We all know getting a good price is important.

But if you ask the best minds in modern Procurement, the bottom line isn’t everything.

Often, the practices and techniques that lead to great outcomes are more nuanced than price-per-unit or multi-year contract pricing. And improving outcomes requires everyone—from stakeholders on up to the CFO—to do their best work together. 

So how do you move beyond the line-item approach to embrace a value-centered, outcome-driven procurement practice?

It’s a topic Sören Petsch, Head of Procurement at CommerceHub, has spent his career exploring.

As a “Financial value creator” with over 20 years of experience in Finance and Procurement, Sören has used the basic principles of trust and transparency to build a thriving procurement practice.

Sören recently sat down with us to talk about the benefits of the enablement mindset, and how moving away from bottom-line measurement can build stronger organizations while still saving money.

The "cost-per-pen" trap 

As a Procurement leader, Sören has spent a lot of time discussing savings strategy with Finance. Many times, the relationship between Finance and Procurement can be summed up in a single phrase: cost savings.

Sören sums up the old-school method of procurement with the quintessential procurement example: office supplies. 

“You negotiate with a supplier—Staples or OfficeMax, for example. You look at usage patterns, and then start negotiating the cost per pen. Which is insane.”

While surely, you may use thousands of such items, “you have a few hundred line items, and it's a very inefficient way of spending your time.”

Though inefficient, it’s a common way of doing business. That’s because, in a function that thrives on the cost metric, cost savings is easy to quantify. It shows up readily on a spreadsheet and fits nicely into performance evaluation.

But there’s a deeper issue with the cost-savings focus: it creates “an unending conversation of cost savings versus cost avoidance… I’ve spent as much time on that type of conversation with Finance as I have on the procurement side of things.” 

The casualty there is value creation: with so much attention given to this topic, “we’re not doing enough of actual procurement work.” 

That extra work, when Procurement is empowered to do it, can drive organizational outcomes that far exceed the cost savings of bottom line, item-by-item negotiation. 

In Sören’s view, “[Procurement is] here to bring external expertise that the company doesn’t have in the form of SaaS and consultants, under the umbrella of the company, safely and with a sense of urgency.”

The goal should be to keep an eye on costs, while also accelerating the speed to market. Sören Petsch quote 1

The culture and cost benefits of enablement in procurement

The benefits of enablement-based procurement go beyond time savings and productivity. In a service-focused environment, the stakeholder and organization become the beneficiaries in a genuine and empowering way. 

This connection is an oft-touted organizational pillar, Sören points out.

“I’m sure you've heard conversations about building trust with our stakeholders, enabling the process, treating everybody as a partner.”

Sometimes, though, that organizational ideal of the procurement process falls short.

“If Procurement is the Cost Savings Department, we break the trust of our internal stakeholders all the time.” 

When procurement moves to an enablement approach, though, the focus shifts from cost savings to best outcomes. That includes outcomes that empower staff to function independently. 

Within CommerceHub, this approach is “trust, then verify.” This procurement mindset has allowed Sören and the team to create a well-controlled purchasing process that empowers stakeholders without friction or strict spending controls. 

For office supplies, for instance, associates order through an Amazon Business account, allowing them to select the option that works best for them with only a few guidelines in place (for big-ticket items like desks and office chairs).

The litmus test for purchases is simple: “Would you write that check if this was your money?” In most cases, this process results in good purchasing decisions and overall better outcomes.

While cost-cutting is not the primary objective in an enablement approach, the approach still nets similar results according to Sören. Partly, this is because trust-based practices create better communication and rapport. 

“I have earned a seat at the table, and I can now start influencing. My perspective is one of many or several, so I just want to be able to listen, learn, and then ask questions.”

With that seat secure, conversations can move toward mutually beneficial deals, faster deal flow, and in many cases, better pricing.Sören Petsch quote 2

4 ways to foster an enablement-focused Procurement practice

For practitioners eager to leave the cost-savings model behind, there are key strategies for embracing the enablement model and shifting to a more cohesive way of thinking. It’s all about building communication and trust throughout all levels of the organization. 

1. Aim for curiosity instead of speed

For Procurement leaders, structuring your team around enablement is imperative to outcome-focused strategies. It’s not about getting to the lowest price fastest. “When you execute for speed, you're going to make mistakes.” 

Therefore, when Sören brings on new Procurement team members, his search criteria vary from the customary qualifications.

“I look for curiosity and coachability. With curiosity, very simply, you’re able to ask, ‘What are we solving for here?’ Coachability is important because that person has to be okay getting feedback, and willing to give feedback.” 

While all the skills necessary in Procurement can be taught, in Sören’s estimation, “I can’t teach [a team member] to be curious… you either bring it or you don’t.” Sören Petsch quote 3

2. Build genuine trust with stakeholders

At its heart, enablement-based procurement is about trusting people to make the right choices. 

It requires both Finance and Procurement to relinquish stricter approaches to budgetary controls, and in some ways step back from the process. 

“I don't need to drive every aspect, like which vendor we choose,” explains Sören, “I just want to make sure that we collaboratively square that circle.”

3. Empower people through process

Trust and transparency go hand in hand, so Sören promotes the right tools to centralize the process

“There are all kinds of bright, shiny tools, but I believe that ultimately, the underpinning is a workflow tool. That makes the whole process visible and more manageable.”

With that transparency in place, the Procurement team can deliver a repeatable process that informs and empowers stakeholders across every level. 

“Good processes drive good outcomes. I measure every step of my process. We have SLAs for every step of the process from legal review to procurement review.” This step-by-step system allows him to set expectations and help clear the path to approval. Sören Petsch quote 4

4. Bring Finance in early, and keep them informed

Finance often has the reputation of shutting down deals mid-stream, out of budgetary or risk concerns. The antidote to this, says Sören, is to involve Finance early in the process, when price details are still in preliminary stages. 

“I'll say, ‘Hey, when do you want to find out where we're landing?’” This approach means Finance stays in the loop for expected pricing. 

“If the pricing changes significantly enough, [Finance approval] gets required again. But if we land in the range where Finance approved, I assume I have budgetary approval.”

On the other side of the trust/verify equation is reporting. It’s important to give Finance the visibility it needs to ensure budgetary measures remain intact.

Good Finance tooling ensures they can verify that the outcomes are as expected. 

Embracing a value-centered, outcome-driven procurement practice

Getting the best price on goods and services is a pillar of the procurement function, especially given today’s economic climate.

But it’s not the only thing at the heart of effective modern procurement.

According to Sören Petsch, Head of Procurement at CommerceHub, an enablement-focused strategy that focuses on the basic principles of trust and transparency leads to greater savings and partnerships long-term.

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With Sören’s ideals in mind, are you ready to perfect the way your company purchases SaaS?

Download our 10-step purchasing process guide to get started.

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