Larry Phelan, EY Global CPO, shares his philosophy on the future of procurement and why value goes far beyond doing deals and cutting overheads
Larry Phelan is on a decades-long journey, the destination of which has just appeared upon the horizon. The EY Global Chief Procurement Officer moved into this position in the professional services giant in July 2009, hot on the heels of the 2008 financial crash, and after spending 10 years in the EY Mergers and Acquisitions service line. In the intervening 12 years, he has reshaped procurement’s value proposition and led a diverse group of professionals across the globe. He has also dedicated his time to the pursuit of one big question: how to elevate procurement as a strategic advisor to the board.
“I think it's really important that procurement is seen as more than just doing deals and saving money,” he says. “It's about the transformation that companies are going through and getting the board to feel comfortable with procurement's unique role. That is to me a big bet.”
It is a quandary that has shaped his approach to leadership and, in recent times, become a wider talking point in procurement circles. Phelan admits he is not alone in working toward this goal, however he does believe EY is well-placed to achieve it. In many businesses, procurement is a bureaucratic function that sits somewhere in the middle of the organisational structure, reporting to a department that reports to a department, and so on. It is a difficult position from which to enact change of any real significance or scale.
“It's harder for many procurement organisations to make that jump,” he says. "At the EY organisation, procurement has a seat at the Global Practice Group table (top 125 partners at EY) and is at the top of the organisational structure because of its value proposition. So, it's appropriate for us at EY and other procurement organisations to be thinking and pushing for that change as a logical step in our evolution.”
For Phelan, while organisational structure is important, it is equally “about the philosophy”. Traditionally procurement organisations are tasked with the two core objectives of sourcing the right goods or services and closing a deal that saves the organisation money. Once the job is complete, they move on to the next. Fundamentally, these objectives are why procurement exists, and many organisations excel at them. This is quantitative value, simple to track on a quarterly basis, and rooted in the core financial principles of business. But Phelan is driving procurement at EY toward another form of value, which he calls “brand value”.
“Brand value is tracked under the four (4) main pillars of Client, People, Social and Financial that define the EY Next Wave strategy,” he explains. “Procurement is driving deals beyond the aforementioned quantitative value in support of transformation, user experience, employee well-being, diversity, sustainability, revenue growth, and serving and advising clients with internal procurement team members. It's bringing forward what we do to help EY client servers, to work with clients in a better way. It's understanding the sustainability environment that's out there and working with our supplier ecosystem. It's a combination of all those things to support that goal.”
Brand value is about driving user experience. It's bringing forward what we do to help EY client servers, to work with clients in a better way. It's understanding the sustainability environment that's out there and working with our supplier ecosystem
To drive this procurement as a business, to get that board-level visibility, it has to be about value return. If procurement costs you a dollar, the reporting needs to show that you get US$5 in value back
The group provides 500 brand value submissions annually, which contribute to top-line growth, innovation, and people engagement, to name but a few. But there remain hurdles in realising the true goal, one of which is a challenge as old as the profession itself: procurement has an image problem and is fundamentally misunderstood by many stakeholders outside its often tight-knit community.
“Those same stakeholders will look in and say, ‘Well, what does that matter? Just do the deal for me, save me money,’ or whatever it might be,” Phelan says. “Well, I think, no, that's yesterday's organisation. What we're looking at over the years and into the future is an organisation that can help you transform, can help you be more strategic, and add value in a different way. So, we are working through that with stakeholders every day.”
Larry Phelan is an experienced business leader at one of the world’s largest and most influential professional services networks. His procurement group is collectively responsible for US$8 billion in annual spend across a multitude of categories, from travel, events and talent management, to technology and every piece of EY real estate. He is also a proud New Yorker of Italian and Irish heritage, who loves nothing more than a hearty serving of lasagna washed down with a limoncello, and whose prized possession is the Bronze Star medal awarded to his grandfather for service in the Second World War.
His colleagues, peers and direct reports already know all of this about him. They may also know he loves going to the opera and, rather conversely, counts AC/DC among his favourite bands. None of this is a coincidence; Phelan is an open and approachable professional, a mentor to many, and a source of knowledge and experience for many more. He is a major proponent of enacting change from within, and that begins with what he considers the “procurement family”.
“These are the individuals who sit within the procurement organisation, and we absolutely consider our suppliers part of that procurement family,” he says. “What we're trying to do is instill a consistency of how they interact with stakeholders, how they should bring data to stakeholders, how they bring transparency of issues to stakeholders, and how they are proactive in solving problems for stakeholders. So, it's making sure that the family acts and thinks and reports and brings data the same way.”
Engendering a familial atmosphere is no easy task given the fact Phelan’s procurement group speak 47 languages and are situated in 35 countries. “The EY organisation is center-led by design so that our stakeholders feel that each and every one of their goals and objectives are satisfied by the people who sit in their country, speak their language, and understand their culture,” Phelan says. “That also means we have key performance indicators and reporting that get set from the center and then rolled out to all of our global teams.
“But it's about making sure that members of our team are healthy and that their well-being is looked after,” he adds. “Especially over the last year and a half — with the COVID-19 pandemic — making sure that we're bringing some levity to their lives has been more important than ever. And even before the COVID-19 pandemic, getting connected on a regular basis, hearing what's on their minds, and introducing opportunities for them to raise concerns about certain issues throughout the organisation makes you truly feel like you're a family.”
Extending the procurement family philosophy to suppliers is a natural extension and one that forges stronger connections and leads to better results. “We put a lot of pressure on our suppliers to bring innovative ideas to us. I mean, that's what they are supposed to do, and they are doing that because we have a number of true success stories,” Phelan says.
One example is a sustainability drive in the hotel sector. “How often does one really need to have the towels in the hotel room or the sheets on the bed washed? You go into a hotel today, and they’re washed every night. Well, now you can check that card and opt out,” he says.
To enhance well-being for their travelers, procurement family members in the talent category worked with suppliers to provide stretchy resistance bands on long-haul flights to relieve tension. These are ostensibly simple projects, but, as with the handful of other examples Phelan shares, they belie the nuance of the procurement teams that worked diligently and tirelessly on them behind the scenes.
“Getting that mobilised across an organisation of our size is a tough task, but it's an important thing to do,” he says. "So, there are examples like that, where we're trying to go beyond the quantitative value into the brand value.”
It all folds into Phelan’s brand value philosophy, the key to the overarching goal of elevating procurement beyond black and red ink.
“I'm not saying that procurement should have a seat on the board. What I'm saying is the content of what procurement brings to the table, for me personally, needs to be packaged differently so that the board fully understands the risks of something not happening, to the value that's being sacrificed,” he says.
Driving procurement forward as a business — Phelan considers EY his foremost client — will be key to this elevation, he adds: “To drive this procurement as a business, to get that board-level visibility, it has to be about value return. If procurement costs you a dollar, the reporting needs to show that you get US$5 in value back. It's the transparency through the reporting that gets that in front of people, to showcase those examples.”
Procurement is at the crossroads of major change. The COVID-19 pandemic redefined the importance of an organisation’s sourcing professionals, just as geopolitical turmoil, natural disasters, and terrorist attacks have in the past — and will continue to do in the years ahead. But Phelan senses the road is levelling out.
“The future goal for the procurement organisation is to make sure that the global executives on our board at the EY organisation fully understand the value proposition beyond the quantitative value, getting into the brand value and the transformation value,” he says. "If we're sitting here a year from now, two days before the end of fiscal 22, I would expect to see more of a regular cadence with our global executives on a number of the transformative events that we have active right now. If we're doing that, then I think we’ll have had a good fiscal year.”