The start of 2011 has seen a debate about procurement’s challenges as the combination of austerity drives and economic recovery converge.
 
Some commentators say the profession risks falling back into obscurity once the recovery really gathers pace.

I share this concern, which was heightened by the recent SM Poll showing that cost reduction remains the number one priority for procurement in 2011. When does the profession make the link to value?

CPOs have enjoyed the spotlight for two to three years now, and have received increased influence as a result. They can now chose two path’s: 1. Continued cost cutting focus, or 2. Making the link to value.

Viewed in this light the results of the survey, which does not even mention making the link to business strategy, are disappointing.
 
With the exception of increased outsourcing and CSR, all the other priorities lay at the low end of procurement’s value chain, which “follow” rather than “influence” business strategy. This clearly needs to change with some urgency if purchasing’s fall back into obscurity and irrelevance are to be avoided.
 
So what is required?

Here are my recommendations to steer the right path:

1. Clear direction. If you don’t know where you are going any road will take you there.

2. Establish an unequivocal link to business strategy.

3. Market the “value” of procurement relentlessly.

4. Engage the business.
 
The key quality required to achieve this is leadership.

Procurement needs brave CPOs who possess the skills, courage and conviction to position procurement in a leadership, rather than support, role and to make the business case to build the required capabilities to operate at this level.

For those of you already working under such a CPO you should learn and absorb as much as possible before carefully considering your next career move. For those of you unfortunate enough not to have a brave CPO, I recommend you find one to work for – why not make it your new year’s resolution? Happy 2011.

Procurement is now front & centre of the business world. So when will CEO’s place it at the centre of their business strategy?

If ever there were a set of conditions to emphasize the procurement functions strategic place in business and the modern world, it is the current maelstrom of recession, sovereign debt, gathering inflation, political revolution and natural disasters. The impact of these events has sent oil and commodity prices rising, company valuations plummeting and halted the production of some of the world’s largest companies.

When supply fails as it has for many recently due to the problems brought about by Japans triple whammy of earthquake, tsunami and nuclear disaster the consequences have become plain and evident. Companies such as General Motors, Apple, Boeing, and Caterpillar have all been affected. GM closed its Shreveport plant, whilst Apple & Boeing have suffered component shortages and hits to their stock price.

Even in the public sector procurement is in the news. It is has become the war cry of governments around the world to battle inefficiencies and reduce sovereign debt by adopting private sector style strategies to reign in cost utilising a more central command approach via category management and strategic sourcing.

This rise to prominence during the current economic crisis shows that procurement is much more than the ‘engine room’ for business. Rather, it is positioned as the financial platform for sustainable growth, profitability and value creation. Procurement not only creates value by sustainably matching demand and supply, it also creates a platform for competitive advantage and differentiation by capturing innovation and scarce resources from supply markets.

Despite this dependency upon supply for sustainable value add, CEO’s the world over have made cost the priority for their CPO’s. Driving the trend towards; single sourcing, low cost country sourcing and extended supply chains with the associated increase in risk. The key challenge for CPO’s now after these tumultuous events is to make the business case for a procurement strategy which goes beyond cost savings and is measured against a balanced range of business metrics.

“Yes, there are two paths you can go by, but in the long run
There’s still time to change the road you’re on.”
From Stairway to heaven by Led Zeppelin

CPOs everywhere can learn from this line from the classic track in tackling purchasing’s own “chicken or the egg” dilemma:

Without a top level mandate, the CPO’s ability to prove procurement’s strategic value depends in part upon the degree of successful procurement integration that can be achieved with other stakeholders. Unfortunately, other functions will only truly integrate when the benefits resulting from such integration can be verified.

The continued focus and pressure to deliver cost savings will never provide the desired breakthrough. As the saying goes, you can’t cut your way to success. So the search for value must rise up the CPO’s agenda. This nicely defines the two paths available to the CPO. The ‘here and now’ approach will deliver incremental benefits, but never the killer punch. But the alternative longer-term perspective is capable of delivering the radical breakthrough required for procurement to reach its strategic zenith.

CPO’s must carefully balance managing short-term concerns, whilst at the same time shape the strategy and capabilities for the future. They must continue both to focus on and develop core capabilities whilst also being strategic and break new ground in order to connect with the broader business agenda to innovate and drive growth.

