Category Archives: Talent

Societal Damnation 50: Talent Tightness

Your organization is expected to deliver 6 miracles on a daily basis, and at least one before the CFO arrives for work. But, as we all know, miracles, by definition, are almost impossible. That’s why, in order to have any hope of accomplishing the nearly impossible feats put before you on a daily basis (such as sourcing an additional 1,000 kgs of dysprosium by the end of the week, even though a major mine just collapsed, and knock $50 off the price per kg [10%+] while you’re at it even though you’re in the midst of a supply shortage), you need exceptional talent.

But such talent is rare, especially when you need true polymaths who are simultaneously geniuses and jacks of all trades and a master of one (Supply Management). This says that only a small fraction of a percent of the population are even intrinsically qualified for Supply Management, and given that these individuals can, by definition, do anything they want, how many are going to want to do something us unglamorous as Purchasing. (Especially considering that, as far as the average person knows — which should not be a surprise considering most curriculums at the Universities they went to still teach decades old operational management theory as the basics of Supply Management — choosing Supply Management means being stuck in the dungeon in the tower of spend.)
This challenge is only exacerbated by the fact that:

Sales gets commissions on every dollar sold, even if such sales cost the organization money, but Procurement’s bonus for identifying value is at the complete whim of Finance.

Procurement could identify, and lock in, $100 M of expected savings on a Billion of spend, primarily through the Herculean effort of a small core team of 10 analysts, negotiators, and project managers, work with Engineering and Marketing to realize $70M of that, or $7M of savings per Procurement team member, who, because the CFO decided that they should have realized 50M anyway, decides to only credit the team with 20M of savings, or $2M per member, and give them a mere 1% of that as reward, or 20K. Meanwhile, the top 10 Sales people, who delivered an average of 1.5M each above their 1M (non-commission) quota (as they get a 150K salary), get a 10% commission on that 1.5M and effectively double their salary, even though only a fraction of the revenue hits the bottom line. For example, if the COGS is 70% and they get 10% commission, 20% of that, or 300K per sales person, hits the bottom line before taxes. But 100% of the savings per Procurement professional, or 2M in the CFO’s discount approach, hits the bottom line before taxes. But they only get a 1% reward for their bottom line contribution while the sales people effectively get a 50% reward for their bottom line contribution. Is that fair? Not at all. And that’s why you can’t get good talent and why all the high EQ people go to Sales.

Moreover, if the savings don’t materialize, or don’t materialize to the extent expected, through no fault of Procurement (because Engineering or Marketing decided to go off the plan or off the contract), Procurement will still be held responsible and Procurement will be rated poorly and the dream team who worked their collective assess off will get nothing at bonus time but a bad taste in their mouth, and instantly leave for the competitor who pays them the most (while giving your firm a bad rep in the process as they will be very frank about why they left your cheap, ungrateful, backwater organization).

Your competitors are desperate too, and those with deeper pockets will outbid you for top talent.

It’s not all about money, and that goes double for top talent, but that being said, money is a factor, and if your competition is offering 20%, 30%, and even 40% more, that’s a little hard to turn down. Especially if they are also offering flexible hours, training, course reimbursement for any course taken on the employee’s own time where the employee gets a minimum / passing grade, etc. So if your training budget is still 0, your corporate policy still mandates being in the office from 9 to 5 (even though your suppliers are in a time zone 9 hours shifted and this means everyone would be working 11 hours any day a supplier has to be consulted), and there are pay ceilings in effect from 5 years ago, the chances of getting anyone talented to join your Procurement department are slim to none, with an emphasis on none.

Talent wants to be sufficiently challenged and sufficiently enabled.

They know they have a challenge, but they also want to know they have the tools to tackle it. If you expect them to work for you, you better have some decent tools. It’s not the Procurement dark ages where the best tool available is an Excel spreadsheet and e-mail to deliver it. If that’s all you have to offer, don’t be surprised if they run to the hills.

