Category Archives: Talent

The Talent Series I: Succession Planning

I know you don’t want to read about it. I don’t even want to write about it. But in a marketplace where there is constantly “increasing competition for procurement professionals” (EuropeanLeaders.net) and where “consultants are able to command $1000/day, and more” (SupplyManagement.co.uk), you face a constant risk of losing your most talented people to your talent-hungry competitors, especially if you don’t have good incentive plans in place that will allow your employees to earn bonuses relative to their performance. (Considering that every dollar they save is generally worth at least five sales dollar relative to the bottom line, is performance-based compensation really a stretch?) Given this harsh reality, I think this is a topic worth discussing – and a great way to kick off the talent series and get those gears grinding.

The reason I’m getting to it now is that I was poking around my favorite analyst site (Aberdeen Group*) and stumbled upon the recently released Market Alert “The Key To Talent Development: Halogen Adds Succession Planning Functionality to its Employee Performance Management Suite”. The brief quotes Aberdeen’s “Enterprise Talent Management” report that identifies a number of challenges companies are facing in their development of the next generation of leaders. The two biggest challenges (at 61% and 56%, respectively), are lack of funding for leadership development and an inability to locate or create a talent pool of candidates.

The first problem is easily solved – recognize the need for talent and invest accordingly – after all, a solid investment in your people will pay for itself in increased productivity, which translates to hard dollar savings when we are talking about procurement personnel. The second problem is more difficult – attracting people is hard, and turning them into tomorrow’s leaders is harder. That’s where succession planning comes in. By figuring out the skill sets you will need to replace your current staff, you will identify the training and mentoring that your new hires need today to become your leaders tomorrow. That way, even if your best people leave or get poached, you will have leaders ready to take their place.

The Aberdeen brief also notes that to truly be successful, companies need to be committed to long term strategic succession planning that incorporates the following key elements:

  • support from the CEO and top executives
  • creation of a talent mindset
  • creation of a performance culture
  • ensurance of data-driven decision making
  • development of a “learning organization”
  • alignment with the overall strategic plan of the company
  • organizational readiness

In other words, it’s more than just a one time effort and more than just the adoption of a technology solution – although a solution that can be integrated with talent management processes such as employee performance management, training, and assessment could be of significant value. So I’d recommend that if you haven’t started working on a succession plan, that you start today. I know it often leaves a bad taste in the mouth, but I can assure you that’s preferable to walking in to work one day and finding yourself without a leader to carry the business forward. And in the future, I think it will be a fundamental part of talent-focused organizations who solve the talent problem. After all, if everyone has access to the same knowledge, training, and experience, then, if you believe everyone has potential, everyone can eventually become leaders in their own business domains.

* This was written pre-acquisition announcement
** Note to AMR (acquired by Gartner): if you want to know why, contact me.

(e-Sourcing) Resistance!

There’s no easy solution.
The price is high, and it’s time to pay.
Turn of the century vision
focused on a better way.

Recently, Tim Minahan over at Supply Excellence [WayBackMachine] has been very focused on e-Sourcing, why it is good for suppliers, strategies to make the most of e-Sourcing, why it’s not all about reverse auctions, and, why there is so much resistance.

And although I indubitably agree with the vast majority of his points, I have to disagree with his rationale for a continued resistance to e-Sourcing by many buyers (and suppliers). However, before I continue the story, we should summarize the story to date.