To do this successfully, they must bring a new perspective on how to introduce plans to boost corporate growth into the work of their teams, how to measure and reward execution on the present priorities while building the future, and how to align behaviours to specific growth initiatives.

There must be a shift in strategic focus to support deep procurement integration across all business departments, as well as ensuring procurement’s integration in the strategic planning process. Real success depends upon the ability of the CPO to gain senior management support at the business planning level, where they must help shape the vision, develop capacity and capability to influence strategy.

This approach sits contrary to the current business focus on cost cutting, but as Zeppelin sang, there’s still time to change the road you’re on.

Consistently listed as a top priority for CPO’s and essential to driving the professions future success, procurement talent management is an essential component of any organizations annual health check. So why then do so many organizations risk future success by continuing to fish in the shallow end of the pool?

Shallow end companies continue to fish from the same old pool by continuing to recruit based upon experience rather than skills. They insist upon same category, same industry experience, regardless of the quality of this experience. Because of this they support an ecosystem of external recruiters who’s people have little idea about strategic procurement and encourage them to take a tick box approach to shortlisting, spending 15 seconds scanning CV’s for the magic key words. Subsequent interviews and selection processes are largely based on what a person has done and not on what they are capable of doing.

The current obsession with selecting candidates based on the experience gained in their last role is harming the talent generation process. We are promoting the ‘same old, same old’.  Moving people around within tight circles instead of significantly deepening the pool from which we fish.

Increasing numbers of businesses are seeking to increase the capability of their procurement functions to control cost, reduce risk and facilitate growth. To achieve these goals CPO’s should look beyond the usual suspects to deepen their talent pool and to create an environment where the future leaders will emerge.

To me, this is the most important issue facing the profession.

As the US Thanksgiving holiday reminds us all that 2011 is rapidly drawing to a close we take a look at five reasons for procurement to say thanks:

1.    Procurement has had a ‘good recession’

Recessionary times has placed procurement in the spotlight.  Whilst there has been company-wide belt tightening – procurements increasing influence over their organizations spend has increased almost across the board allowing them into new areas of the business. With its increased profile, procurement has become the ‘go to function’ for cost savings.

2.    Demand for Procurement Talent has never been higher

A recent report from The Chartered Institute of Purchase and Supply (CIPS) and Hays Recruitment, showed the number of procurement officer jobs had increased by 200%, with requirement for senior buyers growing by 110%. Additionally there were 75% more jobs available in procurement management during April to June 2011, reflecting the trend of procurement placements becoming high-level strategic function in an organisation.

3.    Technology continues to open new doors for procurement

The role of technology in driving procurement transactional efficiency has been highly successful. This has released procurement from a mundane transactional task focused role, to focus on developing its strategic potential. The increasing capabilities in technology enabled analytics are now allowing solution providers to channel their development efforts into creating solutions that drive increased value for procurement.

4.    Expanding influence and innovation are on the agenda

CIPS now offers training courses in expanding procurements sphere of influence. CPOs are actively looking towards marketing techniques to develop value propositions and rebrand their function. CIPS has also recently published a guide entitled “innovate or die” further emphasising the professions desire to expand procurements influence from the ‘bottom line’ to the ‘top line’.

This is an encouraging indicator for the future development of procurements role.

5.    It doesn’t matter if we have a boom or bust economy

Whatever 2012 holds for the world economies procurement has the opportunity to build on its ‘good recession’. The great thing about a strategic approach to procurement is that it has a major role to play in good times as well as bad. A double dip recession is likely to continue the pressure on procurement to deliver savings. Whilst a slow recovery will still require a strong cost management focus, the better prepared procurement organizations will be able to adopt a wider set of metrics to measure their contribution to the organization.

Wherever your organizations sits this Thanksgiving don’t ignore the value your procurement organization can add to your business. Next we will look at the top five reasons why it is not time for the procurement world to get complacent.

If you are considering E-learning as part of your training for your procurement team there are several options available to you:

1. Buying a library of courses and making them available to your target audience.
2. A Buyer Development Plan, where you motivate your learner’s to follow a learning path, based on desired competence per role (or even on an individual level)
3. A mix of the above.

Putting a library at the disposal of your learner’s (option 1) shifts the responsibility for learning from the manager to the learner. As a manager, you would actually rely on the self-discipline of your learners to follow the courses. Experience suggest that in such a situation, most of your team will not complete the courses. The time and motivation are lacking. But for some reason, this is the “service” that has been promoted by most vendors. Given the poor success of E-learning implementation in corporations. It is our view this will change quickly.

