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January 10, 2019 | Bonfire Interactive
The New Year heralds another set of predictions and priorities for the evolving procurement profession. Among the usual discussions of AI, millennials, and cybersecurity, one deceptively simple directive emerges: the need for procurement teams to measure and share their performance.
Measuring procurement performance is listed among the National Association of State Procurement Officials (NASPO) Top Ten Priorities for State Procurement. It’s also highlighted in SourceOne’s 2019 Procurement Predictions and outgoing Spend Matters editor Peter Smith’s article “Six Procurement Truths for the New Year.”
So, why is measurement considered a priority by procurement professionals at many prominent organizations?
The reasons are twofold: firstly, numbers are a powerful means to demonstrate procurement’s impact. Well-defined metrics can help tell the story of how procurement contributes to overarching organizational goals. As Smith notes, procurement needs to “demonstrate the value we can continue to add in a rapidly changing and digitising world.”
On the flipside, procurement metrics also help your team identify shortcomings and allocate the time and resources to improve these areas, fuelling better performance in the long run.
For public procurement teams, ‘a job well done’ is not as simple as hard dollar savings. Some of the other important metrics of success include:
Before choosing any metrics, it’s valuable to ask yourself or your team “what does success mean?” Spend some time determining the key high level goals that your team seeks to accomplish. If this is new to your organization, NASPO’s Critical Success Areas for State Procurement offer a helpful jumping-off point.
Once accomplished, you can then select key performance indicators (KPIs) and metrics that advance those goals.
Taking time in this step helps you avoid ‘vanity metrics’ and ensures that the metrics you choose have a meaningful impact on the overall strategic goals of your organization.
When it comes to KPIs, there are two types:
Lagging indicators: output-oriented, usually an outcome.
Example: Client Satisfaction survey result
Leading indicators: input-oriented, usually an activity
Example: Adherence to agreed-upon project cycle times
Leading indicators help you to see how you’re tracking on an ongoing basis and make changes if necessary while there is still time to impact the lagging indicators. In the example above, this may involve ensuring that you adhere to agreed-upon project cycle times consistently, as this is likely to cause an increase in client satisfaction.
While lagging indicators may be your objective, leading indicators are a good way to ensure you are improving over time in order to positively impact the lagging indicator.
Need some ideas of what to track? See these Procurement Metrics to Start Tracking in 2019.
The next step is to implement a process for collecting and sharing these metrics.
Many procurement software solutions remove much of the manual work of collecting and analyzing your procurement data, providing KPIs in at-a-glance visual dashboards. If this is not possible, seek to devise a system for pulling and preparing metrics that is realistic given your team capacity.
The key to making metrics stick is consistency and visibility — ensure that you have a method for consistently sharing these metrics with your team or key stakeholders so they, too, take ownership in them and can adapt to continuously move the needle forward.
For many procurement teams, putting procurement metrics in place is an impactful step not only to improve your performance but also to share the story of how your team is helping the rest of the organization achieve their goals, too.