Who Do We Need in Procurement?

When evaluating the maturity and potential of the Procurement function, a simple shortcut to the answer is to look at its people. How much do you trust them? How often do you see them? And are they understood by the rest of the business? While some companies perform well here, the answers can be the same for others: not much.

Procurement functions don't always comprise the top talent in the company. Part of this is because Procurement has its roots as an administrative function with a constrained remit, as discussed in Chapter 1: Introduction. Which high potential, career-hungry person would choose a position in Procurement if other functions such as Sales, Marketing, or Finance have a more central role in value delivery for their organization?

The problem is compounded because we sometimes don't know what type of people to hire in Procurement, so we just end up hiring those with the word “Procurement” on their CV. And this can reinforce the problem. But there are exceptions. One CPO told me last year that he routinely rejects people who apply to their Procurement team with “fantastic Procurement resumes,” not because they are bad people, but because the skills are too “old school.”

The CPO

Before we get into defining old school Procurement skills, let's talk about who is needed at the head of the function. In this case, we're calling them the CPO, but they could be called Procurement Director, Head of Procurement, or even Procurement Manager depending on the size of the firm. Actually, the title CPO is a bit misleading here because the “C” is generally associated with a board-level position that Procurement doesn't normally occupy.

It has long been a topic of debate in Procurement as to whether the CPO should be on the board but, in our experience, having Procurement representation on the board doesn't make much difference in terms of how effective it can be. Why? Because a good CPO is someone with excellent stakeholder engagement skills, someone who has built strong relationships with key people and who empathizes well with them—including all board members. For some companies, Procurement is a board position—particularly where Procurement is so business-critical, such as automotive—but for others not, and Procurement shouldn't get too worked up about it, either way. If the CPO possesses the right skills, he or she will have access to every board member every day of the week anyway.

A key part of being able to play the role we've just described is an ability to talk the language of the business. How many functional heads' eyes glaze over if the CPO starts talking about savings that no one recognizes, processes that no one wants, or a supplier deal that sounds overly complicated? Good CPOs, and there are many out there, understand the business priorities first and then make the link between what they want to talk about and why the rest of the company should care—in a language that others can understand.

Another essential trait is the ability to constructively challenge others on the status quo. Have you ever seen your CPO battling with their peers on the nuances of a position? Were you impressed? Some CPOs struggle to challenge effectively, partly because they talk the wrong language but also because they can lack the confidence and insight to do so. But challenge is what a CPO must do, because they need to be the ones in the organization sparking and then driving change.

Finally, a CPO needs to be comfortable existing to make others more effective. It's not a secret that CPOs can sometimes find themselves in conflict with other functions and working in a silo. But Procurement must help other functions meet their targets, and it needs to be relentless in its cross-functional approach to do so. Some of the best CPOs we have had the pleasure of seeing in action look for ways to get their function out of the way of the business to allow the business to do it themselves! That calls for a level of humility and shared purpose.

Today's Old School Procurement Skillset

So, what is this old school Procurement skillset that you still find in some companies today? Well, part of it is completing tasks like updating master data records by liaising with the business and suppliers and trying to ensure policies and procedures are followed by people who don't want to follow them. As you can imagine, this type of process policeman role doesn't really endear Procurement people to their colleagues in other functions. Procurement processes are notoriously long-winded and have a reputation for not being designed with the end user in mind.

The second is that some Procurement functions are not in control of their agenda or program of work. Instead, they are overwhelmed trying to react to issues and requests being raised by the business and suppliers that come up last minute. Since when did working in a reactive fashion and on mainly administrative tasks require highly talented people? Not being very liked and spending so much time on the back foot takes its toll such that many Procurement people who spend their days doing this day in and day out, are generally worn down. Therefore, in these cases, they show little ambition to make their roles more fulfilling and valuable to the company. That is not to say these people are not in general hard-working, they often are! But they and their Procurement functions are in a rut that is hard to get out of.

