Each business function has its own ways of tracking its performance and contribution to the wider organisation. Historically the focus for procurement has been to purely track savings achieved. In recent times procurement savings tracking has evolved by borrowing heavily from sales performance metrics and processes. The use of a savings pipeline for tracking and managing projects from ideas through to implemented cost reduction has been widely adopted and is effectively the inverse of the funnel used for many years by sales functions.
But as we become more sophisticated about measuring procurement performance, are there more metrics commonly used by other functions could we borrow from? Human Resources is one function with several interesting metrics that could be adopted to the procurement setting. Here are 3 examples.
This is a vital metric for HR functions and is usually assessed via an annual survey with reasonable consistency year-on-year to make measuring trends possible. In a procurement setting this would be modified to be Stakeholder Satisfaction. Regularly surveying your key stakeholders, either formally or informally provides a good indicator of how procurement contribution is perceived within the organisation and will help identify where improvements can be made.
Another application could be Supplier Satisfaction. Having switched from procurement to a customer facing role, I know some customers really help us improve as a supplier while others don’t. Surveying key suppliers to understand their view of the relationship they have with procurement and potentially other areas of your organisation can uncover valuable information.
Recruitment / Retention Success
These metrics can be directly applied without any adaptation. Many measurements exist in this area, but some of the most interesting for procurement could be:
· Acceptance rate of offers made (percentage of job offers made that are accepted)
· New hire turnover (percentage of people leaving within 12 months)
· High performer turnover (percentage of those identified as high performers leaving in a 12 month period)
A healthy dynamic procurement function should be an attractive place to work. Many of us stumbled into procurement by accident, but the reason we’re still doing it is because it’s fun, right? The metrics above can show us how attractive our function is to outsiders and to our current employees. Monitoring these metrics over time should help show when things are going well or if there are underlying issues causing a problem.
Revenue per Employee
This is used by HR to judge whether the overall workforce is the right size for the revenue being generated. With procurement this can easily be applied to either spend managed or to savings achieved, or to projects managed with a 12 month period, but could potentially be applied to other “softer” benefits. Industry benchmarks are available – for example our customers are averaging around $1.3m annual savings across 15 projects per procurement employee, but this varies according to industry and size. Again, measuring over time will show trends to ascertain whether performance is improving or declining.
So as the scope of what we define as procurement performance broadens from purely savings tracking to a variety of hard and soft measures, we should absolutely look to adopt the best ideas from our colleagues in other functions. It can only help procurement to improve and thrive.
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