Talent is tight, and everyone is working against you to keep it that way. Finance with unfair compensation policies. Competitors with deeper pockets. And the CIO who thinks the IT budget is better spent on new iPhones for the masses, even though they all got new iPhones last year! But this is just one side of the damnation …

Procurement Talent Management: How Do You Recruit, Train, and Retain Your Way to Procurement Success?

It’s a difficult question. Top Procurement talent is in short supply, budgets are tight, and between (brain-dead) budget cuts and time constraints, training is that magical activity that you only hear about in fairy and folk tales that begin with the words “Once Upon a Time”.

So just how do you find and bind top Procurement talent in today’s economic landscape? It’s a tough problem, but one that Charles Dominick, Founder of Next Level Purchasing, has addressed in his latest paper on Procurement Talent Management: Recruiting, Training & Retaining a Modern & Awesome Buying Team. (Because the world’s second [or is that third] oldest professions is awesome.)

In this paper, Charles notes that just like there’s more than one way to make a tamale*1, there’s more than one way to go about recruiting Procurement talent, namely, the traditional way and the radical way. Organizations that search for talent the traditional way look for people who

  • have experience in the industry,
  • have Procurement experience, and
  • have experience buying the same categories they will be expected to buy.

There are advantages to this approach in that these people are typically loyal to the industry and want to stay within it (as that is their comfort zone and they like their comfort zone), they can typically hit the ground running, and good matches are likely. However, there are disadvantages to. If you continually replace the Volkswagen Beetle with a newer model, you still just have a Volkswagen Beetle. You don’t have anything radically new, and, as such, are not likely to get the radically new ideas you need to get out of a rut.

But there is another way. Instead of looking for someone who’s good on the traditional paper, look for someone who:

  • has the personality that fits the corporate culture,
  • has influential charisma, and
  • has intellectual potential.

Such a person, as Charles notes, can bring support for increased involvement of Procurement in the enterprise (as they fit, and, more importantly, can schmooze their way into non-traditional, and maybe even scared-cow, categories) and have the bandwidth to learn more advanced skills (and use more advanced processes and platforms to get better results). Plus, as these individuals are out-of-the-box that your team is trapped in, they are likely to bring some new ideas with them. You could find your best and brightest talent this way, or, as Charles point out, you could flop as the hire might not like Procurement or, even worse, while seemingly bright with his high IQ, just can’t adapt to the Procurement way.

There’s no right way, and the doctor would like to suggest that the best approach is often a fusion of the two, where you look for someone who:

  • has a high EQ, as they have to fit in,
  • has an above average TQ, as they have to use modern tools,
  • has at an average+ IQ, as they have to be able to solve problems,
  • has an affinity for the corporate culture
    which doesn’t have to be perfect as their EQ will let them adapt,
  • has experience in a relevant industry
    which might not be the company’s industry; for example, if you need an IT buyer, why not hire someone who used to be an IT account manager, is comfortable with the technical terminology, and knows all the tricks and traps providers will throw at you (and how to avoid those expensive change orders), and
  • has some operational experience
    in Sales, Finance, Engineering or a related area that will allow them to pick up Procurement quickly.

This person, who might be used to a different box, is likely to come with some new ideas, adapt to the organizational culture, learn what they need to know, and have the potential to contribute. Now, there’s still a risk that if they come from Sales account management they won’t like the job, but considering the increased reward that will definitely come from expanding the search box (at a lower risk than the true radical approach), the doctor thinks it would be worth it.

As indicated, the paper also addresses the subjects of training and retention, which are important, but which we’re not going to cover. Even though the section on retention is quite good, as there’s nothing groundbreaking on this topic, we’d rather focus in on the discussion of the traditional vs. the radical approach, as a real understanding of this subject will help you tackle the biggest problem — finding talent in the first place. Training is easy — fight until the budget is re-instated and send your people on courses and/or bring experts in on a regular basis to help keep them current on best practices. (Given the ROI numbers, it should be a no-brainer.*2) And any company that truly wants to retain talent will do the little things that go a long way. But even the best employers don’t always know who to look for. That’s why Procurement Talent Management: Recruiting, Training & Retaining a Modern & Awesome Buying Team is a must-read for any CPO or VP who wants to build the best buying team she can.

