Category Archives: Talent

People Matter Most (and high-performing CPOs know it)

Given my temperament to tout the talent gap that is now increasing daily, I was happy to see the recent article from the European Leaders Network that stated “People Do Matter Most, Really”. The article, which referenced a recently completed research study, revealed, again to my content, that the best performing CPOs are concentrating their efforts on their people, capabilities, mindsets, and aspirations.

The study from McKinsey & Company and the  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. They 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%.

Most of the difference between high performers and low performers was encapsulated by three soft elements:

  • Talent and Capabilities of the PSM professionals
  • Mindsets and Aspirations of the PSM department
  • The degree to which the PSM function was aligned with, and able to contribute to, overall purchasing strategy

Furthermore, high performers were five times more likely to employ purchasing managers with analytical expertise and general management backgrounds and six times more likely to hire managers who have experience in another functional area.

Thus, the best way to achieve results is to hire talented and capable individuals with drive and aspiration who have broad experience from a functional and managerial perspective, align them to the overall business strategy, empower them and let them do their job.

Got Talent?

Noting that it has been a while since my last Talent post, I went trolling for good articles. On the CPO Agenda site I found not one, but two great articles on talent development. “Deep Sea Fishing” by Adrian Done and “Nurturing Talent: A Numico Case Study” by Haide Villuendas from last fall’s Autumn issue.

In Deep Sea Fishing we are warned that purchasing functions often make the mistake of adopting a catch-all approach to competence development and that those organizations that fail to apply sufficient thought to developing appropriate deep sea purchasing competencies are destined to stay splashing in the rock pools; or worse, find themselves dangerously out of their depth in ill-conceived quests for the bigger fish.

According to the article, the key to success is the development of appropriate contextually-specific competence configurations that drive specific strategic competitive priorities in the most crucial areas. This is accomplished by formulating an appropriate framework for the dimensions of purchasing competence (which can start with the basic framework provided) and determining the impact of each of the purchasing competence dimensions upon performance.

Although blatantly obvious, step two is often easier said than done. Just because company A did X and experienced Y does not prove that X actually causes Y or that what will work in company A will work in company B. Although you can hypothesize there is a correlation between action X and effect Y, you cannot scientifically draw a far-reaching conclusion from a sample size of one. In order to determine the effect of a competence dimension, you need to establish appropriate objective and subjective measurements and take multiple measures. Then you will know for sure how important a given competence dimension is for your organization.

Of course, when designing, or re-designing, a purchasing function, you will likely not have the measurements you need to determine the appropriate competence dimensions. In this case, you can still proceed scientifically to arrive at a hypothesis of the appropriate dimensions. Conduct a study of what other organizations are doing and measuring and review the relevant literature. If you find two or three dozen studies and articles from reputable sources that all indicate a given competence dimension is relevant in your type of organization, than, chances are, it is not only relevant but will be relevant to your organization. Furthermore, if it is has been shown to impact one or more of the most common purchasing metrics, including the seven important metrics described in the article, it’s likely a sure thing. (The metrics listed are quality, on-time delivery, accuracy, cycle time, commodity knowledge, professionalism, and negotiating ability.)

By now you’re probably asking, just what is this competence dimension you keep referring to? A competence dimension is simply a meaningful measure of competence relevant to a purchasing department. The article lists six basic competence dimensions as part of their framework:

  • Employee CompetencePersonnel are well trained and have the ability to apply innovative ideas.
  • EmpowermentPersonnel are involved in key decisions, have autonomy, and have job security.
  • Internal InteractionPersonnel regularly collaborate and share knowledge with each other and with other departments.
  • Product/Service DevelopmentPersonnel communicate regularly with product and service development departments and assist in the early phases of new product development.
  • External InteractionPersonnel collaborate and share knowledge with suppliers, do joint production and delivery planning, and share risk.
  • IT CompetencePersonnel use IT to achieve company-wide visibility on spend, use eSourcing to get the best value, and make continuous improvements to the procurement cycle.