It started with Why e-Sourcing is Good for Suppliers: Part I in which Tim set out to dispel “The 7 Myths of e-Sourcing” where he succinctly stated, contrary to some archaic popular beliefs that:

  1. e-Sourcing is NOT all about lowering prices
    proper e-Sourcing tools allow qualification and evaluation on all attributes of a supplier’s capabilities and costs, allowing a buyer to make a decision on value
  2. e-Sourcing is NOT unfair to suppliers
    e-Sourcing introduces integrity, opens the playing field, and insures that all suppliers get a fair shake
  3. e-Sourcing is NOT unfair to incumbents
    since good e-Sourcing tools allow the buyer to evaluate the value provided by the incumbent, by way of innovation credits and switching costs, a competitive incumbent is in a good position to actually win more of the business
  4. e-Sourcing does NOT make it difficult to win new business
    since e-Sourcing dramatically shrinks sourcing cycles, suppliers can participate in more events and increase their opportunities
  5. e-Sourcing does NOT lengthen the sales cycle
    since e-Sourcing shrinks sourcing cycles, it also shrinks sales cycles and getting to no fast can be as valuable as getting to yes fast
  6. e-Sourcing does NOT burden suppliers with new cost, technology, and resource requirements
    not only is there compelling evidence that e-Sourcing reduces overall SG&A costs, but a proper on-demand solution can reduce supplier technology requirements to a PC and a net connection, which is likely to already be on the desk of most of the supplier’s analysts and sales people
  7. e-Sourcing does NOT eliminate buyer-supplier relationships
    e-Sourcing platforms allow buyers and suppliers to gain better visibility into costs and risks in the supply chain and work together to come up with innovative cost-saving, value-enhancing solutions that build stronger relationships over time

This was followed with Why e-Sourcing is Good for Suppliers: The Sequel where Tim offered strategies for suppliers to make the most of e-sourcing events. Succinctly, Tim suggested that a supplier should:

  • Teach their buyers well
    by educating buyers on the total cost and value drivers of the industry and using the e-RFX process to lobby buyers to incorporate qualitative metrics such as innovation, fulfillment, and quality into the award criteria
  • Fire bad customers
    since the top 20% of your customers will generally contribute 80% of your profits, you should focus on those customers that provide the same value to you that you provide to them and drop the rest; e-Sourcing facilitates this by letting you quickly gather the information needed to determine whether a potential new customer shares the same attributes and capabilities of your current top customers
  • Do your homework
    make sure you fully understand the buyer’s specifications and award criteria and provide all of the information in a timely fashion
  • Have a game plan … and stick to it
    pre-determine your starting bid, bidding increments, and lowest sustainable price; bidding away your entire margin is not good for anyone
  • Play fair
    not only will you get fired on the spot by a savvy buyer if you attempt to circumvent the process, but you could get a bad reputation which would hinder future business
  • Win the business everyday
    remember, a buyer uses e-Sourcing to help him find the supplier that offers the most value – and a supplier who consistently exceeds basic requirements and expectations is much more likely to be given high marks on the qualitative analysis of future awards, leading to a higher overall value in the mind of the buyer

Then, as a result of the number of comments and e-mails Tim received, Tim inferred that his recent posts on the myths of e-sourcing must have touched a nerve and quickly fired off another short post where he explained that “e-Sourcing: It Ain’t All About Reverse Auctions” and that e-sourcing is not a euphemism for reverse auctions. Instead, auctions are just one flavor of negotiation types available on the e-sourcing menu. Other negotiation types include electronic RFI, RFP, RFQ, sealed bids, transformational bidding, flexible or expressive bidding, and optimization. (…) And, as stated in the previous post, nearly all e-sourcing projects utilize multi-threaded or iterative negotiations, moving from e-RFI-to-e-RFx, etc.

Tim furthermore noted that negotiation itself is only one area of functionality supported by an e-sourcing platform. It is also only a small portion of the strategic sourcing process. Time dedicated to negotiation accounts for less than 20% of the overall sourcing process. The bulk of sourcing efforts come pre-negotiation (…) and post-negotiation (…). These activities largely determine the success and total value derived from any form of only negotiation. This led to a revised definition where he stated that a more apt definition of e-Sourcing is the use of Web-based applications, decision support tools, and associated services to streamline and enhance strategic sourcing processes, determine best-value supply relationships, and advance knowledge management.

