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Measuring procurement performance is a great way to demonstrate the value that you add. This is because well-constructed performance measures allow you and others to judge whether or not you are achieving your goals, get back on track when performance dips and set a new direction when you have met your goals.
Here are six specific reasons why you should measure your procurement performance.
1. Achieve your goals. Goals are achieved by first knowing where you are and then deciding where you want to be. Performance measures are the key to knowing where you currently are 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 benchmarks the price you pay will tell you when you have achieved it. Once you have achieved that goal, your next goal might be to work with suppliers to reduce costs so that prices can be further reduced.
2. Improve performance. There is an old saying that “what gets measured gets done.” You can improve performance by using measures to set a target and then to measure whether you are achieving that target. If you are not then you can take appropriate action. If you have achieved the target then you can “raise the bar” and set a new target 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 failing to meet some of your targets then it provides you with an opportunity to investigate and find out why. The reasons that you uncover may in turn point you in the direction of new knowledge that you need to gain or new skills that you need to acquire. If you do this then your learning will have helped you to 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 in order to carry out a procurement activity. An example of a process is “paying a supplier”. These processes should be linked to your. If the performance measures you use for these processes fail to achieve their targets than it could be an indicator that the processes are broken. In turn, this will tell you that your objectives are not being met and so where and how you need to take remedial action.
5. Influence behaviour. Performance measures can be a powerful way to motivate people to change unwanted behaviours. For example, if you measure contract compliance (that is, what proportion of the money spent with suppliers is covered by a contract) then you will be able to identify those who do not follow your procurement rules and so could be costing your organisation money.
6. Communicate your value. Telling others in your organisation that the work you do is of value is not sufficient. You need to be able to prove it and performance measures are an excellent way of doing this. Using a balanced scorecard approach, for example, will show others that you are not only delivering financial benefits but are also delivering customer expectations, improving processes and continuing contribute to organisational learning and development.
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