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How to hire a chief procurement officer new to private equity – and make it work

May 2022

This is the third in a series of articles exploring the role of the chief procurement officer in private equity-backed portfolio companies.

Private equity firms are frequently cautious about running procurement operations through anything other than a cadre of procurement specialists with proven backgrounds in private equity. In the wake of unprecedented, pandemic-led levels of supply chain disruption globally, alongside fierce competition for talent, we were keen to discuss with a group of PE procurement specialists their views on, and experience of, hiring first-timers into PE.

A general consensus around what these qualities would be emerged, although it should be noted that one member of our group of PE specialist did argue that hiring a CPO untested in private equity is too great a step in an already high-risk industry. “When I go to the outside market, I’m looking to buy previous success,” says Jon Higginson, an operations advisor for Advent. “Ideally I want someone who has previously delivered in that role, under similar conditions.” He adds that though it is possible to accept a candidate with no previous PE experience, there persists a strong bias towards those with experience.

It’s about delivering more with less, which requires solid change, communication and stakeholder management capabilities.”
Oscar Rego TK Elevator, CPO

“There are ways to assess if an executive has the skills required, even if they haven’t done precisely directly relevant work before,” argues Xavier Cassignol, CPO of IDEMIA (Advent and Oberthur Technologies/Morpho). Adds Oscar Rego, CPO at TK Elevator: “At the end of the day, the focus isn’t that different — it’s still about delivering more with less, which requires solid change, communication and stakeholder management capabilities.”

What’s clear is that PE firms need to be rigorous and nuanced in their testing of prospective candidates, conducting strategic capability assessments, case study exercises, and deep referencing. Taking such an approach we believe it is possible for PE firms to discover dynamic, functionally excellent CPOs with no direct experience in PE who have an affinity for the PE environment.

The core indicators of PE affinity that de-risk hiring decisions and release fresh sources of CPO talent:

Procurement is not an isolated function, particularly in PE, where undermining the effective performance of multiple symbiotic teams and functions damages the value creation plan. “You’re always dependent on sales or production or others,” says Tansu Kirimli, CPO at Swissport International. “Understanding what the journey is allows you to bring peers, stakeholders, and other partners in alignment with you.”

We want our CPO to have grit, determination, persistence. And given the complex stakeholder environment, we need really high levels of EQ.”
Paul Vega Cinven, Partner

Deep-dive analysis of cultural fit repays the investment by revealing how an individual is likely to respond to PE specifics. “We want our CPO, in fact all our management teams for the portfolio companies, to have grit, determination, persistence,” says Paul Vega, partner at Cinven. “And given the complex stakeholder environment, we need really high levels of EQ.”

CPOs who demonstrate innate ease with the culture, married to highly collaborative styles, are very likely ready for PE. "Collaboration within and across teams drives enterprise leadership - helping each other for the greater good of the company, which is a crucial cultural change necessary for success,” states Wouter Hut, CPO of Ahlstrom-Munksjö.

A fundamental of the procurement role in private equity is that it is a principal enabler of value creation. It’s therefore essential to establish that an executive seeking to join PE is fully business-literate — able to identify and to focus relentlessly on the drivers of value-creation, as well as being able to talk intelligently about business with commercial partners.

IDEMIA’s Cassignol, who has worked in four different CPO roles under PE ownership, would expect a CPO candidate coming into PE to be “someone able to invest themself as CPO in the overall success of the company, able to look beyond their own function. I’d be looking for someone with an entrepreneur kind of background.”

That’s a view supported by Thierry Minel, CPO at GKN Automotive: “In PE the working capital is part of my DNA; we’re supporting our cash position, the supply chain, finance. And although we’ve been in business for 50 years, we have a start-up mindset, a very strong entrepreneurship mindset.”

The skill set I want to see in a non-private equity CPO is huge resilience and the ability to adapt fast."
Tansu Kirimli CPO, Swissport International

A CPO with no private equity experience is often coming from an environment where “people around them might be making decisions that we would expect a CPO to make,” says Swissport International’s Tansu Kirimli. “So the skill set I want to see in a non-private equity CPO is huge resilience and the ability to adapt fast. There’s going to be a pipeline of projects, all of which need reporting.

“And part of that is not making a big noise when we want to implement something — don’t start requesting steering committees and stuff. It’s your job to win over stakeholders.”

At IDEMIA, Cassignol highlights a defining challenge of PE: “It can be difficult dealing with uncertainty — you never really know for sure when you’re going to be exited.” So it’s vital to test whether a new CPO in their first experience understands their core role in delivering a well-managed exit strategy at peak value.

CPOs cannot expect to thrive in private equity if they bring with them rigid approaches to how things are done — one example cited was whether they would be able to step outside their past experiences, taking a forward-thinking and open minded approach, broadening their focus beyond spend under management and RFP.

Increasingly, says Cinven’s Vega, “with high expectations on impact and execution speed, private equity CPOs will have to be more agile to extract value both cross-functionally and end-to-end across the value chain.”

Ahlstrom-Munksjö’s Wouter Hut recalls his surprise at some of the findings to emerge from assessment exercises at his portfolio company regarding the capabilities displayed by those who thrive in a private equity environment.

“I thought there would be an emphasis on cost cutting and working extremely hard in tough conditions, but it was actually about being open for new things, engaging, accepting help for the benefit of the end goal,” says Hut. “It all made sense once it was laid out, but it was unexpected at first.”

Is sector experience important?

A central part of discussion with our group of PE specialists was whether or not previous specific industry experience in candidates seeking to come into PE was essential. Whilst there are some sectors where industry knowledge is still pretty key, for example pharma and chemicals, there are increasing circumstances where it may be better to hire an industry outsider who is more skilled at transformation and change management than they are at product solutions or processes.

For Swissport International’s Tansu Kirimli, what counts most for a CPO coming into private equity is that they possess what he considers to be the core skillset: “Real strategy implementation specialisation and transformation expertise is what I want in a CPO. That’s scarce. Your direct reports are the ones who should be the subject matter experts, who are the engineers, who know the market, who know the product details.”

TK Elevator’s Oscar Rego believes that so long as a CPO is proven to have an affinity for private equity, it’s possible to develop specific market knowledge, with caveats: “I’d probably want a good procurement guy with a consulting background, rather than a specific industry expert. You can learn about the product over time, but it’s an ability to bridge the gap with every stakeholder across every function that makes the difference.”

Kirimli concludes: “Regardless of whether you’re an industry expert or not, you always need to deliver on three KPIs. It’s savings, it’s payment term extension, and it’s supplier development through relation management. It’s always an aggregate of the same targets.”


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