For many firms scrambling to survive the pandemic crisis, staff training will seem an indulgent luxury. But for procurement people there has never been a more important time to invest in building capability – Jonathan Dutton explains why, for SUPPLY CLUSTERS…
Australia’s supply side was exposed during the early stages of the pandemic crisis – shortages or, more precisely, fears of shortages drove panic buying in the shops. Corporates were not exempt from stressed supply lines and soon enough shortages and bottlenecks appeared as opaque supply chains began to unravel. Meanwhile, in other areas, stock surpluses appeared, mostly of INDIRECT stock or services no longer needed.
Does our capability match our ambition?
The economic fall-out of the pandemic and the subsequent consequences for the supply side were outlined in a recent PASA white-Paper – The seven key challenges facing Procurement post Covid-19. Briefly:
- Rebalancing supply chain risks
- Improving procurement responsiveness & agility
- Managing demand & reducing non-essential spend
- Turning FIXED into VARIABLE cost streams
- Increasing spend visibility through eProcurement
- Harnessing SRM
- Negotiating more agile agreements
These challenges are profound and could help save many a business at a key time. Reducing cost will be vital to survival for many to help claw-back massive losses incurred since Covid-19 struck. Renegotiating supply contracts to align to realistic volumes will be critical to the future business model. De-risking strategic supply chains will be key for many DIRECT buyers.
Indeed, this time might now become procurement’s greatest opportunity to answer the great question posed after the rise and rise of procurement this last 15 years or so – do we actually have the capability to match our ambition?
“Do we in Procurement have the capability to match our ambition?”
The vitality of training
An annual survey of global CPOs by Deloitte each year has had remarkably consistent message. Fully 50% of the CPOs surveyed DID NOT believe that their teams had the capability to deliver their current procurement strategy – let alone any future plans envisaged.
The scarcity of procurement training
So, why then, are we not training our procurement teams much currently? Any procurement trainer will tell you (those left that is) that little training is generally evident in the market. Few public short courses are offered, and fewer consultancies offer any form of training for clients. Well, maybe for just 5 principal reasons:
- No money – corporate budgets are thin, and the training budget is always an early candidate for easy draconian cuts; especially for non-revenue facing back-office outfits like procurement: and cuts are universal post-Covid-19
- No time – procurement teams harried to do more for less, and under resourced in the first place (we rarely win the argument for resource), have too little time for training. Full stop.
- Too long – who has two days, or even just a whole day, to sit through interminable PowerPoint courses for the one nugget we spotted in the brochure.
- Irrelevant – the list of available public courses look samey. Done them. Surely? And, you feel, these are courses not so relevant to the challenges we face right now, anyway.
- Individual focus – proactive team driven capability development planning is rare. More usual is individual focussed remedial training. Spot training for those good or bad, but for few in between.
What training do we need then, and why?
BOTTOM-UP APPROACH – Many HR departments suggest TNAs (training needs analysis). A Bottom-Up approach to defining a team’s training needs through survey type approaches. The problem often is – they don’t know what training they need. They may have an idea, or just desires, but not any thought-through cohesive development thinking. They just want to ‘get on’ and see training as a way of credential-building their way to the next job up the ladder.
TOP-DOWN APPROACH – A better way is often the Top-Down approach. That is, defining the procurement strategy – derived from the corporate strategy. Then determining what skill base and team capability this demands for likely success. Then ‘testing’ the existing skill base, mapping the difference, and forging a training plan (or recruitment programme as well) to close the capability gap. It is easier than it sounds. But procurement free knowledge tests exist online. Even if they are self-assessed, to appease the nervous.
What skills do we need?
Whilst different approaches can forge the right training plan for your organisation, a better initial question is what skills do we actually need in future? Regardless of which process is used (above), some trends are emerging.
Procurement has always been strong on hard skills training – the IQ, or the IP, of our profession – and especially the process driven techniques that underpin what we do (strategic sourcing, P2P, and the like). And at some point in any extensive procurement career, buyers will need to harness all the skills below:
More recently, it is accepted procurement could work harder and do better to build soft skills – their EQ (professional empathy, influencing skills, emotional intelligence, relationship building).
Latterly, one or two astute observers have added AQ to the list. Adaptability quotient. The ability to be flexible and responsive, and to adjust quickly when corporate needs change – as they so often do.
