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Marie Meliksetian
Marie Meliksetian
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Which C-Suite Member Should the CFO Be Talking to More Often?

Working together, procurement and finance can become strategic while effectively cutting expenses, streamlining transaction costs and mitigating potential liabilities.

Marie Meliksetian, Xchanging Procurement Services
Marie Meliksetian, Xchanging Procurement Services

In today’s hyper-connected world, the current global business climate is volatile; it is one that allows for much smaller margins of error and that means a constant reevaluation of business processes and cost structures. Against this backdrop of consistent change, the biggest business concerns in the global industry continue to be:

• Value creation
• Cost containment and profitability
• Falling demand in the core markets
• Responding to Pricing Pressure
• Difficulty forecasting, planning, investing due to market uncertainty
• Business sustainability

In contrast to these concerns, the major opportunities that still exist for businesses include collaboration between departments to improve efficiencies, cost management/profit management, improving customer relationship management, diversification/new market entry and developing/improving Information Technology (IT) Systems.

The C-Suite is aware of these opportunities and executive meetings often include conversations around how to solve for them and the answer is right there in the room; a closer relationship between the Chief Financial Officer (CFO) and the Chief Procurement Officer (CPO). The two titles working more hand in hand create opportunities that address these major concerns and support efforts around the following initiatives. Out of these major opportunities, therein exist overlapping goals that fall to the CFO and the CPO.

Value Creation: Strategic in nature and contribution to the bottom line
Cost savings: Cost reduction and management in driving profitability
Cash management: Payment terms and payment accuracy
Risk management: Business control and enforcement against fraudulent activities and mitigation of potential liabilities
Compliance: Policy setting and enforcement, process, contract and supplier compliance
Business sustainability and supplier continuity: Streamlining contracts for minimized spend and maximized efficiency

It is no secret that CFOs and CPOs share common goals. They work to increase cash, cut cost, and enforce compliance and business control to reduce risk. They both focus on achieving savings, monitoring and controlling risk while leveraging technologies and processes for greater transparency and value. Working together, procurement and finance can become strategic while effectively cutting expenses, streamlining transaction costs and mitigating potential liabilities, but more importantly creating value.

[Is IT Irrelevant? William Murphy, Chief Technology Officer, Head of Blackstone Innovations and Infrastructure, is a keynote speaker at Interop, taking place in NYC September 30 through October 4.]

So what is the roadblock? Engagement and communication gaps stand out as critical challenges to a united CFO and CPO team from what I have seen over the years of working with top corporations.

Engagement - Depending on the company’s maturity, often CFOs work more closely with other business units versus procurement. Many companies continue to consider procurement as a simple purchasing organization who place orders and negotiate the price compared to a strategic sourcing organization with industry knowledge and commercial capabilities. The business units continue to play the role of the sourcing and procurement organization, especially in the indirect procurement (i.e., procurement that is not core to the business) under the pretext that procurement is not qualified nor have the industry experience to handle business category strategies. As such, this business model shifts the engagement of the CFO to work closer with the business units (i.e., CIO, CMO, HR, etc.) as compared to the CPO

Communication - Talking each others’ language is critical. Procurement would need to ensure their interlock with finance is through resources with communication skills aligned to finance language. Emphasizing metrics, precision, and general financial acumen in preparation for meetings will improve the outcome and general working relationship. When skills shortages are identified, finance may also be willing to help build those skills – improving capabilities and learning to work together at the same.

Accordingly, there a several actionable tips for closer collaboration between CFOs and CPOs.

1. Consider CPOs to report to the CFOs. More and more companies are bringing both departments together. This positions the CFOs to have necessary orientation and responsibility to the procurement targets, related savings and compliance management.
2. Engage in regular reviews. It is important to note that reporting in-by-itself is not sufficient to increase the collaboration. Commitment and communication for common objectives and metrics should be reviewed and tracked throughout the year for performance. Engage the business units. Assign focal points from each the finance, business unit and procurement to review, agree and approve outcomes.
3. Assign procurement focal points that can speak the finance language. This will allow a better and stronger benefit interlock for a common objective—higher rate of earnings, improving working capital, etc.
4. Develop and agree on common savings measurements. Pre agreement on savings definition and measurement model is half the battle to communication, collaboration and consistency.
5. Work together to develop company policies. Manage compliance across business units and target offenders.

A united CFO and CPO equal many benefits and overall, a stronger company that is more prepared to succeed in today’s marketplace.

Marie Meliksetian is managing director of Xchanging Procurement Services.

Meliksetian joined Xchanging from an illustrious career in IBM, where she’s held a number of Procurement specific management and leadership roles around the world, and most recently was IBM’s Growth Market Unit Procurement Business Outsourcing Executive in the Shared Services Practice.

Meliksetian has been recognized by the National Association of Female Executives (NAFE) Women of Excellence for Mentorship, and actively mentors more than 25 people.

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