Today I’d like to welcome Don Dougherty, a Partner with SupplyStaff and Denali Consulting.

In today’s global economy, hiring and retaining top talent is a driving concern of corporate and human capital management professionals. Escalating retirement rates are looming, fewer resources are entering the job market than in previous generations, and required skills sets are more sophisticated than ever before. The end result is a tighter market for top-tier professionals and unprecedented challenges for organizations in the area of skills development, retention and recruiting. It is on every executive’s agenda.

What should companies be doing now, before it’s too late? We see development of a “talent strategy” emerging as a key business consideration…leading companies are determining what skills they have, what skills they will need, and how best to retain or obtain those skills. They are then executing aggressively on that strategy. Is your company? Here are some learning’s from those having success navigating the talent battlefield.

Determine the Real Needs
Executives always state they want the best professionals that the market will bear for their organization, but often times too little thought is given to what that is. Assessing what the organization actually needs in terms of skills, knowledge, and ultimately talent, is the first step; not only for now, but for the future.

Identify Current Skill Sets in the Organization
Assessing the organization’s skills may seem like a daunting task, but with a focused effort, some planning and follow through, it can be done relatively quickly. After first determining who will be in the assessment group, a combination of internal interviews, online skills testing, and performance reviews can help you identify and summarize your current organizational skill base. Identify systematic organizational gaps, as well as individual gaps.

Develop a Strategy to Fill the Talent Gap
Once the desired mix of competencies is determined, it must then be assessed whether the talent gap is something that can be trained or developed internally, recruited, or a combination of the two. Filling the talent gap is more of an art than a science, but is typically done through the two primary mechanisms; talent development and talent acquisition. Here is where the company or organization leadership team plays a key role, determining the right mix. Management will often have to make the tough call…understanding where development efforts stop and where recruitment begins.

Train and Retain
Studies have shown that companies with the best retention practices outperform the Dow, NASDAQ, and S&P500. Surprisingly though, we see it’s not the things that have never been thought of before that hold the most promise, but rather the things we knew we should be doing but have not been applying enough. The simple answer – train and develop a creative culture. To fill at least part of that talent void, employees of leading companies are completing extensive training courses & seminars to develop today’s needed skills and abilities. Additionally, talent gaps are being filled by focusing on interpersonal skills, including communication, teaming, innovativeness, and leadership. Ultimately a learning environment is provided where individuals are engaged in their own development and are rewarded for the right behavior. When employees are unwilling to change or grow, another position or even another organization might present a better fit.

Recruit the Difference
To truly transform and operate competitively, companies in all industries, and of all sizes, are aggressively recruiting the best and brightest…and it is sometimes easier and quicker to hire than to develop. While some companies continue to take on this effort themselves, many are soliciting the help of outside experts to help in the process, or take it over completely. Sources say the recruitment outsourcing market in the U.S. is expected to grow at an annual rate exceeding 20%. The strongest areas of growth are expected to be in the areas of recruiting, education and training, and personnel administration —essentially those areas having the biggest impact on overall competitiveness.

The new corporate organization is facing unprecedented demands made upon them by their customers, suppliers, senior management and themselves. While there are many efforts that management may pursue in the quest for competitive success, few are more important than having the right people with the right skills. Bottom line – be proactive in your task to build the right mix of talent.

Today I’d like to welcome Charles Dominick of Next Level Purchasing (now the Certitrek NLPA) with his post on Procurement Transformation.

Procurement transformation. It’s a buzzphrase. It’s a goal. And it’s a reality for some organizations.

But what does it take? What are the necessary ingredients to take a purchasing and supply management department from a state of being mired in the tactical to being a key driver of the strategic success of the organization?

Look at the marketing materials of vendors touting their ability to assist a procurement transformation. You’ll see software that will transform your organization. Consulting services that will transform your organization. Outsourcing services that will transform your organization.

And they all can – and, possibly, should – factor into a successful procurement transformation. But there is one constituency associated with a procurement transformation that doesn’t market to you. There are no glossy mailers. No full-page trade journal advertisements. And (thankfully) no spam.

Who is this constituency?

It is the personnel who fill the seats in your purchasing and supply management department. And they are arguably the most important ingredient that differentiates successful procurement transformations from those that only sounded good on paper.

For success and sustainability in a procurement transformation, you need a great team. You need people to establish synergy with your internal customers. You need people to develop continually improving relationships with suppliers. You need people who are aligned with the long-term goals of your organization.

