CAPS report: Profile of a typical chief purchasing officer

What patterns determine the likelihood of an individual becoming the chief purchasing officer (CPO) of his or her firm or another firm? This is a question authors Thomas E. Hendrick, Ph.D. and John Ni, doctoral research assistant, consider in the study, “Chief Purchasing Officers’ Mobility Compensation Benchmarks and Demographics: A Study of Fortune 500 Firms”.

The focus of this research was to track the career, functional experiences and educational paths current CPOs have taken to become the CPO of their organization and the career histories of the immediate predecessors in CPO positions. Current Fortune 500 CPO demographic and compensation information was captured and compared with two earlier studies CAPS Research reported on compensation.

The study provides details of a typical CPO in 2006:

The CPO community is predominately male (87 percent) and the average age is 49 years old. Total annual compensation is $366,000 ($418,000 if female) and the CPO has a staff of 247 associates. He has been CPO for two-plus years and reports to one level below the CEO. He is responsible for an annual spend of $3.5 billion and has 19 years of purchasing experience. He has been with the current firm for less than 6 years, is CPO of the entire firm and has a B.S. in business and an MBA. He became CPO when his predecessor retired or was the first CPO for the firm. He is not likely to be promoted to a level above CPO before retirement and has seen the value (in 2006) of his stock option plan and retirement fund fall since 2001 due to variability in the stock market.

Other significant findings from the study were:

• CPO compensation, adjusted for inflation, has continued to rise over the time period studied.
• There are not discernable patterns of previous experience, education, or other variables that were observed to be predictors that an individual would become a CPO for his or her firm, or another firm.
• Except in rare cases, the CPO position is not a stepping stone towards a higher position in his or her firm or another firm. In most cases the immediate predecessor in the CPO position retired or left the company.
• Titles of CPOs have not homogenized over the time period studied, with a wide variety of titles resulting.
• For a substantial number of CPOs, they were the first to hold the title of CPO in their firm.
• There continues to be a wide variety of factors that make up the goals a CPO must meet to earn their bonus.
• Generally, CPOs reported they were satisfied with their compensation packages when compared to their peers in other functions in their firms.

To review the CAPS Research Focus Study, “Chief Purchasing Officers’ Mobility Compensation Benchmarks and Demographics: A Study of Fortune 500 Firms”, click on the following link:

http://www.capsresearch.org/publications/pdfs-protected/hendrick2007.pdf

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CAPS Research is a non-profit research organization founded in 1986 to provide leading research to our strategic-minded corporate sponsors and to the public. Our mission is to work in partnership with a global network of executives and academics for the discovery and dissemination of strategic supply management knowledge and best practices. CAPS Research is jointly sponsored by the W. P. Carey School of Business at Arizona State University, and the Institute for Supply Management.