THE FACULTY QUARTERLY

SPRING EDITION 2015


How credible is your scorecard?

Why benefits realisation starts with a trusted benefits framework

Is Procurement going back to the future? Market volatility, the tumbling Australian dollar and sluggish Chinese growth certainly has procurement teams once again looking to the detail of their existing contracts to confirm they are extracting the full value of negotiated benefits.

The consequences poor benefits tracking extends well beyond inefficiencies and missed cost savings.  Impaired stakeholder relationships, opportunity costs, reduced competitive advantage and loss of credibility are all outcomes of poor benefits measurement and reporting.

Identifying six-major hurdles for benefits realization, The Faculty’s ‘Making it Stick’ research also provides case studies and a check-list for CPOs to identify where their benefits programs are falling short.

 “One of the most exciting aspects of this new research is its applicability,” says the report’s author and The Faculty’s Research Manager, Dr. Hugo Britt.  

“Rather than simply identifying a problem that continues to plague procurement functions world-wide, Making it Stick lays out clear steps that CPOs can take to deliver immediate and lucrative results,”

Speaking on behalf of The Faculty’s consulting team, Jade Campbell, Principal Consultant believes the key to tacking those hurdles that prevent savings making their way to the P&L, lies in an enterprise-wide change management exercise.

Jade concedes this is no small task and that creating this kind of ‘cost consciousness’ takes a integrated, multi-pronged approach, involving building cross-functional collaboration, minimising maverick spend; developing crystal-clear benefits definitions, measurement and validation processes that are understandable across the organization, and improving contract management capabilities and discipline.

Of these, Jade recommends the first step is to develop clear benefits definitions and then to measure and report against these relentlessly.

In building this framework, it’s imperative to get this signed-off by the C-suite. “It ought to go without saying, but getting the C-Level, and particularly the CFO on board, will be critical for making your savings stick.”

“Too often, benefits figures presented by procurement are simply not believed by senior management,” says Jade.  “If Procurement continues to claim benefits that are perceived as irrelevant or non credible, the function will never be seen as a true source of value.”

“At The Faculty, we’ve been helping organizations not only build their savings framework, but present this to their Executive in a way that is aligned with broader business’ objectives.”

One of the first things The Faculty advises is to drop the

‘procurement speak’ and start talking the language of the business.

“We coach CPOs and their teams to frame everything using a simple overarching message that aligns with the objectives of the business,” explains Jade. 

To do this, procurement first needs to understand the organization more broadly.

“Find out how your business partners are measured.  What does success look like for them? Then frame your benefits realization framework and presentation to the C-suite in terms of how they will help your stakeholders and the broader meet its goals.”

The next critical step for realizing benefits is the creation of a scorecard that engages with the clients, customers and stakeholders to fully implement a benefits realization framework.

With only one-fifth of research respondents currently incentivizing their procurement teams beyond contract execution, this is problem is widespread.

On this issue Jade says:  “In our experience, tying KPIs and other incentives to the realized benefits will refocus the team’s attention on tracking and managing benefits after contract execution.”

In addition to developing benefits realization frameworks and scorecards, The Faculty is able to assist CPOs through its unique blend of consulting expertise, world-class training programs and the collaborative learning offered by the Roundtable program with::

  1. Training, coaching and developing staff, stakeholders and customers to improve benefits realisation and maintain the savings won by procurement

  2. Driving the message home by being part of your “Making it Stick” roadshow

  3. Auditing and streamlining governance, policies and processes to ensure every dollar of savings hits the books

  4. Working with C-level executives to drive the business case across the line

  5. Reviewing tender evaluation and negotiation processes to ensure that they maximise benefits 

  6. Leading internal teams while the CPO concentrates on running their business

  7. Developing best-practice internal communication strategies and business updates

  8. Simplifying, standardising and centralising your organisation’s benefits realisation methodology and establishing rules of engagement across the organisation.

  To discuss practical applications of Making it Stick research and how The Faculty can assist in realizing benefits, please contact Jade Campbell via info@thefaculty.com or via +61 3 9654 4900.