What motivates procurement leaders such as CPOs (Chief Procurement Officers), Procurement Directors or equivalent? And does this vary between public and private sectors?
They are not just intellectually interesting questions. That issue is something that interests suppliers in particular. I have often presented to executives on the supply side and understanding the motivation of the senior people they are dealing with is obviously very important to them. They believe – rightly or wrongly – that understanding how CPOs think will help them present their own firms better, and ultimately win more work with the CPO’s organisation.
The answer to that question is that many of the factors are exactly the same for public and private sector executives, and indeed for executives from different market sectors or industries. There are some common areas of interest pretty much everywhere.
So of course we would start with achieving value for money, which would hopefully be on the list of any (and every) CPO. Unfortunately, that might translate into “savings” rather than true value for money, depending on how procurement is measured. Going back a few years, we would have said that the public sector was less concerned about “savings” than the private, but with money tight for governments everywhere, and a more commercial focus now in many cases, procurement people in the public sector are often just as obsessed with those savings figures. But whether that is appropriate is another whole topic.
Satisfying the internal stakeholders, budget holders in particular, senior budget holders even more so, is another objective that both public and private sectors have in common. Actually, this one may be more important in the private sector, where organisations can decide that they don’t need procurement people (or even clear processes) at all! In the public sector, EU regulations do make formal procurement a necessity, so arguably procurement people are slightly less worried about their internal stakeholder reputation than their private sector equivalents – with one exception (which we will come into in a moment).
Supporting the wider corporate objectives from a procurement perspective, in particular supporting corporate social responsibility activities, is another factor on most CPOs’ lists. But the difference here, we would argue, is not between public and private sector executives. It is more between organisations that decide, either for altruistic reasons or for more selfish reasons, that they want to embrace CSR, and those that don’t make that choice. And that includes both public and private sector.
But the biggest difference is in what we would consider the number one objective for CPOs and senior procurement folk generally in the public sector. That is to keep their most senior stakeholders – politicians, elected representatives, and the very top level of executives – out of the newspapers and media generally. In other words, don’t let procurement become a scandal. The worst thing for a CPO in government is to see their “boss” on the front page of a newspaper because of a major failure in procurement, a scandal about a supplier, or perhaps evidence of corruption.
We may be a little cynical but most public procurement people would sacrifice a significant percentage of “value for money” in return for ensuring that there were no problems of this nature. Part of that is an admirable desire to support the top people and make sure they don’t get into trouble. But the other factor is that the CPO knows this sort of issue will lose them the confidence of their bosses and can actually bring a career to an end quite quickly. So that is a major reason why the public sector is often considered risk averse in terms of procurement approaches.
A few years ago, the British Prime Minister called for public procurement people to take more risks. “We will stand by them if they do that”, he said. But then he spoilt that sentiment by adding “as long as they have worked within the rules.” And that is the problem. To take more risks in public procurement often means working to the very edge of the EU or national regulations or even perhaps stepping over the boundaries.
And if things go wrong then, who will take the blame? Will it be the politician or the Chief Executive? Well, it might not be good for them, but there is no doubt that it will be positioned as largely Procurement’s fault! Now we don’t have an easy answer to solve this problem. But it may be that procurement people, senior management and elected representatives all need to be more open and honest with each other about the risks that they choose to take (or don’t choose to take), and share responsibility for both success and failure.