The looming talent crisis in procurement and how technology can help
The looming talent crisis in procurement and how technology can help A report from the McKinsey Global Institute suggests that a high jobgrowth scenario in the U.S. would yield a workforce deficit of 1.5 million college graduates by the year 2020.
With global economies still struggling to recover from the devastating financial market meltdown and resulting global recession of 2008-09 — and unemployment rates for professional workers lingering at exceedingly high levels — it might be difficult to accept there is a talent crisis brewing in the procurement and supply management functions. But 1
a recent study of procurement organizations by CAPS Research finds some 80% reporting they have experienced talent shortages in one or more functional areas related to procurement and supply management in the past year. That compares to just 46% reporting talent shortages when CAPS last posed the question in 2009. What is more, while 58% of procurement leaders say they have been able to fill open positions with qualified candidates in the past year, that percentage is down 22 points from 80% in the 2
The new CAPS study was, in fact, inspired by a presentation to Fortune 500 chief procurement officers (CPOs) in which two of the world's foremost supply-management research experts — Phillip L. Carter, DBA and Robert M. Monczka, Ph.D. — identified talent management among eight critical challenges that supply management organizatons will 3
face in the coming decade.
Executives' anxiety around talent extends well beyond the procurement and supply 4
management functions. For example, the 2011 Lloyd's Risk Index ranks talent and skills shortages as the number-two risk facing global businesses. That's up from a 22 rank in 2009 and one of only two risks for which Lloyds study respondents — C-level executives from across the globe and a broad variety of industries — feel they are insufficiently prepared.
GLOBAL TRENDS Demographics are the primary reason for growing anxiety around talent. The Baby Boom generation, born from 1946 - 1964, has begun reaching the traditional retirement age of 65. Even if Baby Boomers defer retirement for up to 10 years, there is no stopping the trend in which experienced, knowledgeable professionals leave the workforce in greater numbers than inexperienced ones will join. There are also projections that suggest future workforce composition may not be well 5
1 2 3 4 5
(Wade, 2012) (Wade, 2012) (Wade, 2012) (Lloyd's , 2011) (McKinsey Global Institute, 2011)
aligned with business needs. For example, a report from the McKinsey Global Institute
suggests that a high job-growth scenario in the U.S. would yield a workforce deficit of 1.5 million college graduates by the year 2020. McKinsey also suggests that the professionals colleges do produce may be ill matched to the types of jobs available. “Many [college students] are not obtaining the skills that will be most in demand,” says the McKinsey
report. “Extrapolating from the current trend, in this decade the United States will produce twice as many graduates in social sciences and business as in science, technology, engineering and mathematics.” 6
Meantime, the Lloyd's Risk Index report notes that China “has a large population of young and old people, but a deficit of working-age professional workers,” and that the search for talent is “much more acute in the Asia-Pacific region” with 70% of business executives rating talent as high or very high among their priorities compared to 42% and 45% in Europe and North America, respectively. Shorter-term economic, social and cultural trends are likely to exacerbate the underlying demographic challenges. For example, structural housing market woes in the U.S. and elsewhere, including drastically deflated prices (which translates into wealth destruction) and record numbers of underwater mortgages (where borrowers owe more than their homes are worth) will undermine workforce mobility, causing uneven distribution of talent — severe shortages in some regions, large surpluses in others. There is also speculation that: n
Corporations' current propensities to hoard cash and avoid creating permanent jobs could accelerate the Baby Boom's exodus from the workforce, and
Corporations' emphasis on squeezing greater productivity from existing employees could drive overworked talent into career changes or independent/contingent roles better suited to their notions of work-life balance. 7
The 2012 Global Workforce Study by human resources consultancy Towers Watson finds only 35% of global respondents qualifying as 'highly engaged' in their work, meaning they score high on the following three elements of sustainable engagement: n
Willing to expend discretionary effort on their jobs,
Believe they have the tools, resources and support to do their jobs effectively, and
Have a work environment that actively supports physical, emotional and interpersonal well-being.
