THE FACULTY QUARTERLY 

Autumn, April 2013

Why lip service is never enough

Creating a customer oriented culture

It’s never easy admitting you might be wrong.  For years procurement has been talking stakeholder engagement, but perhaps we’ve been wide of the mark. 

CPOs are telling us: “We didn’t need to engage, we needed to serve.  We needed to know what our customers’ business drivers were and help them achieve them. We’ve been saying ‘We need them to understand us, what we are trying to do’, when really we should have been trying to understand what they really need. 

The Faculty’s Director of Consulting, Andrew Cordner, believes that just as the business is orienting towards the customer, so too must procurement: “To deliver real value, procurement must help drive the organisation’s goal of becoming customer centric and consider how can become more customer oriented itself.”

Companies which excel at customer centricity grow their value proposition, create loyalty, increase customer satisfaction and (hopefully) revenue. Get it wrong and customers head to the competition.  Or in the case of procurement, circumvent process, create leakage, increase commercial risk and ultimately act as ‘blockers’ to the procurement value proposition. 

To stay relevant to the business, CPOs need to ask some hard questions – like whether you truly understand what your business’ customer acquisition and retention strategy is?  According to Andrew, it’s simply a matter of: “The internal stuff has to reflect the external stuff”.

Creating a customer oriented procurement culture is not an easy task, particularly where the business is highly fragmented or change resistant.  “Customer centricity goes well beyond hollow gestures and lip services,” says Andrew, “It requires procurement to transform its entire operating model around ‘the customer’, increasing satisfaction and procurement’s own value-contribution in the process.

Here, Andrew offers a path for redesigning your procurement function to be truly customer centric:


Understand procurement’s impact on the external customer
It’s well accepted that improving employees’ understanding of how their efforts contribute to the business’ overall objectives increases job satisfaction, performance and advocacy. 

Andrew suggests the starting point for re-orienting towards the customer is to ensure everyone in the team understands how their role is related to serving the end customer and every internal customer in between. 

 “Helping procurement professionals to understand how their role connects to the external customer is critical for normalising and reinforcing behaviours with internal customers,” says Andrew.


Identify your customers 
By its very nature, Andrew believes the starting point for creating a customer oriented culture does not start with strategy, systems, processes, or even people – it must be with the customer. 

Historically, procurement has focused on the buyer – supplier relationship. A truly customer-centric procurement team now understands there are many more “customers” that they need to engage with in order to deliver value to the business – from suppliers, Executives and Finance, to the business unit heads, end users, social enterprises, government, local communities and ultimately the organisation’s external customers.

To fully understand the breadth and complexity of procurement’s customer base, Andrew recommends creating a sociogram: “CPOs are using sociograms to map all the links, interactions and relationships that exist between procurement, the business and the external customer”. in the Faculty’s experience, this visual map will help to clarify procurement’s relationships, channels of influence, lines of communication and so on, that will need to be considered in cultural transformation.


Understand how best to engage the customer
Procurement functions are often faced with the dilemma that multiple customers will have varied, often conflicting requirements, usually at exactly the same time.

When procurement engages Finance, Finance as a ‘customer’ is keen to understand what procurement can do to increase shareholder value. When procurement engages the end user within the business, procurement is trying to ensure the best experience for them – be it price, risk mitigation, innovation, supply continuity and/or right customer service levels.

“Creating a customer oriented culture requires a dedicated communication strategy, with carefully tailored messaging for each of the various customer groups,” says Andrew. A major player in the energy and renewables space has recently embarked on a major communications initiative as part of their 18 month transformation program.

 “Like any communications strategy, our client has really had to think about four things: 1) who their customers are; 2) what are the most relevant customer insights for each group; 3) how procurement’s service offering can address that challenge and 4) what are the most most appropriate channels for delivering that message.” 


Understand what your customer values 
Just like a customer-centric product development or marketing function, customer centric procurement teams must develop a holistic view of customers’ evolving life-cycle needs.

“Start by mapping the procurement customers’ lifecycle and aligning this to procurement’s ‘ways of working’ with the goal of improving customer experience,” suggests Andrew. 

For some customers, this may play out as simply as having a single point of contact, or the ability to self-serve through intranet, tools and templates and purchasing platforms, or it might mean improving the user interface of eCatalogues, or simply, the ability to get an answer more quickly. 

The Faculty has administered numerous ‘healthchecks’ for procurement teams keen to understand the state of their most important customer relationships and to reveal how well they are meeting expectations. “We frequently find a large gap between the two,” says Andrew.


Make procurement decisions with (internal) customers in mind
Once you understand what the customer values, procurement must focus on placing the internal (and external) customer at the heart of all strategy development and decision making.

“The ability to ‘walk in the customers’ shoes’ requires strong listening skills and genuine empathy,” says Andrew, and may be skills more highly sought in procurement professionals of the future.

Empowering senior procurement staff to take decisive, customer oriented action is also important.  “A major resources company has transformed their customer relationships by assigning procurement lead team members to act as account managers to the key internal customers,” reports Andrew. 


Is your team capable and credible?
Procurement professionals have long been selected for their ability to analyse and advice.  In a customer centric environment, the emphasis shifts to creating and embedding a service culture.

Representing a fundamental shift, the pattern of conversation moves from telling (‘this is what we are doing’) to listening (‘this is our approach, what are your thoughts?’). 

“For most CPOs, this will pose a skills gap within their current procurement team, requiring a combination of change management initiatives, capability  interventions and possibly even recruitment activities to fill”.   


Don’t set and forget. Check.  
Customer centricity is a way of operating, not a short term initiative.  Andrew warns: “Nurturing and being proactive about customer relationships is key. Customer centricity is not a ‘set and forget’ mentality.”

Andrew suggests tracking and validating progress by measuring procurement’s customer centricity in the same way the wider organisation measures the health of external customer relationships. “One of our FMCG clients ‘takes the pulse’ of their most important relationships annually to track progress and circumvent issues before they escalate”. 


To learn more about how your procurement function can deliver more value by re-orienting towards the customer, contact Andrew Cordner on +61 3 9654 4900 or via Andrew.Cordner@thefaculty.com.au