If learning is to be taken seriously, we believe that you will have to create a formal learning framework. This can be done by creating a number of learning plans for a buyer, senior buyer, induction training plan etc … based on the desired competences; which you will need to manage and monitor. Setting up your own Academy is the ultimate practice which demonstrates your commitment to developing your procurement teams capability.

However, simply up-skilling your team is only half the battle. The saying “there is nothing worse than sending a changed person back into an unchanged organization” is very true. If the organization does not allow them to put their new found skills into practice – people will quickly revert back to old ways of doing things, become demotivate and worse of all leave the organization to practice their skills where they are welcomed better.

So if you are serious about your procurement teams training – you should also address the organizational barriers preventing them from practicing their skill set. This remains a challenge for most CPOs today.

“A brand is a promise. By identifying and authenticating a product or service it delivers a pledge of satisfaction and quality.” Walter Landor.

Why does Procurement need a Brand?

Procurements brand is arguably the CPO’s most valuable asset. Procurements brand is the totality of how its stakeholders see’s, talks about, and experiences it. CPO’s must therefore have a clear view of how they wish to position and promote procurement within the organization which involves developing a strong value proposition.

If you were asked to give a 30-second elevator speech to define procurements value proposition, what would you say? I have asked this question of procurement people many times and, frequently find them stumbling over their words spouting statements about cost savings and vague buzz words such as ‘value add’. When pressed to define ‘value add’ their understanding of such jargon is unconvincing.

So if Procurement cannot clearly articulate its value proposition, don’t be surprised when your internal stakeholders don’t ‘get it’ and brand procurement as a “service function”. A brand creates a unifying sense of purpose for procurement staff and helps build awareness amongst stakeholders of its value proposition.

How do you measure procurements brand?

Reputation x Visibility = Brand Strength

Therefore the better and more focused procurements reputation is and the greater its visibility with its target stakeholders, the more valuable its brand.

A three part guide for procurement professionals and training mangers to assess how E-learning can be an effective part of their professional development

Here in Part 1 we introduce some of the problems associated with e-learning, discuss how corporate professionals learn and introduce our solution to E-learning.

1.       Introduction

The advantages of E-Learning are so apparent, that all companies will adopt E-Learning in future.  Yet today the reality is that most e-learning is considered a bore; and so it quickly falls into disuse and so it fails.

The problem with most learning is that too much/complex information is presented to the learner and as a result, the working memory quickly gets overloaded and learning simply stops. This is true for all learning but especially for corporate learning (and even more for E-Learning), as – in general and unlike students – corporate learners will be exposed to the course only once. Most teaching does not take into account the way we learn and so it often fails. This is a simple truth and unfortunately applicable to most of E-learning!

Our scenario based animated courses are designed to overcome this problem.  In these scenarios students follow the activities of Daniel, a Buyer as he works in different organizations and industries learning specific real world aspects of procurement.

2.       Learning by observing and doing

Typically corporate professionals come into the workplace after completing their formal education at a university, business school or college. From the point they enter the corporate world, most find they are responsible for their own continuous professional development. This is true even when their organization provides access to learning opportunities. The reality for most is that the day job simply gets in the way of continued formal learning.

So how do most people learn whilst doing their day job? The answer is that they observe their peers and superiors and through a process of rationalizing, reject what doesn’t work for them and take on board what does work for them, and then put it into practice. This is how we develop our real life skills and get ready for our next promotion.

The down side of this approach is that organizations are dysfunctional, to various degrees. By this we mean that to differing levels in all organizations, issues such as weak governance, poor processes, silo mentality and turf wars do not provide the basis of a good  learning experience/role model – and so bad habits are learned. The techniques adopted by the learner therefore, will only be as good as the environment in which they were learned. This is why we are all the sum of the experiences we have either been fortunate or unfortunate enough to have been exposed to.

3.       An Experiential Model of E-learning

We have introduced an experiential model for e-learning which encourages learners to: (1) Observe, (2) Analyze, (3) Assess, and (4) Act. It seeks to draw on the strengths of learning by observing and doing – by creating a ‘best practice’ real life scenario for the learner to observe.  Our model uses a combination of narrative and technology to support specific learning goals in real life situations that ‘dramatizes’ key aspects of our curriculum. The benefits of our vocational model are:

• By creating a best practice environment to observe, we avoid the issues of dysfunctional organizations and ensure that good practice is observed, good habits acquired and reinforced by the learner and spread across the organization.
• It is highly successful in engaging and keeping learners attentive, and so learning is increased.