Many purchasing and supply management leaders recognize this, but don’t always approach building their teams in the best way. Many of them think that having a team primed for procurement transformation simply means firing their current staff and bringing in “new blood.” I’ve seen this approach fail. And cost the organizations a lot of money in the process of failing. I’ve seen the poachers become the poached.

So, having the right talent for procurement transformation isn’t just about recruiting. It’s about three cornerstones:

1. Talent Development
2. Recruiting
3. Retention

Talent development is first cornerstone and the topic for the rest of this post. Almost every purchasing and supply management leader will look at her own team and not be 100% satisfied. The grass is always greener on the other side of the fence.

But why is the grass always greener?

If Company A across town seems to have a more talented team, why is that? Was your organization’s recruiting that bad? Or could it be that Company A just focused more on developing their talent through the years? And if your talent development efforts paled in comparison, don’t blame your team members.

Purchasing and supply management is a rapidly changing field. Your team can’t do the same things day after day, year after year and expect to keep up. Your team needs exposure to what is going on outside of the four walls of your office.

The responsibility for the talent in your department lies squarely with you – the leader. So what exactly do you do to develop the talent for your procurement transformation? Here are a few ideas that you may find helpful, though these certainly do not exhaust all of the possibilities:

• Enroll your team in training.
  Training is a great way to really get your team to focus on nothing but true learning. Have a clear picture of what you want your team to know or be able to do. Then find the training that is specifically designed to give you those results. Training should offer a step-by-step, how-to approach for teaching your team how to meet your goals.
• Share relevant trade journal articles, newsletters, and even blog posts with your team.
  These types of media can help your team understand what is going on in the world. They will get to see how other organizations are going about achieving success in purchasing and supply management. They will be exposed to some great ideas and will eventually be able to separate real-world ideas from textbook theory.
• Coach your team.
  You are the expert. Your team will only appear “dumb” if you think that they don’t know what you know. So impart your knowledge and your experience. Don’t withhold it. You will have a stronger team for it.
• Employ shadowing.
  Sometimes one of your experts will be working on a challenging project. Think about having one of your more junior employees assist on the project. No, it is not the most efficient use of resources especially if you have a busy department. But will it pay long-term dividends when you have a more experienced team and less dependency on one specialist? You bet!
• Rotate your team.
  One of the richest assignments in my career was when myself and three coworkers were in a two year program to switch positions every six months. Even though we were in the same company, each position taught me something new about purchasing and the organization. Job rotation can give your team new skills and reinforce those purchasing and supply management principles that have cross-category applicability.

Having the optimal talent to support your procurement transformation isn’t an accident. It takes leadership. It takes effort. It takes a plan.

Be a leader. Develop your talent. Then your procurement transformation will be a reality, not merely a buzz-phrase.

Today I’d like to welcome Jon Hansen of Procurement Insights.

In 2006 CPO Agenda’s London-based editor chaired a panel discussion asking the question “are there any limits to procurement’s role?”

The panel which included senior procurement personnel from organizations such as Nestle, Danone, British Airways and Merrill Lynch provided some interesting insights into the prevailing (and emerging) attitudes towards procurement from an executive suite perspective. (You can obtain a copy of the panel’s discussion through the following link.)

While the panel’s discussion was generally interesting, there were a number of noteworthy revelations (especially in the context of my recent posting on the pending talent crunch). An example that immediately comes to mind was the assertion by one executive that truly talented individuals “should move out of purchasing after five or six years and do another job, whether it’s finance, human resources, manufacturing or marketing.” Taking into account the fact that some of the panel members by their own admission are either “new” to procurement or do not consider themselves to be “a purchasing professional” makes me wonder if this represents an expansion or an assimilation of the purchasing department’s role within an organization?

There is a significant difference between expansion and assimilation in that expansion acknowledges that purchasing can have a broader role in the organization’s overall success while still recognizing and working within its unique operating framework. Assimilation on the other hand tends to view procurement as an adjunct of a core practice (i.e. finance) where there is a greater tendency to overlook important attributes that are indigenous to the practice. One panel member’s opinion that “procurement is becoming more a profession for generalists, rather than specialists,” represents the assimilation view to which I am referring.

