Inside Supply Management Magazine

The Monthly Metric: Stakeholder Perception of Procurement

June 22, 2020
By Dan Zeiger

This edition of The Monthly Metric could be considered a “procurement pride checker.” When consulting supply management professionals, Chris Sawchuk often asks how company stakeholders would view the procurement organization.

“Not surprisingly, we tend to find that supply managers give themselves a higher score than the stakeholders do,” says Sawchuk, principal and global procurement advisory practice leader for The Hackett Group, a Miami-based business consultancy. Customer satisfaction is as critical, if not more so, as KPIs like error rates or cycle time. That makes stakeholder perception of procurement a scorecard that can humble a procurement department — but also provide a roadmap to higher effectiveness.

“You can’t develop a customer-centric organization without the customers being a part of it,” Sawchuk says. “A key tenet of that is getting feedback from those customers, the internal stakeholders, on how they view you and how you could make a pivot on how you’re delivering your services. Then, go out and do it.”

A procurement organization’s relationship — one that goes beyond transactional to the “trusted business adviser” term that has grown in popularity in recent years — with the rest of a company is a barometer of its overall performance, Sawchuk says. Being trusted by internal stakeholders doesn’t automatically make a procurement department a high-performing one, but it opens the door: The tools that are needed to improve internal relationships are the same ones necessary to create value in other areas.

“It’s an enabler to help you do more things,” Sawchuk says. “If you want to raise your performance and create more value, you must have a strong relationship with stakeholders. … But like a friendship, it takes two to make that happen. You can say that you’re doing all the right things as a trusted business adviser. And that’s when I’d say, ‘OK, let me go check. I’ll go talk to those stakeholders right now.’ ”

Meaning of the Metric

The stakeholder perception of procurement measurement by The Hackett Group determines one of four designations — administrator, gatekeeper, procurement expert and valued business partner — for a supply management organization. In its 2019 research, The Hackett Group discovered humble pie, even for high-performing procurement teams. Among “peer group” organizations, just 7 percent of stakeholders viewed procurement as a valued partner, and 19 percent as an expert. For “top performers,” 47 percent considered their supply managers to be experts, and 30 percent saw them as valued partners.

While a customer-satisfaction metric like Net Promoter Score focuses on a single issue — the likelihood of a recommendation of a company, product or service to a colleague — a stakeholder-perception survey enables more targeted evaluation of personnel and processes. An organization can tailor its own survey questions, Sawchuk says, but third party-designed surveys allow for benchmarking.

Also, surveys can be broken down to measure how procurement is viewed by various organizational levels; if most of the good scores are from executives and not employees who are regularly interacted with, that’s worth exploring, Sawchuk says. Specific process performance can also be measured: How is procurement doing in sourcing or negotiation? These survey results can be used with other KPIs to provide a more sophisticated and thorough report card for a supply management organization.

However, the biggest key is not compiling the data, Sawchuk says, but convincing stakeholders that it will be acted on. “The response rate tends to be under 50 percent,” he says. “Many people in the company just ignore surveys because they think they’ve gotten them from human resources before, and nothing ever happens.”

It’s imperative for procurement to inform stakeholders what was gleaned from the survey results — as well as what will be done. Such action encourages stakeholders to participate in later surveys, Sawchuk says, creating a continuous-improvement process: “(Stakeholders) then understand that it’s a long-term effort to improve engagement, which creates value for them and the business. That’s a good reason for them to keep doing it.”

Procurement’s Plan of Action

Since even high-performing supply management organizations have room for improvement in the eyes of stakeholders, any team can benefit from developing a roadmap to trusted-adviser status. Sawchuk says that procurement organizations that have the best stakeholder relationships tend to do three things well:

Get the basics right. If an organization cannot consistently execute gatekeeper and administrator duties to stakeholders’ satisfaction, it has no chance of moving beyond those levels. “If you can’t do the little stuff, how can you establish trust and credibility to speak on the big things?” Sawchuk says. “It’s hard to start a dialogue about driving innovation if you’re not getting the materials to the plant on time.”

Build relationships. Procurement practitioners can be effective at the tactical aspects of their jobs, but their strategic impact is limited if they are not sought out by stakeholders. “The ability to develop those relationships and trust is a core skill,” Sawchuk says.

Be agile. “You can be a hammer always looking for a nail and be considered a good provider of a service,” Sawchuk says. “But the good advisers tend to be agile. They can listen to (a stakeholder), determine the need, and figure out how to address it.”

By acting on stakeholder feedback, working to eliminate inefficiencies and updating the company on progress, a procurement department should begin to see tangible results, Sawchuk says. Stakeholders will seek supply managers’ opinions before making business decisions. The procurement-perception survey results should become more affirming and less humbling. And the supply management function will become more of a trusted business adviser.

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