Category Archives: Talent

You’re Understaffed. And You’re Not Alone. Now What? Part I (Updated)

This series originally posted in June of 2014. Since nothing has changed, it’s being updated and reposted as it is still ever so timely.

Five years ago, Source One Management Services ran a survey that they summarized in a 4-part series on how Companies Face Limited Procurement Resources that demonstrated the dark state of affairs in Procurement at the time. They found that 1 of 3 Procurement departments were understaffed, and this was not a good thing as costs were climbing, GDP growth was flattening, and availability of supply in certain key raw materials and rare earth metals was diminishing and it took a talented Supply Management team to navigate these chaotic waters.

Fast forward five years, and not only are many Procurement organizations still understaffed, but 51% of Procurement Leaders believe they do not have the capability in their terms to deliver their procurement strategy. But despite this, 72% of Procurement Leaders are spending less than 2% of their budgets on training. Add this to the fact that a survey by DHL in 2017 found that not only is the supply chain talent pool is not keeping up with the changing requirements as technology reshapes the industry, but that demand for supply chain professionals will soon exceed supply by a ratio of 6:1, if it hasn’t already, and the situation is bleak indeed. In summary, Procurement organizations are, and will be, under-staffed, under-equipped, an with not doing anything about it. Not good.

But often your only option for growth in today’s marketplace with increasing costs, increasing competition, and increasing consumer demands is cost control — only available through Supply Management. So what does this mean for you? What do you need to do to survive?

More Analysis
But real, effective, analysis that identifies new opportunities takes time. More time than just dumping your AP and P-Card databases into a spend analysis tool and running the canned top-n spend reports by supplier, category, department, etc. As per our classic, but still highly relevant, post on Spend Analysis – How Do You Get It Right, real savings comes from real insight which requires real analysis, which takes time, effort, and focus.

More Category Sourcing
If you’re short-staffed, you’re going to focus on the top n suppliers, categories, departments, etc. spit out by the canned reports from your spend analysis reporting tool. Some of these will have opportunities, but since you’ll already know most of these opportunities, you’ll miss many of your biggest opportunities, which are typically found in the high-opportunity tier-2 categories that never get addressed due to lack of resources. And you’ll also miss mid-tier opportunities that could be captured with new automation technologies and tactical procurement approaches, as identified in our recent post on how your tail spend should be vanishingly small and the typical losses associated with it negligible.

Identify New Sources of Value
The future of Supply Management, in an inflationary economy, is value-generation. Cost control is a good start, and in an organization overspending by 5% to 15%, it will make a big impact in the beginning. But once all of the fat is trimmed, the best you can do is reign in costs. This means that the next round of savings is going to come from identifying value-generation opportunities. Bundling and unbundling the right value added services for your organization; helping engineering identify more cost-effective alternate materials and production processes that are also more environmentally friendly, and may let you charge a sustainability premium; and identifying new market opportunities based on products and services your strategic suppliers could provide you with can all bring value to your organization.

What next? Stay tuned for Part II.

AI Won’t Solve Your Talent Problem!

Talent is Still the Biggest Issue Facing Procurement Today … so what are you doing about it? (Besides still cutting the training budget as soon as cashflow gets tight and delaying necessary system purchases because you can’t take a long term view.)

As SI has repeatedly said, Procurement Pros need to be jacks of all trades and (almost masters of all but in reality) masters of one (Procurement) (Trend #17), and that’s no easy feat when the skills and knowledge a Procurement pro needs to do her job effectively increases every year.

And new AI / Cognitive technology doesn’t decrease the skill sets and knowledge required, despite what one may think. In fact, it only increases it Why? First of all, do you have assisted intelligence, augmented intelligence, or a cognitive system that is as close to true AI (artificial intelligence) as one can get with today’s technology? And, more importantly, does your Procurement Pro understand what you have, what the differences are, and what the respective limitations are.