New skills are needed
The recruitment website SEEK publishes research from time to time. It has also been fairly consistent. One striking claim is that undergraduates at university today will likely have 14 jobs before they are 38 years of age. Yet 50% of those jobs don’t exist yet. How do you train people for jobs that don’t yet exist? To meet this challenge the education system seems to be training skills over knowledge:
More specifically, procurement consultancy Comprara published their take on the 7 Pillars of capability needed by procurement professionals in future:
The business case for training
This is the million dollar question really. Or the billion dollar question for some, given how much procurement people often spend. A quite typical procurement team in Australia might have roughly 12 staff or so, and spends something like $500m upwards each year. Why not get more impact on your half billion dollar spend, by investing just fifty grand more on your procurement payroll budget of typically around $1.25m pa? Just 4% more cost, then, to leverage better performance from your total investment in the procurement team to save, say, 5% of $500m – fully $25m saved. The business case can be compelling.
Yet, there are also dramatic ways to reduce costs in any proactive L&D programme for procurement teams. There is rarely a need to ‘sheep-dip’ everyone in the team through the same courses. The L&D solution is not always “a course”. There are cheaper ways.
Usually, your team all have different development start points in terms of existing skills, qualifications and experience. And they often have quite different roles and priorities within the team. A mix’n’match approach can work better and much more affordably. It can also save time away from the core job.
As long ago as 2010, a McKinsey article quoted their research conclusions that investment in talent recruited to procurement was four times more rewarding that a similar quantified investment in better process or IT systems to improve procurement returns.
The 70:20:10 approach
A common approach to learning and development strategy is through the 70:20:10 approach. This is a developmental model that suggests a proportional breakdown of how people learn effectively in real-life.
This maintains that “a course” is not always the right learning tool – in fact, only 10% of the learning equation. Fully, 70% of the learning need is on-the-job training, and 20% down to special projects, working with different people, undertaking different experiences or adopting different learning tools for the individual. Much of the 70 or 20% portions of such a programme can often be free of any cost:
Fulfilling the 70:20:10 model using a TOP-DOWN approach to define needs can help forge a cohesive corporate programme for the whole team quite holistically – rather than using more sporadic individual-orientated training plans.
This approach can also make fuller use of eLearning options. Whether short burst eLearning modules, assessed or unassessed, a formal qualification, simply practical online videos, a bespoke design for your own organisation’s needs, or just a selection of eLearning models from an expansive ready-to-use online Academy solution – of which there are a few around.
Another approach is to adopt peer-to-peer learning, as either part of your overall L&D plans or as a simple stand-alone option to support the team in practical ways through a single one-stop solution. Thi is a more formal approach to networking. Peer-to-peer learning comes through organised short professional Roundtables.
PASA CONNECT run a low-cost subscription programme for over 70 organisations and offer up to 200 online Roundtables each year on every topic relevant to the modern procurement role. These are hosted online, are facilitated by experts and run up to 90 minutes at a time. The theme is benchmarking and comparison of approach amongst professionals – each usually sharing similar challenges around named topics or categories under Chatham House Rules. The recordings, slides and notes are held in an online archive for members only to access.
People often come to procurement later in their career, maybe sometimes even as a second choice vocation. Yet procurement is a sticky profession, those that come often find its true value. A role often at the heart of things, close to where big decisions are taken and large sums spent. Yet global markets need global buyers and this brings the opportunity to travel and meets lots of different people. So, buyers are amongst the first to see change coming and procurement offers a broad based business education reaching all aspects of the organisation.
Yet, still, the awesome range of skills needed by the modern procurement manager is underappreciated still. It is a role that demands essential investment in order to leverage greater commercial value from its potential. However, the business case is usually easy – $500m spend, $1.5m procurement payroll (0.3% spend), $50k training budget (3% of payroll cost). Savings could be, say, $25m fairly easily – 500 times your training investment.
Ultimately, the role of procurement is getting harder. More and more organisations want to use procurement as an instrument of policy. To address not just cost, but risk, quality, service levels, innovation, local economic development, security, safety and sustainability – even eradicating modern slavery. This makes the role far more difficult.
Also, today, post-Covid19, we have to rebalance inbound supply chains towards risk management, re-engineer business continuity plans (BCP), dual-source vital supply lines, build buffer stocks, ensure supplier inputs meet safety standards and save business margins through cost-cutting. Quite a challenge. Maybe training would help after all?
Jonathan Dutton FCIPS has a non-exec role at SUPPLY CLUSTERS and is a regular columnist. He is also a brand ambassador for PASA … and some of the material for this contribution was garnered from a recent PASA CONNECT Webinar he hosted.
JD has also recently launched a new online Strategic Procurement Leadership Programme which will first run in late September, with a LIVE version scheduled for Melbourne on 26/27 November as well – restrictions permitting: www.jdconsultancy.com.au/training