Measuring the performance of a procurement department

hudgeon — Fri, 08 Dec 2006 11:26:19 +0000

I’ve recently put together a list of measurable procurement team activities and a suggested metric for each activity. It’s by no means revolutionary but you may find it useful in your organisation.

Listed below are the activities and metrics. Note that your team’s metrics will differ from those listed below based on the behaviour you are attempting to drive within your team, your organisation, and your supply base.

Spend analysis: Enriched addressable spend mapped to the organisational hierarchy (as a percentage of total addressable spend)
Sourcing: Savings, total and savings divided by the sum of procurement staff salaries.
Ordering: Spend through Procurement-controlled channels (e.g. e-catalogues) divided by the sum of P2P staff salaries
Deliveries: Metric: Average elapsed time from supplier dispatch to end user receipt
Invoicing and payment: Metric: Percentage of invoices paid on the date due (or before with negotiated discount)
Contract administration: Metric: Percentage of total addressable spend under contract
Supplier management: Metric: Spend covered by suppliers providing simple cost and SLA reporting back to the procurement department divided by the sum of supplier management staff salaries.

You’ll have noticed that some of the metrics are ratios between the objective and the cost of staff. I find this useful in focusing staff not on the limitations of our resourcing but on the efficiency of the resources we do have, and to constantly search for ways to make themselves more efficient.

Five leadership behaviours correlated to performance

hudgeon — Fri, 22 Sep 2006 21:12:59 +0000

A recent study at Harvard Business School identifies 5 leadership behaviours that are correlated with increased motivation, creativity and performance of team members. There’s nothing ground-breaking or even surprising in the results, but it serves as a useful validation of the importance of day-to-day management activities.

“The team leader’s behavior is critical. I found that there are five leader behaviors that have a positive influence on people’s feelings, and the daily diary method allowed us to identify these behaviors at a very granular level. One of these is supporting people emotionally. The second is monitoring people’s work in a particularly positive way, and that has to do with giving them positive feedback on their work or giving them information that they need to do their work better. The third behavior is just plain recognizing people for good performance, particularly in public settings. The fourth is consulting with people on the team—that is, asking for their views, respecting their opinions, and acting on their needs and their wishes to the extent that it’s possible. And the fifth category was a grab bag of things. But the most important aspect here was collaborating—that the team leader rolled up his or her sleeves and actually spent time collaborating with somebody on the work.”

Contract Capital Management » Management

Measuring the performance of a procurement department

Five leadership behaviours correlated to performance