We recently surveyed over 300 industry leaders and found that Finance and Procurement still don't agree on a number of key business initiatives. It was surprising to find that only 20% of both CFOs and CPOs felt the two functions were aligned on communication, processes, reporting, culture and training.
To gain an inside perspective on the issue, we joined forces with our well-connected network to run a senior leadership guest webinar. The event proved to be a great success and provided some valuable insights into how Finance and Procurement can get more aligned on areas such as people, process, technology and communication.
What became clear from the webinar discussion was that for Finance and Procurement to truly align, the reporting structure has to be right. Having a sufficient reporting structure allows for clarity on deadlines, expectations and ensures alignment on key objectives and initiatives.
Juliet Sotnick, CPO at Babcock, expressed the importance of Finance and Procurement meeting on a regular basis, as it facilitates good engagement and alignment throughout the business.
For Finance it is vital to be aware of Procurements key goals and objectives, as well as their own. Having awareness of Procurement agendas helps align the two functions, as it demonstrates how the other function is operating and provides an insight into the deadlines they are working towards. As Akbar Suleymanov, Finance Director at GSK stated, there is a benefit in educating Finance about what Procurement does and doesn't do. As in many situations Procurement is not understood by Finance, which could be why there is such a vast alignment gap in many businesses.
Aligning on processes is key to ensuring objectives are met and business plans are followed through. However, all parties involved in the process should outline the key objectives and implement a baseline from the start.
Both functions need to be aware of the strategic objectives but also fully understand them. Misalignment usually occurs when there is lack of transparency around what the baseline is. So, having a set of strategic objectives which are reviewed on a regular basis, and that everyone understands is fundamental.
Technology can be a key driver in aligning Finance and Procurement on areas such as, purchasing and forecasting.
For instance, being able to access a central database provides sight of projected costs, guidance on cost avoidance measures and savings, etc. Data analysis is also important for reviewing the key data trends that help project for the future. This is also useful for providing sight of when key contracts are up for renewal.
The issue most businesses face is the lack of integrity in their data, which results in misalignment around the key data trends that are used for forecasting. Nonetheless, there is an opportunity for Finance to work with Procurement to review central databases and work in partnership to outline strategic future objectives.
Aligning on communication
Essentially, communication is the leading factor for fruitful alignment in all areas of a business, which is why it is essential for individuals to clearly communicate with each other on a regular basis. For Finance to align with Procurement on key business initiatives, it is vital to meet on a regular basis. Of course, this is dependable on the logistics of a business but even setting time for conference calls or Skype meetings is crucial for reviewing projects.
Ultimately, upfront communication allows Finance to understand Procurements key objectives, share feedback and ensure business requirements are taken on board.
Raymond Leclercq, who has extensive experience as a CFO within leading Plc’s,emphasised that both functions need to make a conscious effort to communicate with one another to drive success.
The webinar has shown there are many factors that contribute to a successful alignment between Finance and Procurement. If the current reporting structure isn't working, then businesses need to make that structural change to move the relationship forward.
If we take one thing away from this webinar, I think it is imperative to remember the importance of communication and having a reporting structure that supports this. Remember to take an active approach in providing feedback, clarifying understanding and working together to review objectives on a regular basis.
If you're looking to establish a culture of alignment in your business, why not listen to the webinar for some detailed discussion on getting better aligned? https://soundcloud.com/executivesonlineuk
Alternatively, contact me at firstname.lastname@example.org or if you would like a confidential discussion call me on 01962 893315.