If the solution is just assisted intelligence, then it’s an automation solution (RPA) with some expert knowledge encoded to handle typical situations with certain assumptions. If the assumptions are invalid, will the software detect them? If the situation goes beyond the realm of typical, will the software detect it? And even if the software does, will it be able to do anything without expect guidance? An example of assisted intelligence is an automated auction where the platform automates the sourcing of an item or service designated for auction among pre-approved bidders and goes from demand specification to final award without human input. But will it detect if the bids are complete? Within expectations? That bidders are bidding on the right product or service? Maybe the buyer assumes shipping included, but the bidders aren’t including shipping, and since the system only has a ceiling, it doesn’t know that the bids are way too low, and awards to the lowest bidder, that is actually the highest as the bidder is the furthest away and has the highest transportation cost.

Same goes for augmented intelligence. However, with augmented intelligence, the software goes beyond simple RPA with fixed expert rules — it is able to analyze a lot of parameters and pick the closest matching scenario and associated workflow. For example, an opportunity analyzer that takes into account current market pricing, supply availability, bidder responsiveness, current market trends (upward and downward), projected demand, etc. and advises the buyer on the type and timing of the sourcing event as well as the best workflow. But what if the market pricing is a week out of date and the market price just jumped up 20% (due to a fire in a major supplier’s plant) and reversed the trend? That changes everything, but the solution may not detect it and instead advise the worse sourcing event.

Cognitive platforms that continually monitor the situation are better, and if they learn from the actions the expert users take over time, better still, but they still can’t cope with an exception al situation they haven’t been coded for, or trained for. For instance, even if they detected that last minute spike in pricing that reversed the pricing trend and, thus, changed the optimal sourcing strategy, will they understand why the spike happened and the best alternate strategy? Or will they default back to the recommending the default strategy in a situation where costs are increasing … e.g. switching from auction to multi-stage RFI with optimization-backed analysis? Neither is right in this situation. In this situation, its extend the current contracts with your non-affected suppliers, increase the number of units, and lock in supply early, even if cost is higher.

In all these situations, only a knowledgeable, experienced, and sometimes expert Procurement Pro is going to be able to make the right decisions … and a novice relying on the systems is going to make the worst, and most costly, decision imaginable.

There’s no true AI, no all knowing software, and no replacement for a real expert.

The reality is that, at the end of the day, these systems make your experts more efficient — and multiply their productivity — they don’t replace their expertise.

The 10 Worst Innovation Mistakes In A Recession (Update and Repost)

Are we in a recession? No.

Could we be in one real soon? Yes.

Regardless of what “the experts” tell you, two things are true.

  1. Trade Wars are BAD for the economy.
  2. Economic Alliance Breakdown (like Brexit) is BAD for the economy.

Both of these events can spark recessions, and are very statistically likely to at least spark localized recessions in some industries in some geographies. And while it’s hard to say which geographies and industries and to what extent due to the proliferance of alternative facts on even the major media outlets (which is what happens when you let party oriented moguls conglomerate holdings and reduce journalist headcount), it’s still not hard to say the risks are rapidly increasing.

It’s also not hard to say that, based on past behaviour, most organizations are bound to do the wrong thing when it starts. So, to this end, SI is reposting this classic piece from 2008 to remind you of what not to do if things get tight (which is based on a great piece on the 10 Worst Innovation Mistakes in a Recession that appeared in Business Week in January, 2008.

Moreover, making these mistakes creates a self-fulfilling prophecy that spirals you towards hardship.

