Category Archives: Talent

Another Reason You Can’t Wait Too Long for the CPO!

In our last post, we reviewed a post by the Great Garry Mansell on the rule of two where he outlined when an organization needs to hire a COO in order to continue to grow. We noted that you can use the same same logic to determine when you should hire the CPO, which should happen earlier than most organizations believe.

In a follow up post on the hidden tax, Garry gave us another great reason to hire a CPO early.

Basically, as organizations grow, they spend money to feel professional. It’s a hidden tax that grows over time that not only (greatly) reduces their EBITDA and profit, but also decreases their resiliency.

As Garry points out, as companies grow, they spend money to feel professional. They add tools because someone recommended them. They add layers because it feels grown-up. They add process because it looks like control. They add roles because it feels safer than making a hard choice about what to stop. And then they end up with three to ten times as many tools as they should (just look at the average number of SaaS tools in an organization), and spend two to three times as much as they should be. And the processes they add are not the right processes because they don’t have the expertise to define best-in-class sales, marketing, procurement, etc. processes because they don’t have a seasoned CRO, CMO, or CPO to define them. They hire people they don’t need to get stuff done that should be automated or simplified by better processes (that could only be defined by the right senior people who should be hired at the right time, and funds saved until they can be).

This is another reason why you need a CPO early. A CPO will vet not only the reason, but the ROI, of every proposed product/platform and prevent unnecessary purchases and, if something is required, find the best product/platform. They will prevent processes that don’t add value. And they can even help determine when hires are really needed or when better platforms and processes can delay the need.

Procurement will focus their spend on the things that improve outcomes. And they will happily cut the things that improve optics because optics don’t carry you through volatility. Cash and speed do. And Procurement will help you conserve cash and act as fast as it is prudent to.

As Garry states A “good company” that has protected margin and kept agility will outlast a “professional company” that has simply become expensive. And a good company is one that puts Procurement front and center. After all, as Coase clarified, Procurement is the reason a company exists!

Don’t Wait too Long for a True #2: The CPO

Garry Mansell recently wrote a great post on the a rule of two that dictates when the founder of a growing start-up needs to hire a COO to help manage the day-to-day to keep the start-up on the growth track. Garry labels the position the second-in-command — a true strong number two! But he should call it number one, because the role of this CEO’s right hand is to create pace without drama … absorb ambiguity and turn it into clarity … make the founder less central … and allow the organization to scale without burnout.

As Garry points out, when it hits the wall where the company struggles to scale, the company is in a state where it looks like the founder being busy, but not effective. It looks like things moving, but not compounding. It looks like decisions being made, but not sticking. It looks like the organization waiting for the founder to be present to progress. As a result founders often try to solve this with many more heads. Another manager. Another lead. Another layer. It can help in the short term … until the founder becomes the bottleneck for alignment across those layers. They don’t admit that the hardest part is not finding talent. It’s letting go of the belief that ‘only I can do it properly’. They don’t realize it becomes the thing that limits growth.

But when the organization has a good COO, she doesn’t just take tasks. She takes load. She takes ownership of outcomes … and they make the founder better by refusing to let everything sit in the founder’s head. And Garry’s right on all accounts.

The same logic more-or-less dictates when the organization needs to hire a CPO. Even if the CPO is the entire team. Once an organization is big enough for the founder to hire a COO, a true #1, one of the hats the COO inherits is the CPO hat — and takes over the Plague of Purchasing. But as the organization continues to grow, more and more divisions/teams need to buy more and more products and services of all shapes and sizes, which requires more and more decisions and analysis, more policy, and more decisions … which get made, not properly codified, forgotten in the heat of the moment, and made again. Just like when the organization reached the point it needed a CEO, we again have the situation where it looks like the COO being busy getting Procurement done, but not effective. It looks like things moving, but not compounding. It looks like decisions being made, but not sticking. It looks like the organization waiting for the COO to be present for Procurement to progress.

Even though the organization might only be spending a few million, and the savings might only be a few hundred K, which would barely cover the cost of a CPO, making it look like it’s too early to hire the CPO, but it’s the right time. Hiring early allows the CPO to define proper processes and procedures, define platform and automation needs, determine the right time to pull the trigger on platforms and applications, identify when category managers / senior buyers are needed and the team needs to expand, and because processes and platforms were built into the organization as it grew, the CPO will be able to delay hires longer than peers because Procurement will be efficient from the get-go.

Procurement is NOT a Place of Comfort!

A while ago, Garry made a great point in one of his post on how a surprising amount of leadership is simply holding the line on reality.

And, more importantly, a surprising amount of leadership is the acceptance and confrontation of uncomfortable reality. You see, in most organizations, leaders believe it’s their job to be optimistic and keep the team happy and comfortable. They tell the team “we’re almost there … the project’s almost done” even when it’s a dumpster fire. “The pipeline is strong” when all the pipeline consists of is a list of companies who indicated they might be interested in a solution that falls in the category of solutions the company offers and they have not been vetted beyond a third party discovery call. “It’s just timing” when the RFP only gets 3 responses from 7 suppliers after extending the deadline by two weeks. “Once we hire X, it’ll be fine” when the reality is that things will get worse since “X” won’t know how to fix anything until trained (and someone will have to stop fire-fighting to train X, which will allow the fires to consume even more).

A good leader addresses the discomfort.

“Okay, things went to sh!t with this project but we succeeded in the root cause analysis, we can get back on track in two months, and, more important, we also identified three other oversights in the project plan, corrected those, and forced the vendor to upgrade capabilities that will allow us to be more productive than planned when we go live. We’ll just have to work harder to ensure the revised plan doesn’t hiccup“.

