Strategic Planning and Key Performance Indicators for Procurement

1. Strategic Planning andKey Performance Indicatorsfor Procurement Steve Staggs Clark County School District

2. The greater danger for most of us lies not in setting our aim too high and falling short; but in setting our aim too low, and achieving our mark. Michelangelo

3. Presentation Outline • Strategic Planning • Mission and Vision and Building Blocks • Key Performance Indicators • Goals and Objectives • Reporting and Dashboards • Summary

4. Strategic Planning-Defined Strategic planning is a management tool, period. As with any management tool, it is used for one purpose only: to help an organization do a better job - to focus its energy, to ensure that members of the organization are working toward the same goals, to assess and adjust the organization's direction in response to a changing environment.

5. Strategic Planning-Defined In short, strategic planning is a disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is, what it does, and why it does it, with a focus on the future. (Adapted from Bryson's Strategic Planning in Public and Nonprofit Organizations)

6. Successful Strategic Planning • Leads to action • Builds a shared vision that is values-based • Accepts accountability • Is externally focused and sensitive to the organization's environment • Requires an openness to questioning the status quo • Is a key part of effective management • Aligns all parties and levels within the organization towards a focused, defined goal. • Purchasing lines up within Business and/or Finance’s plans • Business and Finance’s plans align with the Organization’s overall plans

7. Alignment & Building Blocks Organization’s Mission & Vision Department’s Mission & Vision Organization’s Strategic Plan & Goals Department’s Strategic Plan & Goals Department’s Measurable Objectives Action Steps or Tasks

8. Situation Analysis • Understanding of organization’s capabilities and limitations • Internal and external factors • Directly affect probability of success in attaining goals/objectives • SWOT • Strengths/Weaknesses – internal • Resources, budget, experience, culture • Opportunities/Threats – external • Regulatory environment, technology, cooperatives

9. Goals and Objectives • Goals-Annual aligned with Organization’s Strategic Plan • Define the desired direction of the department • Measurable Objectives • Motivate staff towards specific, measurable results. • Concise objectives that clearly define the priorities and focus for staff and are aligned to the organization’s overall goals, mission & vision

10. Purchasing Sample • Organization’s plan/goal to improve return on investment or improve value to the organization. • 5 year plan aligned with organization’s goals: • Purchasing’s goal to improve ROI/value: • Increasing cost savings & cost avoidance • Reducing processing time and lead times • Improving communications • Simplifying and consolidating forms • Eliminating paper and automating processes • Identifying, training, and retaining skilled staff • Expanding recycling and re-purposing • Improving staff and supplier performance

11. Goals • Define a specific task to accomplish that is aligned with your organizaton’s future direction • Measure the achievement of a goal by attaining a specific result • Use action verbs • Empower staff to achieve goals • Should drive higher levels of performance/close a critical performance gap

12. Measurable Objectives • Fulfill specific levels of your mission and vision. • Complete each goal by one or more objectives. • Define a specific task. • Have measurable results. • SMART

13. SMART • Specific • Measurable • Attainable • Relevant • Time-Bound

14. Purchasing Goals/Objectives • Training of Staff • Offer training to staff four times per year • Each quarter, staff shall take a minimum of one class • Is this SMART? How can it be improved? • Supervisors teach classes two times a year • No less than twice a year, supervisors shall teach a class • Is this SMART? How can it be improved?

15. Purchasing Goals/Objectives • HUD Business Utilization • Buyers to identify new HUD vendors each month • Buyer to include a minimum of two new vendors on quotes each month. • Is this SMART? How can it be improved? How to track? • Buyers to attend external vendor events 2x/year • Buyers to attend a minimum of two vendor events each year including chamber meetings to meet new vendors. • Is this SMART? How can it be improved? How to track?

16. Action Steps or Tasks • Execute goals and objectives • Can be daily or weekly steps or tasks that break down larger objectives into smaller, more obtainable steps. • Set time limits for completion. • Establish quantifiable measurement system

17. Lessons Learned on Objectives • Watch out for common mistakes when setting goals and objectives: • 1. Work must be within your area of control • EX: Increase requisition processing by 50% (only works if you receive 50% more requisitions which is probably not within your control) • 2. Rules must be followed • EX: Improve processing time of requisitions from three weeks to two weeks (not possible if requisition requires Board approval which may take 3+ weeks) • 3. Must be measurable • EX: Improve customer satisfaction (how do you measure?)

18. Procurement KPIs • Cost Savings • Cost Avoidance • Improved Performance • Expanded Services • Revenue Generation

19. Cost Savings/Cost Avoidance • Cost savings reduce future spend below current levels • Negotiated discount on service contract moving forward • Cost avoidance reduces potential future spend, but not below current levels • Negotiate delay in price increases on service contract • How to measure? • Negotiated price vs. proposed • Bid price vs. market price • New bid price vs. old bid price • Cost of system/software/methodology vs. resource reduction

20. Increased Performance • Timeliness • Goods/services purchased meet customer requirement • Direct delivery to sites • Life cycle management • “Version” management

21. Expanded Services • Enhanced warranty coverage/management • Loan programs • Kit management • Trackables • Reuse of furniture and equipment

22. Revenue Generation • Recycling • Surplus • Rebates • Bonuses • Commissions • Sales

23. Reporting • What to report? • Progress toward or achievement of goals that are specifically aligned with organization’s goals, based on: • Achievement of measurable objectives that are: • Relevant to the rest of the organization, for example: • Cost savings, timeliness, supplier diversity

24. Reporting • How to report? • Common tool is the dashboard • Provides immediate visual status - green, red, yellow/blue • Many forms – gage, charts, simple boxes • Should able to distinguish achievement and target • Should be easy to update continually

25. Summary • Strategic planning is tool to help the organization improve • Aligns all levels of the organization toward a defined goal • Must be appropriate to the environment • Goals should be geared towards specific results and drive higher levels of performance • Objectives – SMART • Regular reporting a must to remain focused/adjust as necessary