The scenario framework helps the participant learn about a real life procurement challenge or learning event in a fictional company, and observe how Daniel and his colleagues manage it. In fact it is not an uncommon phenomenon, just as in a TV soap, for participants to form attachments to the characters as if they know them.

We have received excellent feedback and testimony from buyers.

In part 2 we will discuss how our model produces content that is both engaging and facilitates immediate understanding.

A Step change in Procurement E-learning Training:

A three part guide for procurement professionals and training mangers to assess how E-learning can be an effective part of their professional development

Here in part 2 we discuss how our model produces content that is both engaging and facilitates immediate understanding.

1. Producing a Procurement Soap Opera

The course design hinges on animated movie episodes, presented in the style of a TV ‘soap’.

Features that are incorporated into the design of each episode include:

• Clear learning goals and objectives
• Real life ‘scenarios’ learners will recognize and relate to
• Cognitive load principles to avoid short term memory overload which prevents learning
• Sophisticated dialogue and compelling storyline
• interactivity, via quizzes, knowledge testing and assessments

The instructional design is therefore aimed to facilitate a range of learner benefits that include:

1.1   Clear learning goals and objectives

Learning goals are clearly defined at the onset together with the target audience for the course.

These are then placed within a specific scenario and presented perfectly to demonstrate procurement best practice. Because it is E-learning one benefit is that it can then be utilized to expose learners to the most efficient methods of learning.

We learn by doing. So one of our goals is to embed various activities and practice screens that will help to reinforce the learning material, accelerate and solidify the mastery of course goals and to track and qualify the learner’s progress.

1.2   Cognitive Load Principles

Cognitive load theory, one of the most scientific researched theories of learning and the brain; says that teaching will be far more efficient if it is conducted in the way the brain works.

The working memory is a barrier to learning; information presented is processed and only upon clear understanding, will it flow to the long-term memory. Therefore, information needs to be presented in a simple manner, so as to limit the load on the short term memory.

Our courses therefore apply cognitive load principles to support the learning process and facilitate immediate understanding:

• New information arrives – via your ears (audio channel) and/or eyes (visual channel) – and is then presented to our brain. There it is first processed by our working (short-term) memory before being stored in our long-term memory in the form of schema’s or pictures. This is the basic learning process.
• Unlike the working memory, which is momentary, long term memory provides permanent storage and unlimited capacity. The key to learning is therefore, storing the information in your long term memory. This is when learning occurs.

The benefits of applying cognitive lead principles into our course design are that we facilitate immediate understanding. This is unique in procurement training.

1.3   Technology

Flash/HTML5 is our development tool of choice. It is seamless and streamlined. It can pass information straight from the Flash interface directly to our database or the most advanced SCORM learning management system. In stark contrast the majority of suppliers use MS Word and Power Point which have no capability to pass information back to an LMS or SCORM values at this time. Despite this we estimate that more than 90% of all procurement E-learning content uses these limited and static software tools for E-learning development.

Most suppliers employ Articulate, Lectora, and or Captivate to create a simple online electronic page turner, what a missed opportunity. No wonder so many E-learning projects are considered a bore and fail a few days after the launch.

These development approaches rely on several different tools to achieve the same results Flash/HTML5 can do all by itself. For comprehensive E-learning instructional design, production development and team collaboration, our approach produces superior results.

1.4    Animated Visuals

Our animated movie style serves to engage learners in a vivid learning experience. Yet we believe that because it uses a ‘soap opera’ approach to depict characters and scenarios, it also permits the necessary distance for observation, analysis and assessment – in essence it allows the learner to ‘eavesdrop’ to be a ‘fly on the wall’ observing positive behavioral responses to difficult situations.

The benefits of this animated approach rather than video have been borne out by research:

• Animation allows a wide range of contexts and characters, and yet still produces quality movies.
• People enjoy animations—the simplicity of the graphics lets people use their imaginations in relating to the characters.
• The graphics do not intrude on the material being studied as much as videos.

