Money matters: According to Mike Straw, pharmaceutical companies are under increasing pressure from investors to improve financial returns and procurement functions have a role to play
Pharmaceutical companies are under increasing pressure from investors to improve financial returns. Coming at the same time as healthcare providers around the world try to rein in drug prices, the need to cut out waste and improve efficiencies has never been greater.
Undoubtedly, procurement functions have a role to play here. Better aligned and more effective procurement processes can help the whole business to improve performance.
Despite this, the 2015 ProcureCon Healthcare benchmarking survey found that less than half (48%) of the pharmaceutical professionals surveyed saw procurement as a strategic partner in their organisation. This follows a recent Deloitte survey that declared only 28% of CPOs felt their procurement function was highly regarded internally and seen as a key business partner.
In the current climate, pharma’s big and small need every part of the business to play a maximum part in value creation – and procurement is no exception. Procurement functions really need to prove their worth and show that they can be a real partner to the business – not just an administrative backwater.
A key issue for pharma procurement professionals is that 58% of CPOs feel their team does not have the skills required to deliver their procurement strategy. As a client once told us “procurement professionals are hired for their procurement skills and fired for their behavioural skills”.
This lack of love for pharmaceutical procurement functions and the wider procurement industry has resulted in a lack of confidence in themselves. While speaking at a recent conference I found that procurement professionals often under-valued themselves and, you might say, saw themselves as the “ugly-stepsister” of the organisation.
Perhaps they need to take some advice from Will Smith’s character, Alex Hitchens in the 2005 film Hitch in which he professes that to be loved you have to “leap and hope to God you can fly! Because otherwise, we just drop like a rock... wondering the whole way down...’why in the hell did I jump?’"
Procurement functions need to take this leap and start seeing themselves as the prettiest girl at the party. To do this they need to shift their thinking. I believe that to shift perceptions four key changes need to be made:
Permission and Confidence
Procurement needs to stand up as an equal within the organisation. They have hugely important roles and until they respect that themselves the rest of the company will never ask them to the dance.
Shift Perceptions
The procurement team needs to start challenging the status quo, not just accepting things because “that is the way they have always been”. Their perceptions need to be shifted just as the organisation also needs to shift its own perception to give procurement the respect it deserves.
Leading the agenda
Through more strategic thinking and being organisationally savvy, the procurement team can start to contribute more to leading the agenda, instead of just following it. This occurs when you start thinking big and can switch between modes: facilitator (simply helping to get contracts in place), expert (a source of knowledge to be consulted by the business) and coach (helping the business to improve by offering advice and guidance based on previous learnings).
Executing the agenda
Whenever you look to strive for more there are always pitfalls. The more ambitious you are the more pitfalls you are bound to encounter. So procurement teams should not become dispirited if, in making the three changes above, they experience setbacks. That’s an inevitable part of the process. The key to executing the agenda is navigating such roadblocks and turning resistance into momentum. Don’t take the path of least resistance and revert back to old ways at the first sight of trouble. Instead, expect some setbacks and look for solutions so that you can execute what you are trying to achieve.
Working with a number of large procurement functions in the pharma sector, we have seen ROI of as much as 60:1 through programmes that have helped transform how they partner with the business.
If procurement implements these changes, they can start to achieve breakthroughs – and just maybe, get asked to the prom.