Nurturing Talent tells us that it can be difficult to attract and retain top purchasing talent and that any organization that wants to do so needs to make a serious effort in terms of time, resources, and commitment. But more importantly, it also spells out what talent looks like to Numico and what talent should look like to you. Talent consists of three broad attribute categories:

  • Attitudeetiquette, passion, and EQ: emotional intelligence
  • Brainpoweranalytical thinking, structured reasoning, and creativity
  • Knowledgegeneral knowledge, qualifications, and relevant experience

Furthermore, attitude and brainpower are given priority – since purchasing specific knowledge can be taught as long as the person has enough brainpower and the right attitude, as could be evidenced by a university degree and a desire for continuous learning.

The article also provides some good advice for growing and retaining talent.

  • RenumerationGood buyers spend the bulk of their time asking what a product or service is worth – it’s only natural they’re going to ask what they’re worth.
  • Learning on the JobNot only does it give your organization a competitive advantage, but it gives a purchasing professional a sense of accomplishment and, when done right, fun!
  • Career PathGood procurement personnel are ambitious. They want to know that they can advance over time.
  • MentoringThis can make both the mentor and the mentored feel valuable and maintain your competitive edge as relevant knowledge is passed on within your organization.
  • Team DiversityBusiness is Global – and Procurement even more so. Encourage and support diversity on your team, who will enjoy learning about other cultures.
  • Say Goodbye with GraceYour top talent leaving can be a good thing! A recently departed employee can be an ambassador for your firm – promoting it to potential future employees and customers. Furthermore, if an ambitious employee left because your firm didn’t have the appropriate position for her at the time, there’s no saying that such employee would not be interested in returning in the future when such a position opened up. Since there is nothing more valuable than a dedicated employee who brings back knowledge of best practices from other companies, it’s important to make sure they leave on the best of terms.

Critical Purchasing Officer

In a recent CAPS Research publication “Supply Leadership Changes” they point out that few decisions that affect the success of supply in an organization will have more impact than the decisions regarding who will be the CPO and to whom he or she will report.

The report had some interesting findings:

  • There were a total of 73 CPO changes and 75 reporting line changes in the 30 companies studied over a 10 year period.
  • There was a total of 29-first CPO appointments in the 30 companies studied over the 10 year period.
  • The centralization of supply at a firm was typically triggered by a simultaneous corporate strategic change and move towards centralization of many functions, and trigged the establishment of the fist CPO in 22 of 29 instances.
  • In 5 of 29 cases, the first CPO was established when the executive team recognized that centralization of supply would gain the corporation a variety of benefits.
  • Initial CPOs and replacement CPOS are typically found within the company more than they are not (62% and 73% of the time).
  • When a CPO was recruited outside the company, the CPO came from a supply position.
  • An internally recruited CPO with a supply background had an average tenure of 4.3 years while an internally recruited CPO without a supply background had an average tenure of 3.5 years, but first-time CPOs with a combination of supply and non-supply experience had an average tenure of 5.5 years.
  • CPOs leave their position for a variety of reasons, the most common being promotion to another position. Other common reason are major corporate strategic and structural change and a major corporate strategy strange.

These findings, and other, have some interesting implications:

  • Leadership in the top supply function is in a state of constant flux and getting a running start at the position is important.
  • The trend toward the appointment of non-supply managers to the CPO position is continuing and a significant burden of education and support falls upon the shoulders of the senior supply managers with supply experience.
  • Individuals aspiring for the CPO position need to move to a corporate supply position.
  • The CPO and the person to whom he or she reports forms a powerful team within the organization.
  • A new CPO must create a plan of action.

This might imply that:

  • A supply manager should constantly be improving herself. Continuing education and awareness is critical. ( Blogs contribute to awareness. )
  • A supply manager should be ready for increasing responsibility.
  • Corporate supply is where it’s at.
  • If you want to be a powerful CEO, get a great CPO.
  • A good plan is important.

