From the pandemic, supply chain disruptions, inflation and military conflicts – planning has become exceedingly difficult. Today’s Chief Financial Officer (CFO) is the CEO’s most trusted adviser and strategist. Traditionally, a CFO’s responsibilities included reporting the numbers, measuring performance and monitoring process compliance. But, as we move through the 2020s, the future CFO role is much more than the once traditional CFO role.
Mike Tyson once said, “Everyone has a plan until they get punched in the face,” and the last few years have illustrated that in the world of business.
The CFO of the future needs to continue delivering value as their duties evolve, avoiding “punches” while also building skills in other areas of the business, enabling them to transform into a multi-disciplined strategist. This blog explores one area for CFOs to evolve: procurement.
Procurement: Moving From Order Taker To Strategic Asset
Unfortunately, procurement is often caught up in a vicious cycle that results in its value to the organization being downplayed. Here’s how that cycle typically plays out.
- Cost savings generated by procurement generally impacts only the bottom-line revenue. Shareholders and analysts focus on top-line revenue, so the value procurement adds through cost savings often goes unrecognized.
- Procurement data is of questionable quality, causing procurement to inaccurately report and forecast costs, eroding its credibility.
- Because of this unenviable combination, procurement struggles to recruit and retain top talent. The best analytical and strategic thinkers migrate to departments where their skills are recognized, resulting in better compensation.
How the Future CFO can Adopt a New Mindset
However, a CFO can break the vicious cycle around procurement by bringing value to business partners. Doing so puts a spotlight on the contributions procurement brings and earns the CFO a more strategic role within the C-Suite. Here are three ways the CFO can realize value for stakeholders.
1. Be Strategic
The traditional, one-dimensional view of a CFO’s role as the numbers person limits an organization’s potential. This coventional view of procurement relies heavily on outdated processes that employ technology to reduce manual and repetitive tasks. These tactical implementations are only as successful as an organization’s ability to manage change (and the people’s willingness to adopt new technology.) Technology that, by design, only replicates a familiar process with marginal improvement.
It may look good on paper, but given the massive changes and disruption involved, the risks outweigh the rewards.
The future CFO has to do more than invest months implementing software in hopes everyone will embrace the same process (but managed using new software).
2. Use Procurement As Strategy
How does the future strategic CFO succeed? The way to prosper is to give procurement a seat at the strategy table and don’t hesitate. Trust that procurement can add value and be prepared to act on the opportunity.
The future CFO should invest in platforms that unify data across disparate systems to enable this approach, creating a comprehensive real-time view of purchasing, supplier, and process performance data. Utilizing the right technology is crucial.
Arkestro’s data orchestration platform has specific industry-leading capabilities and will allow the procurement function to:
- Predict and win 2-5x faster savings
- Improve forecast and benchmark accuracy and frequency
- Better align Procurement activities to organizational priorities
- Build better relationships (internal and external)
- Influence more spend and, thereby, save more
- Do more with less. Higher resource productivity from procurement FTEs
- Identify and favor high-performing suppliers
- Transform procurement from a bottleneck into a strategic partner to the C-Suite
3. Change The Game: Put Theory Into Practice
When done right, future CFO invests, not in tactical software upgrades, but in a strategic Predictive Procurement Orchestration platform. This investment results in fewer steps, fewer decisions, less typing, a better user experience and all of the business benefits of high-intent procurement, including cost savings, supplier performance, and multi-dimensional cost savings aligned with ESG, risk management and diversity goals.
Procurement has long been criticized for being short-sighted in optimizing for short-term cost savings – because that is how many organizations measure procurement’s success. By optimizing for high-intent and high-impact decision making, financial cost savings are the effect of a great process running on a self-driving system rather than trading off with other corporate targets or the end user’s experience and sense of urgency.
The Future Is Now
Predictive Procurement Orchestration can change the world and make the CFO a major strategic player in the C-Suite. Whether it’s aligning cost savings with diversity or sustainability goals, greater supply chain resiliency, driving dramatic cost savings procurement offers numerous leverage points for strategic CFOs to create differentiated value and impact.
Drop the outdated software and adopt Predictive Procurement Orchestration, with fewer steps, fewer decisions, less typing, a better user experience and all of the business benefits. This is the future and this is how a CFO can break the vicious cycle around procurement and bring value to business partners.