1.5   Carefully Scripted Audio

Scripts are carefully developed to translate the learning goals into real life scenarios to which buyers will relate. It combines with the visuals seamlessly to support the objective of immediate understanding.

The scripting is intended to help learners to evaluate critically the scenario being played out, looking at the contexts in which the characters are placed—in order to understand the procurement landscape.

1.6   Interactive & Engaging

As learners engage via the movie in the interplay of different factors associated with procurement, they are invited to interact with the subject matter.  There are opportunities for the learner to analyze and assess the issues raised in each scenario, in order to develop capabilities in working with, and managing procurement.

An intuitive interface is provided and the narrative-based movie with its visual, audio and graphic clues is designed to be easy to use and accessible to different types of learner; the movie engages the learner in a real life experience. Crucially, the movie format provides a way of communicating without telling, placing the onus on the student to learn and draw conclusions.

This is experiential based learning that is built upon the principles of storytelling, a medium through which we can communicate meaningfully with each other. Participants are encouraged to relate the story to their own experiences and to work with these, translating learning into action. There is specific advice on how to use and enhance their newly acquired knowledge in actual situations; they are likely to face at some time in their day jobs. The individual scenarios help learners to broaden the concepts out to a wider stakeholder community.

In the third and final part we will discuss learning outcomes and draw conclusions on the requirements for implementing effective E-learning.

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A Step change in Procurement E-learning Training:

A three part guide for procurement professionals and training mangers to assess how E-learning can be an effective part of their professional development

Here in part 3 we discuss how our model produces measurable outcomes and sum up the topic.

1. Measuring Learning Outcomes

By starting with the end in mind the course design aims to facilitate a best practice approach to the way Purchasing Practice is conducted. By targeting very specific learning outcomes at the setting goals and objectives stage, participants are presented with the opportunity to learn how to manage a range of specific procurement issues and challenges. They learn to identify and list the key issues, where the vocational model can help learners to acquire:

• appropriate behavioral responses to difficult problems
• personal attributes such as interpersonal skills, to encourage teamwork and taking responsibility
• wider knowledge of the complexity of procurement issues, to help with decision-making
• specialist subject matter skills

This approach facilitates a range of interactive quizzes which allow the learner to assess their own understanding and with more formal assessments determine whether the learner has mastered the subject matter.

2. Conclusion

Your E-learning initiatives don’t need to fail. You can succeed where other corporations have failed. We believe that our Vocational model fits well into the bigger picture in supporting the corporate learner with the following benefits:

1. Our fly on the wall environments avoid bad habits being learned and promote good habits which the learner can spread across the organization.
2. The format is highly engaging and keeps learners attentive, and so learning is increased.
3. Cognitive load principles facilitate immediate understanding.
4. Flash/HTML utilization directly supports the most advanced SCORM learning management system.
5. Animation allows a wide range of contexts and characters, which people enjoy.
6. Movies provide a way of communicating without telling, placing the onus on the student to learn and draw conclusions.

So if you are interested in implementing corporate E-learning, you will naturally want to achieve tangible results in terms of increased efficiency and effectiveness in executing purchasing practice. To achieve this goal in a competency focused environment, procurement staff must display the behavior and abilities required in their competence profiles. These results can be achieved through E-learning. However, highly effective course material is essential, and this only can be achieved through good instructional design and content delivery using the tools and techniques we have described.

Remember: that, if a course is not effective, it will not improve performance and, therefore, it has no value at all.

Over on the Purchasing Practice Academy we have launched the Category Management Master Class which was 12 months in the making. Here is a bite-size look at the key principles of category management:

Category management is founded on five key principles:

1. Cross- functional team approach
2. Strong supply market knowledge
3. Make change happen
4. Stakeholder engagement
5. Facts and data based

These principles rest upon the foundation of governance, because for the implementation of category management to be successful it is important that corporate governance is strong. There are two levels governance required:

1. program level, where a steering group manages the category programs .
2. corporate governance, refers to the system by which companies are directed and controlled

If these factors are in place category management becomes a part of the company’s overall business strategy, and procurement can play a lead role in driving and influencing strategy.

How does your category management approach stand up?

It is becoming increasingly important that procurement is able to measure and report its impact on company performance, using metrics the CFO will understand and accept. RONA or Return on Net Assets, is one such metric.

RONA, is a financial measure that helps to express the relationship between profit, sales, expenses and total assets. RONA demonstrates how a company generates profit. For example the impact of cost reductions, sales increases and inventory reductions are measured by RONA.

