best practices that will accelerate improvement efforts.

Q: Does participation in the Business Alignment Tool require a substantial time investment?
A: You can expect to spend a total of 5 to 10 hours on the Business Alignment Tool
survey from kickoff to reporting. The Council has done everything possible to
alleviate the burden of survey administration and participating members find
that the time spent on the Business Alignment Tool has been worthwhile.

Q: Will my organizations’ results be kept confidential?

A: Yes, we will honor the confidentiality of both individual responses and overall
company results. We will present aggregated results from across the Council
membership, broken down by industry and geography, but specific responses
will never be tied to an individual or organization.

Q: Do I aggregate responses in my organization and send you a single, unified response?

A: No, the Council gathers and tallies individual responses through a user-friendly
Web-based survey tool.

Q: When will I get to see my company’s results?

A: Following the close of the survey, it takes about four weeks for the Council to
prepare a detailed summary report.

Source: Procurement Strategy Council research.

30 Bridging the Gap
 Bridging the Gap 31

Procurement Strategy Council

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