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Three Steps to Gain Firm Leaders’ Buy-In for Procurement Investments

Clay Fox | December 06, 2018

HBR recently held its annual Procurement Roundtable, an invitation-only gathering of 25+ law firm procurement leaders. In connection with the Roundtable, HBR surveyed the participants on a variety of procurement-related topics ranging from organizational information for benchmarking through current front-of-mind topics / priorities, including investment in procurement technology solutions. These technology solutions are a key tool that can help a procurement function on multiple fronts. They improve operational efficiency and, through controls, mitigate risk, as well as help with tracking, monitoring and reporting key performance metrics that can aid in promoting the procurement function’s value proposition.

Based on the Procurement Leader survey, the most commonly identified technologies currently used by firms are invoice automation/processing (56 percent) and contract management (54 percent). Technologies such as spend analytics and supplier relationship management were less common – only 27 percent and 7 percent, respectively, reported having these technologies in place, although 53 percent of participants indicated they plan to implement spend analytics and 47 percent supplier relationship management. Additionally, 40 percent plan to implement contract management and 32 percent invoice technology.

Despite their plans to acquire procurement technology solutions, law firm procurement leaders struggle to convince their firms to make critical investments, such as in new technology, limiting the procurement function’s ability to elevate its role to a strategic partner. We heard this theme in our Roundtable discussions and we regularly hear it in the market at large.

Traditionally, gaining that support is tied to making a compelling business case that connects the investment to the value it will generate. For the procurement function, that really comes down to measuring and reporting on its key value drivers, whether those are cost management, risk mitigation or service improvement. Unfortunately, many law firm procurement functions do not effectively do this – only 39 percent of our survey respondents currently track and report on performance metrics. That means 61 percent do not. Compare that to the corporate world where, according to the Deloitte 2018 Global Chief Procurement Officer Survey, 88 percent of companies have a procurement scorecard.

To build an effective business case, procurement leaders must (1) align procurement goals and activities with firm leadership’s and the partnership’s priorities; (2) measure how procurement activities support those priorities; and, perhaps most importantly, (3) report to firm leadership and stakeholders on those results.

 

1. Align goals with firm priorities.
It is important for the procurement function to align its efforts with the law firm’s priorities. Of course, cost management is a priority for all firms, but as the complexity of operating a law firm has grown, the areas a procurement function can support have evolved as well. For example, a firm may prioritize risk mitigation (the procurement function can help with third party risk management); client service delivery (the procurement function can make sure that the firm’s people have the tools); diversity and inclusion (the procurement function can track supplier diversity); and more. With an understanding of the firm’s (and specific firm leaders’) priorities, procurement leaders will be better equipped to identify procurement capabilities that can support those goals and outline a strategic plan to advance those capabilities.

 

2. Track metrics that tie to these priorities.
All procurement functions should keep metrics related to cost savings – that is the baseline. Beyond that, procurement teams should measure activities that promote the firm’s priorities discussed above. For example, the procurement team can track contract coverage (annual spend covered by contracts), monitor risk profile (percentage of suppliers and spend with high or critical risk-rated suppliers) and report supplier diversity spend (percentage of spend with diverse suppliers). Fortunately, those procurement functions that have started tracking and reporting metrics are beginning to take on a more strategic role in their firm, given the ease of demonstrating the function’s value to the organization.

 

3. Report to stakeholders on a regular basis.
Finally, and perhaps most importantly, procurement leaders should regularly report progress to relevant stakeholders. This helps demonstrate a specific connection between the procurement team’s efforts and outcomes, while showing progress towards specific goals that tie to the firm’s priorities. These reports serve as the foundation of the business case for new investments by demonstrating the procurement function’s current value to the firm and giving context for explaining the proposed investment’s value. With a solid business case, you are much more likely to secure buy-in from leadership.

For more information about how a procurement metrics and reporting program can help your firm, please contact me at CFox@hbrconsulting.com