As with many things, the talent issue in Procurement stems from a lack of understanding of what Procurement can deliver and therefore the sort of people needed and the qualifications required. This creates a low bar and explains why you can end up with people in Procurement roles who are behind their peers in, say, the Engineering function, or the Sales function, in which certain qualifications and standards are required. Just look at the ratio of degree-educated people in the Procurement team compared to, say, Finance. It's pretty revealing! The people in these other functions are sometimes more capable and therefore exert considerable influence over their colleagues in Procurement, often taking ownership of strategic tasks that overlap with Procurement such as liaising with suppliers on important topics and making commercial decisions with Procurement expected to fall into line.

Of course, there are many exceptions to this and plenty of highly educated and very effective people out there in Procurement who do incredible things for their companies. Believe us, we have come across many of them! But we think there is a big opportunity to make this more common across more companies than it is today.

As already mentioned, what does sometimes seem to be valued by companies in their Procurement teams is “Procurement experience.” You just need look at the number of Procurement job adverts out there that make this a prerequisite. If you question what is meant by this, you'll often get a vague answer about it meaning good process knowledge, or similar. Actually, we think it can in some cases betray a lack of understanding of what actual skills should be sought.

A large part of Procurement's role today is about ensuring that due process is followed—usually a complex sourcing or contracting process, complete with heavy forms to fill in. Another skill that some companies genuinely appear to value today is the knowledge that a Procurement professional has of categories and key suppliers and even the individual day-to-day relationships they have with supplier counterparts. This is particularly interesting, and our experience in consulting shows that our clients often want our consultants to have massive amounts of supplier and market knowledge.

However, this doesn't make the difference between success and failure in Procurement, at least not always. One of the large pharma companies has recognized this and has started to post actual problem statements that they have in their business in place of traditional job descriptions. They then hire those people who can help them solve these problems, regardless of any Procurement experience.

Finally, some companies prioritize good negotiation skills. But negotiation skills as defined—as they often are in this context—by being able to navigate the theatrics of a series of negotiations with a supplier and score a win by getting the lowest unit price, without taking into account other factors, are in fact grossly overrated. By being more data-driven and striving for longer term win-win deals with suppliers, it is possible to get far superior results without all the emotion and theatrics.

Tomorrow's Procurement Team

We've had the good fortune of working with many high-performing CPOs and the teams they have built over the years and, from this experience, we have summarized a list of four principles that any CPO should consider when putting his or her team together to ensure success from the start. These principles depart from some of the traditional approaches we have just examined that some companies still follow. They are:

• Define success and align incentives,
• Build a team of diverse skills,
• Ensure the team is versatile,
• Focus on execution.

Attraction and Retention of Talent

Now that the four principles of a winning team are in place, a CPO needs to find ways of successfully attracting and retaining some highly talented individuals to the team. A recent Efficio survey of Procurement business leaders revealed that training and development is one of the surest ways to do this (The Human Factor, Sept 2019). And it's easy to see the logic in this. Top talent is invariably ambitious and understands that to progress it needs ample opportunity to learn and grow.

In some cases, Procurement functions, if they offer any training at all to their team members, will stick to what is seen as the core Procurement syllabus of negotiation and perhaps some other technical Procurement training, such as contracting. Some companies go further and sponsor their employees to pursue Procurement qualifications, such as CIPS (Chartered Institute of Procurement & Supply). There is no doubt that courses like these can be beneficial and, in the case of CIPS, it is a qualification that is recognized across the industry. This does help some companies to attract people to come and work in their Procurement function. But are these the right people?

There are drawbacks to this approach. The first is that too strong a focus on technical skills in Procurement misses what really makes a high-performing Procurement person. As we have laid out in this chapter, broader analytical and commercial skills are much more important, as is having the right soft skills to build trust and then influence stakeholders. There is little focus on these skills in technical Procurement courses.

The second drawback of this approach is that it is one-size-fits-all. Some CPOs will view training as a box that needs ticking and for ease will send sections of the team on certain courses, with no expectation for further learning. But this is not nearly as effective as allowing tailored learning for individuals in the team based on their individual needs, which are unlikely to be the same. This is much easier to do today than it was 20 years ago when training nearly always had to be classroom-based.

Today, we live in an era of cheap information. You can literally learn about anything online these days, often for free. Viewed through this lens, there really is no reason why individuals in the Procurement team should not be encouraged—or freed up, depending on how you look at it—to design their own training syllabus and take their learning into their own hands. Clearly the environment for this needs to be set up by the CPO, who must embed a culture of self-learning. This means encouraging and supporting self-awareness of training needs—or, even better, ambitions—and then checking in with the employee, at least during the performance review cycle, to see what sources of knowledge they have been able to find to facilitate that.

