Functional excellence vs strategic alignment

posted by Britta Nonhoff
15 September 2017

Procurement is a critical process in most companies; not only impacting the bottom line, but also supporting supply base insight, innovation, risk and social responsibility.

The argument rages across academia and business as to how to make procurement more effective?

Through a systematic review, we have compared directions in academic literature with consulting publications and practitioner experiences. The findings raise the fundamental question of whether procurement success within a company is a function of organisational status, strategic alignment, maturity, a combination of these, or none of them?

Organisational status

Strategic procurement literature argues for greater recognition and involvement of the procurement function by the business. However, we would argue that there is no evidence that procurement performance is related to status.

Strategic alignment

In academia, strategic alignment is used to express procurement’s support of long-term business objectives; essentially the procurement strategy is derived from and aligned to the company strategy. In practice, the evidence points to purchasing professionals selecting strategies to address specific challenges or opportunities and these may, or may not, be seen as strategic for the company.

Maturity

Maturity models are a useful benchmarking tool to compare procurement practice and attainment across different dimensions. Researchers agree that procurement requires a higher level of maturity, implying that every company should become excellent in everything. This line of thinking seems to ignore the specific context of the firm and where excellence is needed, against being just good enough.

The key to understanding both maturity and alignment seems to be that of its ‘context’ – the reality is that ‘right’ can mean different things. Yet, this idea is almost entirely missing from the academic literature. It is mentioned more frequently in consulting practices’ white papers, but the idea is not developed because of their focus on individual clients, which inhibits answering bigger picture questions.

These observations point to an important gap in management theory about procurement. It should be grounded in the context of the firm and rely on a rigorous, yet pragmatic and engaging, approach. Bridging that gap to give procurement professionals and their boards better guidelines for both organisation and practices cannot be the domain of either academia or consulting – it will need a joint endeavour.

☛ Britta Nonhoff is a consultant at LCP Consulting – a BearingPoint company

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