*1 We don’t use the other phrase here on SI. (LOLCat does not approve.)
*2 But that’s the problem at many organizations these days, no brains in the higher ups. 😉

Economic Damnation 04: Gen X, Gen Y, and Gen Z

Why are:

  • Generation X, the generation born between the early 1960s and the early 1980s,
  • Generation Y, the generation born between the early 1980s and the early 2000s, and the
  • Generation Z, the generation born between the early 2000s and the present day

An economic damnation? As will be discussed in detail in societal damnation 50 on talent, talent is required to keep your supply chains moving. People are required to enter the data to keep the information chain moving, to move the money to keep the financial chain moving, and to move the goods that keep the physical chain moving.

The majority of this talent is a workforce between the ages of 20 and 55, who will have been born between 1960 and 1995, and will thus be primarily composed of Generation X and the Generation Y Millennials, and as Generation X begins to retire en-masse, Generation Z will begin to enter the workforce in a few more years.

As a result, not only is talent a damnation, but it’s a damnation that comes in three different flavours.

Generation X

Generation X wants stability. They are at least half way through their career, if not nearing the end, and they are looking for their last (long-term) full-time gig that will give them fair pay, a great pension / 401 K / RRSP, flexible hours to help manage their children’s, or grandchildren’s, schedules, time-off to help good causes and volunteer in the community, good healthcare and wellness programs (as they aren’t getting any younger), and career development — as they have been out of school for (quite) a while and need help keeping up with new skills and work requirements.

Generation Y

They are looking for unique opportunities (such as overseas assignments, travel-intensive positions, or opportunities to work with cutting edge technology or developments, even if they might not succeed), work-life balance (as they are very active), social responsibility (as they care about working for an employer that cares about the environment and humanity beyond their local community more than previous generations), modern technology (as they grew up with technology), and mentoring (as they want to learn how to succeed and thrive in the real-world).

Generation Z

The beginnings of generation Z are just beginning high-school. And whereas Generation Y grew up in the information age, where technology was becoming more ubiquitous by the day, Generation Z grew up in the communication age where not only was technology becoming ubiquitous, but communication technology was becoming ubiquitous and just about every Gen Z is growing up with a smartphone where they can call, text, and e-mail 24/7. While we don’t know what they will want from a job perspective, we do know that they will want to be connected to their friends and colleagues 24/7 so any company that has not entered the communication age will not be able to recruit this coming generation.

In other words, every generation wants something different from the workplace and gone are the days when all it took to get an employee was job security, a fair pay check and some health benefits. Today, that’s the entrance fee to join the employer’s club. If you want talent, that costs more. Much more.

Regulatory Damnation 35: Health and Safety

Health and Safety, generally referred to as Occupational Safety and Health (OSH) or Workplace Health and Safety (WHS) in North America, refers to regulations and regulatory management concerned with the safety, health, and welfare of employees, be they full time, part time, contingent, day labourer, or unpaid intern. In an advanced organization, it’s a key component of CSR (Corporate Social Responsibility) as the health and welfare of any person doing any task for the organization is a key concern of any responsible organization.

So why is this a damnation? Is this not only the right thing to do but something you want to do as an injured or unwell employee is not productive? It’s a damnation because in some countries of the world, it’s becoming a regulatory nightmare. And not only is failure to comply with the regulations, some of which may go beyond common sense, a huge fine, but if someone gets injured and your organization failed to comply with the regulations, in some countries (and the United States in particular) that’s a million-plus lawsuit waiting to happen.

It’s a massive risk management activity that often adds very little value to the organization.

First, you need to either have your lawyer spend cycles researching all relevant OSH laws to your business at the municipal, state, and federal levels and make sure you are fully compliant, or shell out thousands upon thousands (upon thousands) of dollars to an expert OSH law firm that will provide you a list of all regulations you need to adhere to, minimum requirements, and example programs.