And since this last post was a week ago, it looked like it was the end of the story. But comments continued to poor in, and yesterday Tim blogged “Whither e-Sourcing?” in response to a particular remark by Kevin Brooks of Apexon (acquired and merged with Infostretch in 2022) that essentially pointed out that despite all the value, you still often find tremendous resistance to the e-Sourcing process. In this post, Tim offered a conjecture as to why buyers and suppliers resist. The conjecture:

Laziness

Tim states that buyers don’t like the way e-sourcing adds discipline and accountability to the process and that suppliers don’t like e-sourcing because it introduces a level of competition and quotes Dave Nelson (of Honda, John Deere, and Delphi) who said buyers do not like e-sourcing because it makes them do their work and Jason Busch of Spend Matters who said ”e-sourcing doesn’t allow buyers to select suppliers based on the size of their Morton’s [steakhouse] expense account.

And even though we are all quite capable, and probably guilty, of becoming quite lazy every now and again, especially when we are tired, bored, and worn out, I do not think this is the cause, only the perceived symptom.

So let’s assume that what Tim, Dave, and Jason said is true and that buyers and suppliers are lazy when it comes to e-Sourcing, that this is only the symptom, and try to deduce the root cause(s).

(1) Buyer’s don’t like the discipline and accountability e-Sourcing adds to the process.

I do not believe that buyers fundamentally have a problem with discipline – after all, discipline is process and a well-defined process can streamline your work, not make more of it. Maybe they don’t like the accountability, but when you consider that it is their ass is on the line, and that a well designed system can actually make it more transparent that they are doing their job well and the screw-up down the line is someone else’s fault, the system seems kind of attractive.

However, if the buyer does not judge the system to be well designed, well explained, and easy to use, then the buyer is going to equate that system with more work, and not less, and since your average buyer is more likely overworked than not, it’s only logical that they would resist. But it’s not resisting out of laziness, it’s resisting in an effort to keep their workload down in an effort to maintain their current level of productivity.

(2) Suppliers don’t like e-sourcing because it introduces a level of competition.

Suppliers are always under fire from competition with or without e-Sourcing – and most recognize this fact! However, if the process appears to favor the competition, it is logical that they would resist, and this would be out of fear and not laziness.

Thus, not only does the supplier need to be educated on how e-Sourcing improves the process and levels the playing field, the supplier has to have confidence that the buyer will use the tool fairly.

(3) Buyers do not like e-sourcing because it makes them do their work.

As I said in my response to the first point, for the most part, I do not believe that buyers do not want to do work, I believe that buyers do not want to do extra work that will detract from their productivity (and make them look bad). And since a poorly designed, or poorly explained, system will only cause them extra work, it is natural they would resist.

(4) E-sourcing doesn’t allow buyers to select suppliers based on the size of their Morton’s [steakhouse] expense account.

This is actually the most valid point – but not because buyers are greedy and want kickbacks, but because buyers want to be recognized for what they are worth and get what they deserve – just like the rest of us. I’m willing to bet that if a buyer is willing to select a supplier based on a few free dinners or a “supplier forum” in a tropical paradise that they are doing this because they are over worked and under paid with respect to their peers due to a poor, or more likely still, lack of incentive program on their employer’s part. And as regular readers will know, I strongly encourage incentive-based compensation since the best productivity stems from incentivized workers.

In other words, for the most part (*), I do not think that buyers or suppliers are resisting e-Sourcing because they are lazy. I think that they resist because they are overworked, under paid, or under-supported. If the evangelist took the time to properly demonstrate how the expected results could be achieved, management made the effort to insure that workloads were reasonable and that proper incentive and reward structures were in place, and everyone approached e-Sourcing open, honestly, and with the best of intentions, then I believe that a large number of buyers and suppliers would be willing to at least give e-Sourcing a try. However, if you continue to live in organisation man’s world and simply try to shove an e-Sourcing solution down their throats as the latest “flavor of the month” software system, then I expect the resistance will continue. That’s my view. (If you disagree you can try the comment feature or e-mail me directly.)

