For those of you paying attention, you’ll notice that I recently did a four part series on Talent Management and, more specifically, a common Talent Management problem shared by many enterprises. Starting with a post that said If This is Your Advertisement for a Sourcing Manager, You Have a Talent Management Problem, which discussed one of the worst advertisements I have ever seen for a Supply Management professional, the series then moved on to explain that If You Want to Attract Talent, [You Need To] Start with a Good Advertisement, discussed What a Good Job Advertisement Might Look Like, and finished up with a post that addressed Now What [That] Your Job Advertisement Actually Attracted a Good Candidate. I did this because talent is critical to your Supply Management function. Without the right talent, you might as well fold up the operation and outsource it all to a third party because you won’t get anywhere unless you have the cream of the crop.
And we’ve known this for a while. Back in 2007, Procurement Leaders published a piece on how People Do Matter Most, Really that referenced a joint study undertaken by McKinsey & Company and the Supply Management Institute that found that high performing firms had high performing purchasing departments and that what matters is the people in the purchasing department, how talented they are, how motivated they are, and how they interact with the wider organization.
Specifically, the study found that purchasing departments that excel in these aspects of their activities achieve savings two and a half times higher than those that don’t. Furthermore, their positive influence branches out beyond the historical territory of PSM to include areas such as revenue, innovation opportunity generation, and the leadership of commercial change in the company. In more detail, high performing firms demonstrated annual purchasing savings of 3.5%, a 1.4% annual reduction in COGS, and an average EBITDA of 17.7%. Compare this to low performing firms that only achieved a savings of 0.6%, a 0.5% increase in COGS, an an average EBITDA margin of only 12.7%. And now that every dollar might mean the difference between survival and corporate death, an organization just can’t afford to not be high performing.
The reality is that, despite what some vendors and consultancies might have you believe, first rate platforms and processes are not enough. You have to have the people with the brains and the skills to use them. Back room paper pushers won’t cut it anymore. So do you research and attract some real talent. The bottom line will thank you.