Chief Procurement Officer: Overview of the role's skills, KPIs and variable pay

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July 9th, 2019
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What are the main qualities that a Chief Procurement Officer needs to have in 2019? A handful of professionals recently attempted to answer this question in the latest Baromètre des Décideurs Achats (procurement decision-makers barometer) study, carried out in partnership by Determine, the French National Procurement Council (CNA), Décision Achats and Nomination.

Three key themes were addressed in this study:

Which skills are essential for a Chief Procurement Officer?

Chief Procurement Officers must develop their skills in the following three areas:

  • Sourcing innovative suppliers

Chief Procurement Officers are responsible for recruiting innovative suppliers in order to give their company a competitive edge. It is vital that companies surround themselves with innovative partners. This not only allows them to benefit from their capital gain (process, products, techniques and skills), but also offers new sources of savings.

  • Risk management

In response to an ever-changing regulatory environment (Sapin II Law, GDPR[1] etc.), knowing how to manage risk is now essential for companies. Procurement departments often lack ability in this area. Nowadays, Chief Procurement Officers must be able to secure supplies and contracts, as well as safeguard supplier relations.

  • Sustainable procurement

An increasing number of companies are engaging in a CSR approach[2], which is reflected in procurement departments by the growing popularity of sustainable procurement. However, this concept is still in its early stages and the vast majority of Chief Procurement Officers stress the need for training and resources to develop their knowledge in this area.

What are the main KPIs for a Chief Procurement Officer?

Whether we're looking at Chief Procurement Officers or their teams, the main indicator remains the same — savings! However, Chief Procurement Officers can introduce new indicators, such as avoided costs, innovation and risk management. The aim is to reposition procurement departments as business partners.

Directly linked to savings, Chief Procurement Officers are also judged based on their company's net profit.

They are also evaluated based on performance criteria specific to managing their supporting duties:

  • Internal co-operation and project success
  • Team management

What proportion of a Chief Procurement Officer's earnings is made of up variable pay?

Chief Procurement Officers progress within a performance culture, with 68% of respondents saying that they receive variable pay. For the vast majority, this variable pay makes up less than 20% of their earnings.

The evaluation criteria for Chief Procurement Officers are consistently linked to their KPIs. Nevertheless, new trends are emerging with variable pay linked to CSR or supplier listings.

Chief Procurement Officers contribute to key challenges in their company's competitiveness, CSR and risk management. These officers are often a member of the Management Committee or the Executive Committee, and therefore align their procurement strategy with that of the company in order to support its development.

 

[1] General Data Protection Regulation

[2] Corporate social responsibility