Another comment that caught my attention was the position taken by one panel member that out of his organization’s 20,000 suppliers only a few (i.e. 100) will merit engagement from a strategic perspective. As a result, there is going to be a continuing need for what was referred to as “low-level” buyers. However, the same individual concluded that “one strategic business thinker with the right skills and capabilities is worth 10 or 12 of your normal, run-of-the-mill purchasing people.” This “class distinction” as I will call it is certainly not new to the industry. It is however a potentially detrimental viewpoint in that it can increase the risk of a serious disconnect with and between key stakeholders. Particularly if you are of the opinion that there will be a continuing need for traditional purchasing personnel.

Procurement through the looking glass?

Recognizing that there are “hard-nosed purchasers” as well as “creative and innovative guys” (the reference to guys only is duly noted) one panelist highlighted the benefits of the increasing number of CPO’s that are “coming from outside the procurement world.” Referring to these individuals as “people who come from business . . . and therefore understand the business language,” the executive indicated that the new CPO’s “tend to be wonderfully connected in their organizations” bringing an element of creditability that will “help to bring procurement into the mainstream.”

While collaboration is essential to the ultimate success of any initiative hence the benefit of being “wonderfully connected,” is this necessarily the most important qualification for a CPO? Or is it the hallmark of a project champion or a key stakeholder contributor? This is another important distinction given that the panelist later made the statement that “I come from business and when I leave procurement I’ll go back to business.”

I have a first hand understanding of the corporate mindset in terms of increasing one’s value through a diversity of experiences (one day I will have to tell you the story of a top sales manager’s decision to accept the head position in his organization’s service department solely to increase his odds of being promoted up the corporate ladder). However the risk of being perceived as an outsider or an interloper under these circumstances is very real, especially if you already have your foot pointed to the exit door.

Unfortunately departmental resistance has been one of the most common challenges associated with a failed procurement initiative. This poses the question, are the only individuals who possess the capability to run the procurement department of the future, the ones who do not think of themselves as being procurement professionals?”

If the answer is yes, what does this say about corporate commitment in terms of personnel development within their purchasing ranks?

A question of corporate culture

How an organization views the role of its procurement department differs from one company to the next. One panelist made the following observation when asked if the shortage of talented people was the greatest constraint a CPO faces: “the context, history and the culture of the company is important. Take a specific category as an example. I moved to Nestle from a company where procurement was heavily involved in any new capital expenditure project right from the start. Now I find myself in a situation where we have very limited involvement to actually influence the buying decision.”

This indicates that some companies confine their purchasing departments to a narrowly defined functional role versus being a strategic contributor. While I do not have specific data regarding the percentage of organizations that operate under this misconception, the consequences of doing so can be catastrophic.

One example is the computer manufacturer who built the Hot Wheels and Barbie PC’s for Mattel in the late 1990’s. Operating on razor thin margins the pressure to use low-cost components from off-shore OEM’s was great. Unfortunately, the power supply that was ultimately selected failed in 60% of the machines (adding insult to injury was the fact that the failures occurred on Christmas morning when excited children attempted to turn on their new PC’s).

The company, whose sales grew from $27 million per year to $118 million in just 18 months collapsed under the wave of return costs which eroded the aforementioned paper-thin margins. The manufacturer went into bankruptcy in early 2000, while Mattel was left to deal with a public relations nightmare.

What role did the PC manufacturer’s purchasing department have in the power supply selection? Did upper management’s pressure to meet an unrealistic selling price unduly influence their decision? Finally could the purchasing department’s management have done anything to avert the disastrous outcome? Not wanting to pick on Mattel, the same questions could be asked regarding Thursday’s recall of 967,000 plastic preschool Fisher Price toys that were manufactured by a China-based supplier. The recall was due to “excessive amounts of lead” used in the products’ paint.

The above examples certainly demonstrate the breadth and width of the potential impact that is associated with the purchasing process. What needs to be seriously considered is whether the purported benefits of handing the reigns to a CPO who does not have a purchasing background versus developing a leader from the existing talent pool within the department itself make sense in this period of dynamic change?

It is really a question of creditability. In which individual would the CEO and board have the greatest level of confidence?

Referencing Jim Collins’ book Good to Great*, if an organization fails to invest in developing its leaders from within then it is likely that they will look to someone outside of the corporation. In the majority of such cases (note that I did not say in every case), the odds of sustainable success will be limited.

*Note: The book Good to Great referenced the practice of looking outside of an organization for leadership. While there are certainly instances where an individual outside of a company was brought in to run a particular procurement department, I believe that the term outsider can also be extended to include individuals from other unrelated areas of the same business.