This Week in Procurement

TWIP: Plus ça Change, Plus C’est La Même Chose

Happy Friday!

Earlier in the month, Deloitte released the results of their 2018 CPO Survey. I always look forward to this report: an interesting check on the pulse and general health of the procurement function. Those of you intrepid Art of Procurement listeners may recall me discussing the results of both the 2016 and 2017 surveys with the authors, Brian Umbenhauer and Lance Younger.

For highlights from this year’s report, check out the Slideshare (below), or download the report directly from Deloitte (no registration necessary).


What struck me this year is how “the more things change, the more they stay the same”:

  • The importance of cost savings as the primary metric: 78% of CPO’s cited this as a key priority in 2018, and over the past 6 years this number has vacillated between 74% and 79% (with the exception of 2014 when it dropped to 69%).  
  • The band for the next priority – supporting new product or market development – is similarly consistent, within the mid 50% range (58% in 2018).
  • We continue to execute well against the basics. In 2018, 70% of CPO’s reported that they met, or exceeded their cost savings goals.

Where it gets interesting, however, is when Umbenhauer and Younger dig into the expanding of the procurement value proposition.

In 2018, 86% of the >500 respondents aspire to position the procurement function as “highly regarded internally, and seen as a key business partner which contributes significant strategic value.” Another 12% were after a “fair partnerships with the business”. So, in sum, we are a group committed to making a difference, operating as an integral part of our organization’s value creation chain and being of service to our stakeholders.

———-

All good transformations start with a gap to close.

A gap which, of course, has to be apparent to those that care about it and can affect a shift.

Here is our conundrum: despite our ongoing push to increase our value proposition (and attendant increase in our stature with stakeholders), the percentage of those who believe they have an excellent level of effectiveness is just 24% (a slight increase from 21% reported in 2017 but well below the 32% reported in 2016.) Does this mean that we are getting worse at our jobs?

My own view is that this may be a good sign. It could be an indication that we are being tougher on ourselves in our efforts to level up (see the aspect of the Dunning–Kruger effect that describes high-performing individuals underestimating their relative competence, sometimes called the ‘imposter syndrome’). There is, of course, another possibility: we are successfully repositioning our value proposition and, therefore, our organizations have increased the expectations against which we must deliver

Making Choices

As many of you are aware, the team and I at Art of Procurement and Palambridge are intentional in the choice of focal points for our energies. The vast majority of our attention centers on ways to help amplify our collective and individual impact as procurement professionals.

At Art of Procurement we have been building a safe space for sharing provocative ideas and field tested perspectives from acknowledged procurement catalysts.

While AOP is about ideas and discussion, Palambridge is about execution: we help clients produce unreasonable results by enabling them to leverage their internal networks and expertise by facilitating access to an ecosystem of subject matter experts and calibrate the provisioning of those resources with the client.

Given that, it should come as no surprise that I find that the most interesting (and actionable) insight coming out of this year’s CPO Survey related to talent and leadership:

“Over half our survey respondents believe their teams do not have the necessary skills to deliver their procurement strategy, and the recruitment market is becoming more challenging; yet there is less spent on training and deployment of talent development strategies.  What is clear is that there is a direct correlation between stronger leadership capabilities, higher spend on training and enhanced performance… So the question must be asked why procurement leaders are not focusing more on talent and leadership capability development”

Leaving a Mark

The final finding I want to highlight concerns the investment in training.

I believe the headline here may be that traditional learning and development strategies are not driving the desired outcomes for a large number of CPOs.

One expects that high performing companies would, on the margin, invest more in learning and development than average performers do. The numbers seem to bear that out (“…analysis shows that organizations performing at a higher level tend to spend more on training for their procurement teams than their peers in other organizations, with almost twice as many spending more than four per cent of their overall budgets.”). The conclusion I draw from this nugget is simply that it pays to invest in people, in particular, and L&D, in general.

When the spend is between 1% and 3% of overall budget, there does not appear to be a correlation between training outcomes. as measured as average team results vs. best in class team results. I suppose there can be any number of reasons why CPOs would affirmatively choose to reduce investment in learning and development. I suspect there may be a correlation between the drop in investment and a reduced efficacy of traditional L&D strategies. Said another way, for those who spend 1%-3%, the current approach to L&D appears broken.

Because there is no noticeable difference for those that spend 1%-3%, it seems plain that most of these CPOs would, rather than increasing their training spend, increasingly decide to take the more traditional route (as in “let’s not upset the status quo and save some money while we’re at it”) and have been reducing their spend to <1% of overall budget (CPOs reporting investing less than 1% of their operating budget in training has jumped significantly since last year — 34% vs. 25%).

I wonder about those CPOs who are budget constrained and can only spend 1%-3%, notwithstanding an authentic desire to invest more in their people. What can they be doing to generate more impact bang for their L&D investment buck?

Generating Fulfillment

Some questions to ponder:

  • What percent of my time do I spend “sharpening the saw?”
  • Am I taking advantage of all the L&D opportunities my firm provides (e.g., participating in internal courses, tuition reimbursement programs, taking a colleague to lunch, attending an industry event)?
  • Am I creating opportunities to develop my skills outside of work?
  • Am I making myself available to support others in their efforts to “level up?”
  • What are the next three non-fiction books I plan to read?

Being a Catalyst

As always, if you come across an article, whitepaper, video or podcast that you would like to share with your fellow catalysts, please send a quick email with the details. I read every email and am eager to read yours.

This Week in Procurement

This Week @ AOP

I was delighted this week to welcome Jocelyn Stahl, onto the show. Jocelyn is the Director of Indirect Sourcing for The Hershey Company. While she didn’t bring me any chocolate, she brought me something almost as sweet: an up close view of her team’s ongoing transformation journey building out an Indirect Procurement organization that cultivates and elevates catalysts.

In our conversation, recorded live at ProcureCon, Jocelyn shared the work that she and her team are doing to create a culture that respectfully challenges the status quo while maintaining a laser focus on the needs of the stakeholder – which often come into conflict with one another. I also ask Jocelyn her perspective on Guided Buying, not only as a tactic to manage tail spend, but also as an opportunity to enhance stakeholder perception of partnering with procurement.

Also on AOP this week:

Until next time,

Phil

 

About the author

Philip Ideson

Philip Ideson is passionate about the role that procurement professionals and leaders can plan in creating competitive advantage for their organizations in ways that go beyond the traditional value proposition.

Philip founded Art of Procurement as a way for the procurement community to learn from each other, increasing the impact they have on their organizations. In 2017, he co-founded Palambridge, a virtual platform of procurement experts, technology, and intelligence. Palambridge provides a broad range of flexible procurement solutions, available on-demand.

Prior to Art of Procurement and Palambridge, Philip enjoyed a career that spanned the procurement value chain, working across three continents for organizations such as Accenture, Procurian, Ally Financial, Pfizer and Ford Motor Company.