In this economy, one thing we can count on is that all organizations will be asked to do is stretch their budgets and increase productivity. And although an efficient procurement department is a net plus on the company’s bottom line, they won’t be immune from the calls to do more with less. So, how do you do it?

Getting more from your organization involves liberating Purchasing staff and organizations from stultifying systems and structures, and from unclear objectives, arbitrary use of power, and the frantic activity and effort (much of it wasted) found in the unorganized organization. Organizational Design is one of the most potent tools available to senior managers for shaping the direction of their organizations. Organizational Design focuses on human behavior at work and, more importantly, how to develop processes and systems that keep employees intellectually engaged, rather than driving them to distraction, burnout…and seeking “other opportunities”.

We have found that CPOs need to keep the following 6 factors in mind to create a successful purchasing organization:

1. Design a structure that empowers. Although there is no one-size-fits-all org chart, a well designed organization balances centralization to maximize economies of scale and decentralization to empower local requirements and decision making. Excellent examples are Telefonica, RWE, J&J and Schlumberger (the later 3 are described in this white paper).
2. Attract and retain Purchasing talent. With purchasing staff moving away from transactional roles and towards strategic functions, job requirements have changed…a lot. McKinsey Quarterly found that “paying an additional 40% to hire an A player could yield an overall return of 100% or more in a single year.” Once you have found and hired that top talent, retain them by proactively aligning their aspirations with organization goals. Encourage high performers, stimulate their minds and minimize the hassles that hinder their performance.
3. Frequently update tools and processes. With the most advanced productivity tools on the market, it’s hard to get bored. This is particularly true of top performers, who typically embrace continuous change and adoption of new capabilities. SAS’ philosophy on the subject sums it up best: help staff do their best work, keep them intellectually engaged, and remove distractions. Evolving technology and processes certainly helps on all 3 fronts.
4. Implement meaningful metrics and reward systems. First figure out what metrics will be meaningful for measuring the purchasing organization’s impact on their goals (a chart that maps goals and measurements is available here). Then create rewards that encourage people to care about the metrics. These don’t have to be monetary. Recognition, career-growth, influence and even something as simple as a preferred parking space can be very powerful motivators.
5. Nurture a culture of entrepreneurship. Entrepreneurs are empowered to perform and tasks and utilize any processes needed to get the job done. They loath overhead (the dreaded bureaucrat’s empire) and always try to do the most with the least. Foster this spirit and your department’s profile, results and reputation with the company will flourish. And your empowered, engaged employees will surprise you with their positive attitudes and creativity.
6. Deliver an impact. Once all of the above factors have been integrated into the purchasing organization, success is a sure (or near-sure) thing. Communication and alignment of goals within the department is key. But, it’s also important to sing the praises of your group to the company at large. Be vocal about the achievements in order to grow the influence and spend under management of the procurement organization.

***Sections of this post were based on a white paper I co-authored titled “How to Get More From Your Organization”. You can download the pdf version here.***

Colleen Slaughter is a Senior Consultant in Ariba’s Spend Management Services group. Colleen specializes in Change Management, Talent Management, and Organizational Design.