The goal of each company is to reach more sales at lesser costs by using fewer assets. Buyers contribute to this goal by keeping inventory levels low and by reducing costs and expenses.

Of course, there are many other important metrics that CPO’s must understand and use, but RONA provides a clear quantifiable measure of procurements contribution.

What measures do you use? Let us know.

Learn more about procurements impact on company performance at the Purchasing Practice Academy

How can CPO’s and VP’s of HR find ways to motivate procurement teams through each individual team member? The answer is simple: assessments.

One of the greatest challenges faced by CPO’s is the strategic personal development of their team in order to ensure effective use of their talent. To properly manage this important resource, they must identify their challenges and implement employee development and training. Employee development will help CPO’s effectively manage, motivate and empower employees resulting in higher rates of employee productivity and retention. By using employee assessments, CPO’s are better able to take stock of a team members capabilities and help them apply these talents where most appropriate.

CPO’s can use assessments to:

•  scope job requirements
•  evaluate how potential employees fit jobs
•  identify changes that will keep employees engaged

By better understanding the people they employ, CPO’s can solve many of their most critical and expensive problems. With reliable information to make HR/Talent decisions, CPO’s can successfully fit people to jobs in which they will excel, become better managers, improve service, build more effective teams and ultimately, retain their best employees.

Employee assessments will provide CPO’s with insight that could lead to higher productivity and job satisfaction throughout their team. The information collected from assessments provides them with perspective on the current reality of their ‘bench strength’ and highlights areas of concern.

So, how can you improve the performance of your team? By measuring the essential factors that mark the difference between success and failure in specific roles, CPO’s will be able to put the right person into every position, allowing them to utilize their talents without limitations. This leads to greater job satisfaction, improved morale and employee retention because their team is made up with a workforce of people who are highly productive, skilled and committed to doing their very best.

When choosing a purchasing skills ssessment, procurement executives need to think about practicality, reliability, validity, and impact.

You’ll need to consider the broad ideas of practicality, the feasibility of giving a particular assessment; reliability, the consistency of assessment results; validity, the fit between the assessment and the who, what, why, and how of conducting an assessment; and impact, the possible positive or negative consequences of using the assessment.

Once you’ve considered these factors and defined your purposes for conducting an assessment, you can search for one that meet your needs.

Use the checklist below to be sure you’ve made a considered selection:

1. what is the intended purpose of the assessment?
2. do you have the necessary resources to administer the assessment?
3. do you have the necessary resources to score the assessment?
4 does the assessment’s intended purpose match your purpose for assessing?
5. Is the assessment appropriate for the competencies you want to assess?
6. Is the assessment appropriate for the roles and experience level of the people you want to assess?
7. Will the assessment results be used as intended by the developers of the assessment?
8. Have you considered the possible impact of the test and does it support your objectives?

Purchasing Practice has produced a guide for procurement executives on purchasing skills & knowledge assessments for procurement staff.  It is designed to help executives understand the role of assessments in building capability in procurement. If you would like a copy you can request one via our contact page.

Employees and applicants vary widely in their knowledge, skills, abilities, interests, work styles, and other characteristics.  These differences systematically affect the way people perform or behave on the job.

CPO’s and Organizations can use assessment tools and procedures to help them evaluate current and prospective members of their team when reviewing the following talent management functions:

1. Selection:  Organizations want to be able to identify and hire, fairly and efficiently, the best people for the job and the organization.  A properly developed and applied assessment tool may provide a way to select successful purchasing professionals.
2. Placement:  Organizations also want to be able to assign people to the appropriate job role. For example, an organization may have several procurement positions, each having a different level of responsibility.  Assessment may provide information that helps organizations achieve the best fit between employees and roles.
3. Training and development:  Assessments are used to find out whether employees have mastered training content.  They can help identify those applicants and employees who might benefit from either remedial or advanced training.  Information gained from testing can be used to design or modify training programs.  Assessment results also help individuals identify areas in which self-development activities would be useful.
4. Promotion:  Organizations may use assessments to identify employees who possess managerial potential or higher level capabilities, so that these employees can be promoted to assume greater duties and responsibilities.
5. Training Program evaluation:  Assessments may provide information that the organization can use to determine whether employees  are benefiting from training and development programs.

