Procurement Performance: 6 Reasons Why You Should Measure Procurement Performance
Measuring the performance of acquisitions is a great way to demonstrate the value you add. That’s because well-constructed performance measures allow you and others to judge whether or not you’re achieving your goals, get back on track when performance drops, and set a new direction when you’ve reached your goals.
Here are six specific reasons why you should measure the performance of your acquisitions.
1. Reach your goals. Goals are achieved by first knowing where you are and then deciding where you want to be. Performance metrics are the key to knowing where you are today and then setting a new and better direction. For example, if your goal is to have the best prices in your industry, then a performance measure that compares the price you pay will tell you when you’ve achieved that. Once you’ve achieved that goal, your next goal might be to work with suppliers to lower costs so that prices can be lowered further.
2. Improve performance. There is an old saying that “what gets measured gets done”. You can improve performance by using measures to set a goal and then measure whether you are achieving that goal. If not, you can take appropriate action. If you have achieved the goal, you can “raise the bar” and set a new goal that challenges the current level of performance. Either way performance improves.
3. Opportunities to learn and grow. If your performance measures show that you are not meeting some of your goals, then you have the opportunity to investigate and find out why. The reasons you discover may, in turn, point you in the direction of new insights you need to gain or new skills you need to acquire. If you do this, your learning will have helped you grow as a person and as a Procurement professional.
4. Broken processes. A procurement process is a combination of tasks and decisions that are needed to carry out a procurement activity. An example of a process is “paying a supplier”. These processes must be linked to your. If the performance measures you use for these processes are not achieving their goals, it could be an indicator that the processes are broken. In turn, this will tell you that your goals are not being met, and therefore where and how you need to take corrective action.
5. Influence behavior. Performance measures can be a powerful way to motivate people to change unwanted behaviors. For example, if you measure contract compliance (i.e., what proportion of money spent with suppliers is covered by a contract), you will be able to identify those that are not following your procurement rules and therefore could be costing your supplier money. organization.
6. Communicate your value. Telling others in your organization that the work you do is valuable is not enough. You need to be able to test it, and performance measures are a great way to do that. Using a balanced scorecard approach, for example, will show others that you’re not only delivering financial benefits, but also meeting customer expectations, improving processes, and continually contributing to organizational learning and development.