(*) I say for the most part because there is always the exception. In that case, all you can do is show the lazy moocher the door and move forward with the rest of your sourcing team.

Avoiding The Talent Shortage

Regular readers of Supply Excellence [WayBackMachine] will recall Tim Minahan’s recent post “New Supply Risk: Losing Your Top Talent” where he noted that talent poaching has reached new heights in the supply management arena and pointed out a new study from Denali Consulting and SupplyStaff that examined the labour challenge of how to retain your best people.

The Denali study reported that the typical company experiences a nearly 40% voluntary turnover rate by employees. It also reported that a good salary is often the top indicator of employee retention. Neither of these results should be startling when you consider the recent articles on the European Leaders Network and SupplyManagement.com that highlighted the Increased Competition for Procurement Professionals and that Interims Cash in on Demand Boost, with top-skilled individuals easily able to command $1000/day, or more.

Fortunately, management approach and work environment also affect employee retention, with top performers preferring a work environment that continually challenges them, provides a clear career path, and autonomy. The study, as Tim Minahan pointed out, highlights the following secrets:

  • Keep the work challenging
  • Nurture highly skilled candidates
  • Encourage and support a work-life balance
  • Deploy Mentoring programs to encourage advancement

An article in the summer issue of CPO Agenda also took up the issue of how to retain your best people. The article, by Sharon Jordan-Evans of the Jordan Evans Group, offers three additional suggestions.

  • Conduct a ‘stay’ interview
    Instead of guessing, find out what your staff really want. Ask meaningful questions such as: Are you challenged in your day-to-day work? What would provide more interest? What could I do more/less of? What will keep you here? What might entice you away? What do you want to learn this year?
  • Give them some space
    Provide the freedom that allows people to get the job done in ways that work best for them. Telecommuting, flexible work schedules, casual dress, etc.
  • Mine for Opportunities Link arms with your best people to mine for the next opportunity. They might enjoy heading a new project or spend category (marketing or legal services, for instance). Let them touch the end customer or build relations with a key internal stakeholder. Rotate assignments to deepen or broaden their skills. Support their investigation of new supply markets.

And, finally, even though you might not always be able to compete on salary, remember that there’s nothing to stop you from competing on performance-based incentives. After all, when every dollar of bonus they get is the result of tens of dollars of captured savings to you, it’s a win-win situation. (If you’re having trouble measuring savings, I would suggest you start with my Cost-Reduction and Avoidance write-ups {Introduction, Metrics, and Incentivize for Success!} over on e-Sourcing Forum [WayBackMachine].

Si, Se Puede! (Yes, Procurement is Able!)

While browsing through the European Leaders Network portal earlier this month, I came across the article “Firms yet to realise procurement potential” and then the article “Increased competition for procurement professionals” in rapid succession. To me, the connection is obvious. As Tim Minahan points out in Supply Excellence [WayBackMachine], great supply management organizations use a simple strategy to stay on top: buy the best talent.

The first article notes that a recent study by PA Consulting Group found that only a quarter of leading organisations have realized the full potential of best procurement practice and that current firms are focusing too much effort on reducing procurement overheads, which does not deliver significant benefits. After all, as the study explains, “The disproportionate focus on reducing procurement overheads risks undermining the ability of many organisations’ procurement functions to deliver significant sustainable benefit.”

The quoted study concludes that CEOs and CFOs must invest in procurement capability through restructuring the procurement function in order to achieve a genuine transformation. This transformation can be achieved by extending the capabilities of their staff, rotating them to increase awareness, and recruiting to fill identified skills gaps.

However, what it overlooks is the importance of having top performers on your team to lead the way and mentor your junior staff. The reality is that top results often come from efforts led by top performers who have the best ideas and the most relevant experience and expertise in the job they do. I believe that is the main reason competition for professionals is heating up, as pointed out by the second article, which notes that competition for procurement professionals has hit an all time high.