  1. Fire Talent
    Talent is the single most important variable in innovation. And innovation is the single largest lever you have to increase productivity and decrease costs.
  2. Cut Back on Technology
    The rise of social networking and consumer power means that companies have to be part of a larger conversation with their customers. This requires technology. Furthermore, the best way to insure you are getting the best price is to tackle the right categories, as identified by spend analysis, with strategic sourcing decision optimization to make sure you are making the award with the lowest total cost of ownership. It’s also important to make sure that all of your invoices are submitted in an electronic format that can be automatically matched against contracted rates to make sure you are being overcharged. This requires leading-edge technology.
  3. Reduce Risk
    Innovation requires taking chances and dealing with failure. Although it’s important to control risk, trying to eliminate it entirely will just end up eliminating any chance for innovation at your company.
  4. Stop New Product Development
    This hurts companies when growth returns and they have fewer offerings in the marketplace to attract consumers. And with today’s rapid pace of technological change, you could even lose customers in a recession to a competitor who keeps innovating while you stand still.
  5. Replace a Growth-Oriented CEO with a Cost-Cutting CEO
    Most recessions only last two or three quarters and, these days, are relatively shallow. Penny-pinching CEOs don’t have the skills to grow when growth returns. Plus, a penny-pinching CEO is the most likely individual to fire your top talent.
  6. Retreat from Globalization
    Emerging markets are sources of new revenue, business models, and talent. And, like it or not, emerging economies like India and China are soon going to have more buyers for your product than the countries you’re currently selling to.
  7. Replace Innovation as Key Strategy
    … With Systems Management and Cost-Cutting. Once focus shifts away from innovation, it can be very hard to get the focus shifted back.
  8. Change Performance Metrics
    Shifting employee evaluations away from rewarding riskier new projects toward sustaining safer, older goals. This leads to risk-averse behavior and stifles innovation.
  9. Re-inforce Hierarchy over Collaboration
    A return to command-and-control management. This alienates creative-class employees, young Gen Y and X-ers, and stops the evolution of the corporation. In today’s world, companies that don’t evolve die – and they do it quickly. The average life-span of a Fortune 500 company is shrinking every year.
  10. Retreat into Moated Castles
    Cutting back on outside consultancies is seen as a quick way to save money. Yet, one of the key ways of introducing change into business culture is to bring in outside innovation and design consultants.

Remember that winners always emerge out of recessions and they always win on the basis of something new. If you don’t always have something new in your pocket, you’re not going to win. And if it is a recession, and you don’t have something brand spanking new to pull out of your pocket when the recession is over, you could literally be toast. Furthermore, even a recession provides growth opportunities. People still spend money. They still need to eat, maintain their homes, and their life-styles. The difference is that they don’t spend as much money and look considerably harder for the best deal. This means that they’re much more likely to waver on brand loyalty if you can provide them a better product on a better price – and this means that you can still grow by taking market share away from your competition.

So don’t make the innovation mistakes. If it is a recession, then whether you come out of it a winner or a loser is up to you.

Furthermore, if it is a recession, and your company supplies sourcing and procurement technology and services, then this should be a major growth period for you! After all, how else is your average blind-in-one-eye company going to save money? This means that not only do you have to make sure that you don’t make any of the top 10 innovation mistakes, but that you invest for a growth period because, if you play your cards right, it will be.

Talent Tempering: Part IV

In our last two series we discussed Technology Advances and Process Transformation, which SI calls Transition, that collectively comprise two of the three T’s critical for organizational success. The third T, talent, that we are discussing in this series must not only be in abundance, but also be appropriate for the organizational needs. This means that you not only need talent with a good mix of IQ (intelligence and skills), EQ (emotional intelligence and wisdom), and TQ (technology and mathematics/logic), but that the mix must be suitable to cover the range of Supply Management tasks before your organization, and in sufficient quantity.

But, as we discussed, this is often easier said than done. In order to determine if you have the right mix of talent, you first need to understand the type of talent you have individually and as a team (through a multi-faceted collective assessment), define where you need the talent to be (which can be a complicated affair, and would take at least another series, if not a short book, to describe), do a gap analysis, and devise a plan to get the team, collectively and individually, from where they are to where they need to be. This plan will consist of a mix of training and education options, so that each individual is offered the methodology by which they (likely) learn best, but also related methodologies to broaden their horizons and increase their learning potential.

But this will not be enough, because, by the time they get to where the plan identified they should be, processes will have changed, technology will have changed, and the supply chain as a whole will have moved on rapidly. You can’t keep up … the best you can hope for is a team that will individually and collectively work together to keep up as best as they can and prioritize the needs as they arrive and change.

But sometimes, you’ll have a team where one or two members have no interest in going above and beyond and riding those supply chain rapids day in and day out. They’ll want to get off every day at 5 pm, and not get back on until the next workday at 9 am. The rest of the team won’t be able to survive unless everyone is willing to contribute as needed 24/7. In this case, and only this case, will you have to (immediately) replace your talent.