Some good examples of learning that can be pursued in this way that falls outside of traditional Procurement training would be data visualization, influencing skills, even sales skills. The point, however, is that they should cover whatever it is the individual wants to learn to help them be better at their role and therefore make a more valuable contribution to the company.

Of course, self-learning and self-motivation can't be completely relied upon to take the place of a more standard approach to training everyone on the team on a perceived common skills gap. However, even here there are improvements to be had in how training in Procurement is traditionally delivered. E-learning has been around for a long while, but still some Procurement functions have not taken the plunge. By giving their employees more flexibility in terms of when and how they consume training, whether through e-learning or even a mobile device, the impact of the training is likely to be higher.

The other, more important, side to the learning equation is “learning by doing.” And this is particularly important in Procurement, where the actual technical skills are straightforward and not even a major prerequisite for success. You can focus solely on training and absorbing concepts but, unless you spend your time trying new things out in real life, you will only progress so far. This has often been a weakness of traditional Procurement functions with static roles. You do the same role day in, day out, and there is little opportunity to try something different or get exposed to new things. And it's not very attractive to an ambitious, highly talented person and not likely to be enough to retain them either.

As we have already discussed, when building a winning team, a key principle that a CPO needs to adhere to is keeping that team versatile and employing people in project roles, moving them from one project to the next as priorities and demand change. Not only does this give the Procurement team the agility it needs, but it also gives the highly talented people in Procurement the constant source of learning opportunities that they often demand. Suddenly Procurement goes from being a job that is similar for 10 years to a career that offers new experiences and variety every few months!

In fact, the CPO should go further than this and not be afraid to allow his or her best people to leave Procurement to go and work in other functions within the business. By doing this, it opens up Procurement as a function for many people who would never have dared go near it, thinking that once they were in Procurement, they were trapped unless they moved to a different company.

The highest-performing Procurement organizations make a point of helping their best people to leave to go elsewhere in the company because, on many occasions, the people come back more rounded. Highly talented individuals are also happy to be rotated into Procurement, knowing it's not a dead end.

Critically, the skills we have spoken about in this chapter that make successful Procurement people are transferable, such that they can be successful in most functions. Procurement just needs to make sure it is one of the seats on the merry-go-round for talented individuals who want a successful career in a company.

Being Bold When Hiring

As we've discussed, when it comes to recruitment, Procurement experience is often sought after in candidates. The reason is clear: it seems like the least risky strategy. If someone has 10 years of Procurement experience, then surely they will do well in a winning Procurement team. No one could possibly get in trouble if it doesn't work out, given they are tried and tested in a Procurement function.

Given what we have said in this chapter about successful Procurement people, however, Procurement experience should be a nice to have, at best. The technical side of Procurement is not rocket science, and the concepts can be learned quickly by bright people. By narrowing your search for people to build that winning team to those who have spent significant time in Procurement, you are eliminating huge swaths of the brightest, most high potential candidates. The remaining pool without doubt has some excellent people in it but not enough to go around!

In our view, a company would do better to hire bright, motivated people irrespective of any previous Procurement experience—for example, from Sales or even graduates straight from university—because it will be easier to find candidates with the skills to ensure the Procurement team is a winning one. It is interesting to note that the consulting houses hire according to this model. They generally take people from good universities, with a rounded personality and often a science-related degree, but no Procurement experience. They teach them the technical Procurement concepts very quickly, and they often achieve excellent results with their clients. They can help their clients achieve these results because generally these candidates are motivated, they want to learn, they have excellent analytical and commercial skills, and they relate well to their clients and the people with whom they need to work.

Of course, this model is not necessarily one-to-one transferable to industry, but by being bold and hiring for tomorrow's winning team rather than the traditional Procurement skillset, CPOs will have a much greater chance of pleasing internal customers, getting traction in the business, and raising the Procurement profile. In doing so, Procurement becomes an attractive function in which to work and breaks the low visibility cycle that has plagued it for so long.