Some assessments can be used to predict employee and applicant job performance.  In assessment terms, whatever the assessment is designed to predict is called the criterion.  How well a test predicts a criterion is one indication of the usefulness of the test. Assessment strategies should be developed with a clear understanding of the knowledge, skills, abilities, characteristics, or personal traits you want to measure.

Strategic procurement can drive competitive advantage by enhancing revenues and lowering cost. Procurement can be said to be strategic in an organization if it contributes directly in the business planning process. To do this successfully, however you first need a clear understanding of your organizations strategy:

- Is your organization following a Cost leadership, or differentiation strategy?
- What is your organizations growth strategy – new product launches, acquisition plans, divestiture plans etc?
- What make v buy decisions support your organizations value chain?
- At what stage of the industry or product life cycle is your organization and how does this effect procurement strategy?
- What are your organizations competitive priorities – cost, quality, speed to market etc?

When you have the answers to such questions you must determine if you have the right mix of capabilities to make an effective contribution and put in place development plans to close any capability gaps.

If you have the answers to all these questions and the capabilities in place to execute plans to make an effective contribution, then congratulations – you are already a leader in your field. If you find yourself not able to answer all the questions and have gaps in your capabilities then you have an opportunity to develop your procurement capability and demonstrate procurements vital contribution to the long term success of your organization.

Very few CPO’s are in the fortunate position of contributing to their organizations success at such an aspirational level, but it is such a level that the ‘Brave CPO’s’ out there must aspire, if we are to continue procurements drive to sit at the top table.

What are you doing in your organization to contribute at a strategic level?

We welcome your comments

Procurement Capability: People Matter Most

Many companies underinvest in the purchasing team’s capabilities and exclude them from strategic decision-making processes in favor of functions, such as operations and sales.

The lack of importance placed upon procurement, has unintended consequences over time. A negative compounding effect develops resulting in:

• talent flows away from procurement towards the perceived higher-status functions
• procurement becomes buried at the bottom of the organizational structure, and
• those within procurement develop a ‘victim mindset’, seemingly impotent to do anything to change the situation.

These consequences ultimately bring about a self-fulfilling prophecy – that procurement is not strategically important.

The consequences of this underinvestment in building procurement capability are often not obvious in day to day organizational life, but in reality they are highly damaging. On the other side of the negotiating table are sellers who receive heavy support in training and capability development. When they come up against an underdeveloped purchasing team, the result, like that of a football match between Bahamas and Brazil, is fairly predictable, and significant value is lost.

Yet purchased materials and services make up 50 – 90 percent of an organizations total cost in many industries. As a result, companies that do not invest appropriately in the purchasing team’s capabilities and culture are throwing away more value than they realize. It is now well documented that Purchasing Leaders achieve higher margins than Purchasing Laggard. Among the dimensions that strongly affect purchasing’s success, are capabilities and culture. So people matter most.

Building procurement capability helps to raise the function’s profile and to give high-performing procurement professionals more leadership-development opportunities and exposure to senior management – building their self esteem and facilitating more powerful behaviors.

In our experience, companies that invest in developing purchasing skills are able to attract and retain better purchasing talent and capture the financial impact more quickly and sustainably. If you would like to learn more we would love to talk to you.

Is the purchasing profession intent on contemplating its navel?

It sometimes seems so from the number of times the procurement press raise the debate about what to call ourselves. Procurement Leaders magazine (and the others) have repeatedly used the topic on their blog. In this article and this article, and this article, etc. It seems like a regular topic to fill editorial space, when in fact the purchasing press are as guilty as anybody in using multiple terminology.

Needless to say, I am amongst those who think we have better things to focus on – like adding value. Value is the key, and each company’s value chain is different.

Arguing about Purchasing vrs Procurement does not really add value. What  about other names in common use like, Supply Management or Supply Chain Management and others?

Procurement could rightly be argued to be a part of the supply chain and therefore subservient to it as a function. It depends upon the  focus of the firm. The discussion needs to take place at the firm level and so the debate to standardize terminology across all firms could go on forever – and quite frankly, alienate the profession with stakeholders.

What is important for practitioners, is to understand their role in their firms value chain and to make sure they contribute to it. To obsess about the name this is done under, is not the best way to enhance the status of the profession.

Linked to this argument is, to whom procurement reports?