Then you need to identify all hazards of the

  • physical and mechanical variety
    and make sure all personnel have the appropriate safety gear and safety training and supervision if they are new to the task
  • biological and chemical variety
    and make sure all personnel have the appropriate safety gear, training, and supervision and make sure that the risk of exposure is minimized as much as it can be (and only qualified, certified personnel are allowed in the lab where the deadly virii are kept)
  • psychosocial variety
    and make sure all personnel are kept as far away from them as possible (which may mean keeping the CEO away from general assemblies, as he* is likely a psychopath)

Then you need to document your research, your policies, your training methods, your enforcement methods, and your regular review activities in case the OSHA (Occupational Safety and Health Administration) or its equivalent comes knocking at your door (as the result of complaints, injury, and/or lawsuits).

And if you’re in Procurement, not only do you have to worry about the safety and health of your employees (who might have to travel to dangerous regions for site visits of what could be danger-ridden factories), but of your supplier’s employees as well. If their practices aren’t up to par and a major disaster happens at one of their facilities, it’s your corporate brand that is going to take the hit when the dust settles and multiple worker’s rights group are quick to point out the failings in your supply chain.

It’s yet another time-sucking task that should be easy and obvious but isn’t thanks to mountains of legislation and suppliers who care more about money than people.

* Most CEOs are men. It’s probably because (considerably) more men than women have been diagnosed as psychopaths. (If most CEOs are psychopaths and most psychopaths are men, then we have a logical explanation for why most CEOs are men outside of sexism.)

Sourcing Innovation is all for Rank and Yank in Procurement!

In particular, SI is all for yanking anyone who suggests that the right way to manage talent is to yank out the worst performers in your organization on an annual basis.

This is another prime example of a consulting cock-up from the Big 5/6 who also brought us (often courtesy of the Board of Directors, as per yesterday’s Procurement Damnation post) baseless outsourcing, unnecessary asset liquidation, and the contingent conversion.

While the doctor is all for the reassignment, or, if necessary, the removal of labour that’s not cutting it, arbitrarily hacking the bottom 10% is the dumbest move you can make. Not only does it ruin your reputation (which is why, on Glassdoor, only 62% of current and former employees would recommend Amazon.ca, which employs the rank and yank strategy, as opposed to Google which is recommended by a whopping 92% of current and former employees), but it ruins your future results.

For example, let’s say a new CPO comes in, does a deep performance review across the talent base and removes the non-performers from the organization (either by having them reassigned to another department or retiring them). If everyone who is left is a performer, arbitrarily removing the 10% of the lowest performers in the following year is equivalent to hammering a nail in her coffin with her in it.

To clarify this, let’s say the department has ten employees including three senior buyers, two intermediate buyers, two junior buyers, one full time spend analyst, one full time relationship manager, and one full time contract and compliance manager. If the performance measurement is geared towards identified savings, because the directors are dictating savings, after two years, the relationship and the contract and compliance manager will likely be gone because, doing their jobs properly, they are not identifying savings but ensuring savings identified by the buyers or analyst is realized. In fact, even if each role has its own scorecard, due to the fuzzy nature of what a relationship and compliance manager will due, it’s still quite likely that whoever fills these rolls will rank quite low and be at risk of getting the axe.

But if they don’t get the axe, then, chances are the junior buyers will because the intermediate and senior buyers, who will be more educated and experienced, will able to skew their projects and results to the performance metrics they are measured against. And that’s equivalent to the CPO nailing her coffin while she is in it because, at some point, the senior buyers are going to retire and need to be replaced by the intermediate buyers who will need to be replaced by the junior buyers, who will need a few years to become intermediate — which means that the organization will never see any junior buyers advance. (As it will be cycling a new junior buyer in every year as it cycles one out every year.) As a result, in the long term, the organization will slowly run out of intermediate, and then senior, buyers and results will diminish rapidly — to the point where all employees are equally poor, returns are dismal, and there will be no difference between cutting the bottom 10% and cutting everyone.

Get the picture?

So the next time someone suggests that the organization employ a rank and yank strategy to get better results from its talent, SI strongly recommends that you jump up and say “that’s a great idea, how about we start with you” as you hold open the door!