The Talent Series XI: The War is Still Going Strong

Just in case you missed it, I wanted to point out the recent article declaring that there is “no end in sight for the ‘war for talent'” over on the European Leaders Network site.

According to the article, the ‘war for talent’ in procurement is being fought as fiercely as ever on battlefields as diverse as Mumbai, Shanghai and Singapore and that a recent survey from McKinsey suggested the logistics industry is facing an annual demand for 75,000 employees, not a huge number until you consider at present, the industry graduates just 5,000. In other words, the demand is fifteen times as great as the supply!

The article concludes by noting that the next 12 months do, however, promise to offer further challenges to an industry function that has come a long way but still has further to travel and whether it’s changing the mindset of existing procurement staff, to ensure that strategic thinking becomes second nature, or attracting the new breed of employee necessary to drive forward change at an exciting time, the ‘war for talent’ shows no sign of abating.

What I’m wondering is why all these articles that acknowledge the war is worsening fail to mention that good eSourcing and eProcurement systems can help these companies by allowing their current staff to do significantly more with less while they search and fight for new talent. (And, more importantly, when are companies north of the border going to realize this fact? I’ve been back in Canada for three and a half years, but have spent the last two and a half working exclusively with companies south of the border.)

EQ IQ

When on the Lean path of challenging the norm, eliminating waste, and searching for root-cause, business leaders must apply “Emotional Quotient” (EQ) skills to overcome roadblocks. … You need to identify, take ownership, solve and meet challenges head on when applying an emotionally intelligent response.

I didn’t get beyond the first paragraph of this article on The EQ Factor from Supply & Demand Chain Executive without thinking back to JB’s posts on Spend Matters [WayBackMachine] (“What is the Spend Manager Made Of?”* and “The Spend Management Talent Game”*) where he noted that a high EQ (high interpersonal skills) is one of the three key areas required to excel in Spend Management and that practitioners need to understand the world beyond them and possess general problem solving skills that go beyond functional – or even technology – knowledge. That’s probably what drew me in.

The article states that Emotional Intelligence (EI) can be defined as the innate dimension of intelligence responsible for our potential to manage opportunities when presented and manage relationships with others. EQ (like IQ, only with emotions) is the relative measure of a person’s healthy or unhealthy development of their innate EI and notes that while many leaders can comprehend tremendously intricate data, frequently those same leaders lack empathy, sabotage relationships, and ultimately fail to “rally the troops” and implement desired changes.

It then goes on to illustrate what EQ is by way of a Case Study called The EQ Blunder about a planning manager who is pessimistic, condescending, and challenging. But the specifics aren’t important, the points they specifics illustrate are.

The article notes that EQ can be learned by addressing the five critical skills that make up emotional intelligence through training and reinforcement. These skills are:

  • Self-Awareness
  • Mood Management
  • Self-Motivation
  • Empathy
  • Manage Relationships

A self-aware person gathers their thoughts and formulates a reply that includes an acknowledgment of the concern, followed by questions to gain clarification in an effort to build a complete, unambiguous, and mutual understanding of the facts and/or circumstances before formulating a response.

An individual who controls her mood is capable of self-management – of evaluating the situation and adapting appropriately. They look at the costs and benefits of the small actions as well as the large ones and align their actions with their attentions. They take the appropriate amount of time and give the right amount of attention to critical tasks in order to manage all the issues and act appropriately. They are optimistic, see beyond the present, and anticipate the future.

They are motivated, and take action because it feels rewarding to do so. They manage and sustain their energy levels and ensure that they are able to persevere through the challenges.

They are socially aware. They take ownership, accountability, see through the problem, ask questions, and do whatever is necessary to create change and improvements. They are empathic, in control of their body language, and sharing.

They can manage their relationships. They commit to worthy goals. They are compassionate. They are leaders.

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.