Daily Archives: April 14, 2009

A Procurement “Metric of the Month” is a Bad Idea

As a prominent blogger, I get a lot of e-mail (or should I say spam?). One of them had “Procurement Metric of the Month” in the title. I was about to trash it, as this is one of the worst ideas I’ve ever heard (as I’ll explain shortly), but then I noticed it was from Hackett. Needless to say, this got my attention. Why would one of the leading research firms in the space, which produces the very useful and relevant Book of Numbers, be touting a “metric of the month”?

It turns out they weren’t promoting a “metric of the month”, which would be an incredibly bad idea because a metric is only useful if you benchmark against it month after month after month for an extended period of time to measure your progress (and changing metrics too often gets you absolutely nowhere), but a new free research offering as part of their Hackett Performance Network (where, if you qualify, you can get access to selected research reports, performance studies, and webcasts). Designed for Finance, HR, IT, and Procurement, this new offering is apparently going to showcase an important metric in each area each month, starting with Tax Book Entries Requiring Correction Percentage, Outsourcing Utilization by HR Process Category, IT Business Value Contribution through Portfolio Optimization, and Level of Supply Risk Management Adoption.

With respect to the latter metric, which focusses on procurement, Hackett points out how 67% of world-class organizations implement supply risk management consistently across the business as compared to only 13% of their peers, indicating that top performers are 5 times as likely to have a comprehensive supply risk management strategy. Considering that effective supply risk management is a way for procurement to elevate its value proposition and help the business protect its brand, cost leadership, and stability, this makes sense. It’s free, so check it out. Just don’t take “metric of the month” literally.

The Market Dilemma I: The Key to Getting Out of this Recession

I’d hoped I wouldn’t have to state the obvious, but everywhere I look it’s doom and gloom together with ridiculous economic explanations pulled out of a depth so dark that even a proctologist with a flashlight would have trouble finding the source, when the answer is extremely simple. In fact, I can sum it up in one word. FAITH.

And no, I do NOT mean faith in your God, a God, Gods, what you perceive my God or Gods to be, deities, supernatural beings, faith healers, shamans, or any other religious entity you might care to believe in.

Nor do I mean faith in the government, Wall Street, or other people in power to “make the right decisions” and “pull us through this”.

I mean faith in the system. Like religion, systems only work (and catch on in the first place) if people believe in them and have just the right amount of faith*1. Too little faith, and things fall apart. Just like the influence of a religion will decline until it eventually disappears if people stop believing in it and making it part of their daily life, the strength of the system will degrade when people stop buying, selling, and participating in the system on a daily basis … until it starts to fall apart. Similarly, too much faith will lead to problems. Just like overzealousness led Middle Ages Christians to the Crusades and small groups of Muslims to the extremist jihads of today, too much faith in the market leads to overzealous buying, selling, evaluations, and run-ups that are unsustainable and lead to crashes. In other words, too much faith broke the system, too little faith is preventing its recovery, and just the right amount of faith will fix it.

The only way out of this mess is BUSINESS-AS-USUAL. As I’ve been saying for months now (in my Dumb Company, Dead Company, and Your Marketing series … see my recent rant), business people must accept that the path to business-as-usual IS business-as-usual. In a free market economy, this includes bankruptcy (which, as Robert Rudzki points out, is vital to capitalism). We must conduct business as usual (without unrealistic assumptions of demand or profitability increase … remember, slow and steady wins the race), or we’re going to stay in a quagmire. And in this space, as I’ve repeatedly said, the leadership has to come from solution vendors and consulting firms because the majority of buyers work in organizations where the CPO is not part of the C-suite and can’t directly influence the path of their company.

Faith should start with, above all else, faith in yourself and your ability to make a positive impact on your company, your industry, and the economy in general. This requires making smart decisions each and every day. Over the next three days I’ll be offering up specific starting-point suggestions that solution vendors, consulting shops, and buyers can use to get their organizations, the industry — heck, maybe even the economy — back on track.

*1 For those of you who don’t see a connection between religion and economic models, try to look at modern culture through the eyes of a future “new” archaeologist with a strong anthropological bent. Such an archaeologist would say that societies are strongly influenced by people’s beliefs, and people’s beliefs are strongly influenced, and part of, their religion. Based upon the remnants we’re likely to leave if we vanished today, this future archaeologist would see almost universal evidence of technology and commerce but only pocket evidence of the many different religions that are practiced today. Said archaeologist may in fact be led to conclude that the major religion of our time was capitalism. Now, I’m sure my intelligent readers will find as many arguments against this as for, but it is something to think about.