“Losing MegaCo to our biggest competitor, whom we know can’t serve MegaCo, was a big hit. We had to cut our simultaneous sales efforts in half and what’s left in RFP stages doesn’t even equal MegaCo’s potential when combined, and we know we’re only batting 50% when we get to that stage. We need to refill the pipeline with active targets fast, and we know that the leads given to us by DealSourcingCo are not well qualified based on our few conversations. Since we also didn’t have time to review many leads the past quarter, those wankers really slacked. We have to shape up, do our own pre-sales and qualification, work overtime, and re-jig the entire pipeline over the next two weeks. However, even if only a third of the “pre-qualified” leads pan out, which is the current success ratio, the good news is that we’ll have more than enough to keep us busy and get back on track for next quarter.”

“It’s not timing. If 4 / 7 potential suppliers didn’t answer the RFQ, then we really f*cked something up. We need to contact each of them, and find out why. We’re we not specific enough on our requirements? Was our guaranteed commitment too low? Was the timeframe too short for them to respond? Were we asking too much in the RFQ for no guarantee? Did we misjudge the supply/demand and they just don’t need us? However, I just licensed us a category management system where we can encode all the knowledge we gain from every sourcing exercise to make sure this situation doesn’t (unnecessarily) happen again as we will know what we need to get it right“.

“Bob quitting and taking all his knowledge was a big loss. We’re totally underwater as we don’t have his category knowledge, know which of the 10,000 spreadsheets he was using for the last events, or who really managed the relationship at the supplier. The fact my predecessor never made Bob properly track anything left me with a hole I’ve ben struggling to figure out how to fill, especially since every time I pushed for better data organization he kept being more insistent he just didn’t have the time with his workload.
However, I did license an AI tool that will scan all his files, attempt a categorization by category, and extract the likely supplier, contact, products, and prices. I did license a category management tool that all of this data, once reviewed by an independent expert, will be pushed into.
And I did go out and find a few independent consultants who are real veterans with 20 years of category experience and engage them for the next quarter to sit down and help us get everything organized. (Independent, not fresh-faced known-nothing MBAs from a big consulting co.) The next three months will be hell, but then things will be better than they ever will before because we’ll all know where all the key category knowledge is at all times and we’ll be able to bring Bob’s replacement on and have that person be effective day one. For now it sucks, but if we can hit our targets, I’m going to expand your bonus pool by giving you some of mine“.

That’s leadership. Telling the team as it is, making sure they understand it’s not going to be comfortable for a while, but that they will get through, you’ll be there with them, and you’re doing whatever you can to make it possible.

A Key Leadership Skill for Procurement … Is NOT What You Think.

There’s a lot of great posts on leadership, so we’re not going to discuss what a leader is. (And if you don’t know, go find them and come back.)

But leadership is more than just what you think about. It’s not just the attributes you associate with command, authority, and communication … and the greatness you expect from people that attain the position. It’s also the attributes you associate with submission, anarchy, and concealment … which you might associate with followers, lack of leadership, or walled organizations. (But that’s another post.)

But the most overlooked skill for Procurement, as Garry point out in a LinkedIn post on the leadership skill no one talks about, is the ability to end things. In fact, a CPO’s ability to end things is more important than a CEO’s ability to end things. (But that’s likely another post as well.)

In Procurement, especially a poorly functioning Procurement organization, a lot of things will need to be ended:

  • the people who were placed in, but don’t belong in, Procurement will need to be removed — if the organization won’t transfer them, they’ll need to be let go
  • the supplier relationships that aren’t working will need to be ended as soon as possible
  • the consulting relationships offering no value (and just billing hours for nothing) need to be axed
  • the processes that aren’t working need to stop (and they will need to be replaced with modern processes that do)
  • the data silos that aren’t connected, aren’t up to date, and aren’t usable need to be connected and updated or deleted
  • the systems and software not meeting Procurement needs must be disposed of

That’s a lot of endings that need to occur before new beginnings can take place.

And if these endings don’t happen, Procurement will collapse and maybe even take the organization with it. As Garry notes, organizations don’t collapse from lack of beginnings, they collapse from an inability to stop!

Like Any Tool, AI Won’t Solve Leadership Problems!

Paul Martyn is right to cringe a little every time he hears a solution provider say:

AI and automation won’t replace employees. It will free them up for more strategic work
Because there are two fundamental problems with this statement.

1. As Paul points out in his recent article, if strategic work is not already happening, that’s not a technology problem. That’s a leadership problem!

2A. You can’t drop tech in and suddenly become more efficient unless you have all the data and processes in place to support it — and it’s a money back guarantee you don’t have all of the data and processes in place to support it.

2B. Unless AI stands for Augmented Intelligence, AI will actually consume MORE of your time as you deal with the hallucinations and errors it will create on a regular basis. (Remember, only 1 in 20 organizations are seeing a return on their AI investments, and I guarantee those are the ones that either got tricked into, or simply bought, old fashioned RPA (robotic process automation) that actually works.

Don’t fall for the spin. If you want strategy

1. Make sure it’s already happening.

Maybe it’s only 10% of categories going through strategic sourcing, but you have to start somewhere. Then you can increase that percentage as you automate more tactical work.

2. Allocate time to (old-school) automation.

One at a time, pick a very time consuming process ripe for automation. Map it end to end. Redesign it for automation. Automate it. As time frees up, more time for strategy and automating more processes.

3. When the automation effort in time-consuming / painful processes that remain exceeds the expected time return over the next 12 months, look for outside help.

Not before. And that’s how you don’t fall for the spin!