(Before we continue we should note that you don’t replace talent just because they don’t have the skills, because that’s often your fault, and not theirs, for not providing them proper training and mentoring — which we know you’re not doing given that training budgets were slashed heavily during the last recession and never restored, despite the constant lip service paid to the importance of talent and training. Not until you have provided them with ample training, mentoring, and time can you deduce whether their lack of performance is their fault or yours, and since they should never have been hired in the first place if they did not show aptitude, it’s only fair to assume it’s your fault that aptitude never blossomed into capability and performance. Of course, if they can’t pull their weight after given sufficient mentoring, training, and time, then you will have to reassign them [or let them go if there is no suitable job in the organization], but typically you will need to replace people because they don’t want to pull their weight, not because they can’t.)

So how do you go about finding and recruiting the right talent?

That’s a tough question. Fundamentally, you need to find a candidate that

  • has the raw IQ, EQ, and TQ you need
  • has a desire to learn …
  • and the willingness to put in the hours on and off the job
  • plays well with others
  • doesn’t overvalue his worth …
  • but respects it as well (as you need the candidate to also respect the worth of others)

and, preferably:

  • has experience in the industry …
  • and with the categories she will be dealing with …
  • preferably through another role (engineering, marketing, etc.) as well as that will help her work with the other departments
  • is familiar with the types of technology being used …
  • has sufficiently strong math, logic, and reasoning skills
  • and sufficiently strong people skills

even before you get to your customized wish list. This is a tough sell, and one you are not likely to do on your own.

You will need to rely on your team to help you — they will know who the best candidates are among their peers and who the organization should seek. And any of your colleagues who do not agree are the kin of Maury the Management Moron and, as indicated in this classic post on what to do if you really want a renaissance education, I can only hope that one day your boss will catch on to the fact and show them the door, Fresh Prince style!

Talent Tempering: Part II

In our last post we discussed that in our last two series we discussed Technology Advances and Process Transformation, which SI calls Transition, that collectively comprise two of the three T’s critical for organizational success. The third T is, of course, talent, which must not only be in abundance, but which must also be appropriate for the organizational needs. This means that you not only need talent with a good mix of IQ (intelligence and skills), EQ (emotional intelligence and wisdom), and TQ (technology and mathematics/logic), but that the mix must be suitable to cover the range of Supply Management tasks before your organization, and in sufficient quantity.

In order to temper your talent, you need to start with a page from the process transformation handbook that says before you can make any changes for the better, you first have to understand where you are, then where you want to be, and identify the gaps. And then, of course, make a plan to close the gaps. But how do you understand where you are?

As per our first post, you do a collective assessment, which is defined as the (weighted) average of a self assessment, a manager assessment, a team assessment, and a third-party assessment that provides a reasonably accurate view of each individual on the team and the overall team.

Then you temper the talent. You look at the gaps between where each individual is and where you want them to be and put together a plan to get them there. What will that plan consist of? Charles Dominick of Next Level Purchasing offers us some good advice here as well. Put together a plan that takes advantage of the multitude of offerings that are available to increase the skills of your team members (without sending them back to school) that include, but are not limited to:

  • Internal Training
  • On-Site Seminars
  • Conferences
  • Online Courses
  • Certification Programs

Each of these has advantages and disadvantages, but they can collectively address your IQ, EQ, and TQ needs at the individual and group level in interesting and unique direct and indirect ways, allowing you to adapt a training program to the learning needs of the individuals and the team. If a team member learns best by doing, online training with detailed exercises might be the best training method. But if a team member learns best by being shown, on-site seminars might be best. And so on.

The best way to figure out the right training mix is to use a mixture of self-selection and third-party assessment. Ask your team members what they want, provide a reasonable cross-section of the collective requests to each team member, and have a third party help you measure the improvements. (This way if a team member asks for internal training, another for an online course, and a third for a conference, and you give these three employees all three options, and measure their capability against a skill before and after, you can see what works best and refine the training plan as time goes on.)

And now you have the basics of how to measure where your talent needs tempering and the methods to best achieve that tempering. But is it enough?