Again we see significant variation amongst firms. Should we report to the CEO, CFO, COO, CIO, or HR? I have seen them all – and this too, reflects the focus of  the firm and the potential for our profession to add value – and the maturity of the profession in the firm.

A further argument in this debate links the issue of our ‘name’ and ‘role’ together. If we think in terms of value chains where we ‘buy, add  value, and sell’, then we could argue for a ‘commercial function’, with  Procurement – Sales & Marketing, creating an integrated supply chain reporting to the same CXO. A Chief Commercial Officer for example. I have seen this also, and it worked very well. So this raises the possibility of the Commercial function.

In the end, it must be a good strategic fit with the firms value chain and reflect the ability of our profession to add value. This in turn is linked to the level of maturity, % of spend with external suppliers, importance of the supply  chain etc. So the important issue for CPO’s/Heads of function to focus upon, is to build the capability of its  staff to a level where they can make that vital link to the firms strategy and truly add value – under an appropriate name for each firm. With this capability achieved – the name will choose itself and become an irrelevant issue.

If you would like advice on building capability and linking the procurement function to the business strategy to add real value from your procurement, send us an email at info@purchasingpractice.com

Experiential e-learning for procurement: quicker, more productive than classroom based training?

At a time when change is faster than ever a key advantage of e-learning is that it has faster delivery cycle (velocity) times than traditional classroom-based instruction. The exact increase in velocity can be debated but the fact that it takes substantially less time to deliver the same amount of content is undisputed:

• According to Brandon Hall (2001) these factors can add up to an average compression (saving of learning time) of 35-45 percent when a course is taken out of the classroom and delivered as e-learning.
• Rosenberg (2001), argues e-learning ‘can take anywhere from 25 to 60 percent less time to convey the same amount of instruction or information as in a classroom.’
• Christian Terwiesch (2014), professor of operations and information management at Wharton, said there is a compression 50% as you go from the traditional classroom to online media.

So what happens to all this lost time?

Firstly, there are certain things that can only be done in the classroom that take up time which unfortunately we cannot replicate online. These are case discussions, games, exercises. Those are things that can only happen when we bring people together.

Secondly, there is a fair bit of waste in typical classroom practices. That has to do with the fact that different students learn at different rates, so the slower students extend the teaching time required.

When a student struggles in the e-learning, they can just rewind and review the content as often as they like to catch up.

E-learning can deliver benefits by reducing the time it takes to train people because:

1. Learners can go at their own pace, not at the pace of the slowest member of a group
2. Time in classrooms can be distracted by questions / topics introduced by other delegates that are irrelevant to the needs of the  individual learner
3. There is less social interaction time
4. It takes less time to start and wind up a learning session
5. There is less travel time to and from a training event
6. Learners learn what they need to learn, they can skip elements of a program they don’t need

So you really do gain efficiency.

This learning compression factor reduces the single largest cost of training in organizations; the cost of staff attending the training course, rather than the direct delivery costs in terms of trainers, course materials, travel and accommodation.

Check out our experiential e-learning demos here

Nuff said

Despite the evident advantages, one of the challenges that e-learning faces is that of low utilization and completion rates, or is this metric just a red herring, does it really tell us anything?

People like to quote this metric, but should we focus much more on participation and engagement? By segmenting learner behavior, we see four categories of learner behaviour:

1. Those who are just browsing the content;
2. Those who want to view the material but won’t do the work;
3. Those who will do all of the work;
4. Those who just want to use it to reinforce current knowledge and use the content as a performance support tool.

So focusing on a narrow completion statistic is not meaningful in terms of evaluating the success of elearning. Completion rates is a performance metric designed to evaluate traditional classroom based programs — and many try to apply it to elearning.

Clearly, there is a huge value to the knowledge that can be disseminated through online learning that makes training more productive by reaching more learners without increasing the training budget.

Procurement and HR executives already have felt the cost pressures on their training budgets resulting in a reduction of training hours per employee. In the face of new technologies leading to better and better e-learning, courses can now be developed that have the same learning effect as traditional classroom learning. Given the cost advantage, it’s very hard to ignore it.

It should be noted however, that not all e-learning courses are created equally. Our experiential e-learning model represent state of the art in currently available e-learning for procurement. They are designed to make learning easy and make the courses engaging for the learner using learning scenarios buyers will recognize and translate learning into their own environment.

If you would like to learn further about the benefits of experiential elearning in procurement email us academy@purchasingpractice.com