The second article references the 2006 Salary Survey by recruitment company PSD and supply chain consultancy State of Flux that found competition for high-calibre procurement professionals has risen as more companies demand candidates who have well rounded commercial skills in addition to their purchasing backgrounds. The survey found that salaries in the technology and banking sectors are up ten percent while regional senior salaries have risen five percent.

Given the constantly increasing demand for experienced procurement professionals and the limited talent pool, what can you do? Focus on retaining the top performers that you already have and on moving them up into senior roles where they can help you groom your future all-stars into top performers down the road. After all, as Dr. Joseph Robert Carter, the Avnet Professor of Supply Chain Management and Department Chair at the W.P. Carey School of Business at Arizona State University, says, the key to great supply chain performance is to 1. Train your existing team. 2. Repeat step #1.

*Si, Se Puede!, a famous quote attributed to, Cesar Chavez translates as “Yes, we are able!”

Skills Development (Talent Management)

Last month, the ISM awarded a number of individuals and organizations the R. Gene Richter Award for Leadership and Innovation in Supply Management. The recipients were primarily organizations that had demonstrated massive improvements in their sourcing and procurement functions which came about through concentrated improvement efforts. These improvements were the direct result of the adoption and consistent implementation of best practices across the sourcing and procurement functions in the organization. This week we are going to discuss the best practices that helped one or more of the recipients transform their organizations and win these coveted awards.

Today we are going to talk about skills development and review how it helped BP transform their sourcing organization, as described in the article “Accelerating Procurement Capabilities” in the latest issue of Inside Supply Management.

In July 2004, BP introduced the Capability Accelerator Program, a modular skills development program focused on improving the skills of its sourcing professionals over a rigorous six month period. Consisting of eight modules, the program was tailored to each participant based on independent assessments of each individual against a role model job profile. The program included hands on expert coaching and peer learning groups. Surveys indicated that nearly 50 percent of the participants indicated a perceived significant improvement while the remaining responses indicated some improvement for an average of 3.3 on a 4 point scale.

The program was developed because BP realized “There is a direct link between the skills of our procurement professionals and our ability to capture value.” The reality is that the effectiveness of your sourcing organization is ultimately not dependent on the technology you use or processes you put in place but the people who staff it. Yes, tools will make them more efficient and process that institute best practices will increase the value of each activity they perform, but the real value stems from their ability to find innovative savings opportunities, streamline processes, and lead innovation. The more skilled they are, the better they do (especially if they have good tools to support them).

As with Information Technology, Sourcing and Procurement is an area where star performers really shine. I’ve read studies that demonstrated, based on bug free lines of code, that your best developer is up to 22 times as efficient as your average developer (with an average efficiency of 10 to 15 times). This sounds astounding – one star performer can do the job of up to 20 average performers, so you can hire 10-20 warm bodies at market rates or one star at 2X to 3X the market average rate and save a bundle, huge ROI – how else can one person save you that much money? Well, if you’re a large organization with over 1B in spend, with a sourcing manager who manages 100M in spend, and she finds an innovative way to squeeze 2% out of your production costs above and beyond what is obtained by using auctions to drive down prices and decision optimization to optimize award allocations, that’s 2M in savings that directly resulted from the action of one individual, sans technology or process. Every event she conducts is going to save you money, whereas your star IT performer just reduces fixed headcount costs!

Thus, investing in skills is one of the best innovative practices that you can employ. (Innovative because most companies do not invest near enough in employee skills development, regardless of the function). There are multiple ways you can go about this. In addition to designing and implementing a program in house, you can quick start a good skills development program by partnering with universities that offer customized programs (such as the W.P. Carey School of Business at Arizona State University or the Supply Chain Resource Consortium at NC State University), organizations that offer training and certifications (such as the CSCMP or the ISM), or even specialist consultant and training organizations (like Next Level Purchasing). Each of these options can bring you tremendous value, so just go for it!