Compounding the talent problem for CPOs are the facts that: n
The procurement function is gaining in importance and complexity,
Capabilities needed for the new, more strategic procurement regimes are not yet well defined, and
There are still only relatively small pockets of excellence when it comes to secondary and higher education devoted to preparing people for careers in procurement and
(Economist Intelligence Unit, 2011) (Towers Watson, 2012)
supply management. n
There is also plenty of research to suggest that different generations of workers —
Baby Boom, Gen X, Gen Y and now Gen M (mobile) â€” have vastly different work motivators and ideas around things like the role of technology, work-life balance, job security, loyalty and engagement. With no one-size-fits-all approach to talent management going forward, the imperatives for CPOs are twofold: n
First, accept that clearly articulated strategies are needed for talent segmentation, attraction, retention, development and promotion, and
Second, understand that radically different models may be needed for meeting talent requirements, including (but not limited to) remote and contingent workforces, incentive-driven employment models, outsourcing, greater use of mobile and automation technologies, extensive internal training and development, active careerpath planning, vocal evangelism for procurement and supply management functions and even political/social action to ensure that systemic problems in primary, secondary and postsecondary education systems get corrected.
PROCUREMENT TALENT DEFINED So what does it take to be considered talent in the disciplines of procurement and supply management? A decade or more ago, this would have been a much easier question to answer. To excel at procurement one needed to be: n
Analytical and aware with respect to economies and markets,
Skilled at negotiation,
Ethical (to a fault), and
More interested than average in treating the company's money as if it were something worth saving rather than squandering.
Ask a CPO today what they require and you will hear all those things plus: n
Skilled at selling, marketing and communicating ideas,
Technically knowledgeable; possessing sophisticated understanding of engineering concepts,
Technologically, culturally and socially savvy,
High on business acumen; possessing sophisticated understanding of finance, accounting and treasury concepts,
Customer/end-market focused, and
Capable of analyzing, reengineering and/or designing processes and business systems.
But that's not all. Beyond relatively definable skills and knowledge bases for procurement and supply management, lie all the various personality traits associated with talent. What
differentiates the A from the B and C performers within any business organization can range anywhere from: persuasive, influential, charismatic, engaged, assertive, passionate, self-motivated, creative, curious, and fast learner to eccentric, difficult, arrogant, aloof, intolerant, unconventional, and so forth.
CPOs should find effective ways of marketing and branding their function
The first step for CPOs is to define, very specifically, what talent means to them and what it will be expected to deliver to the procurement and supply management organization in terms of performance. With that definition in mind, here are considerations for devising a talent management strategy that can meet the challenges of the coming decade.
ATTRACT TALENT 8
According to the 2012 CAPS study , a 'lack of qualified applicants' is, by far, the number one reason that CPOs have been unable to fill open positions — cited by nearly 80% —
CPOs must focus on their personal brands as managers & leaders Collaborate with HR to create, describe & sell their positions to the market place
while fewer than 20% believe the problem is a function of inadequate compensation. This suggests that CPOs need to work much harder at making the procurement and supply management functions, their companies and their specific job openings more attractive to job seekers. First, CPOs should be collaborating as a group —across companies and industries— to find effective ways of marketing and branding the function at both the college and secondary (high school and technical/vocational school) levels. Individually, CPOs should also be collaborating with HR and other senior corporate executives to ensure their companies are well branded in the marketplace as desirable places to work. Is the culture seen as positive? Are physical work environments attractive? Is the technology state of the art and supportive (versus outdated and/or frustrating)? And are there clear upward career paths for top performers? Finally, CPOs must focus on their personal brands as managers and leaders. Are they known for surrounding themselves with talented people (even though those people can be more difficult to manage)? Does their management style accommodate true talent's personality traits? For example, do they give their teams roles in ideation and decision making? Do they adapt their management styles to different personalities? And are they known for helping people to earn recognition for their achievements, build their resumes and progress into positions of greater responsibility, pay and prestige? Beyond building personal brands for great leadership, CPOs will also need to shed their perspectives as buyers and approach filling positions as sales propositions, clearly defining their value as employers and collaborating closely with HR to create, describe
and sell their positions to the marketplace.
TEACH TALENT 9
While the 2012 CAPS research does not address the question talent retention directly, it does touch on some key benchmarks that will likely figure into CPOs abilities to retain top talent as global economic growth continues to recover and competition for high-
CPOs may need to lobby more for direct training and development funding, but can also find creative and inexpensive ways to accomplish the same results
performing employees both within the procurement function and with competing functions such as finance, operations, supply chain/logistics and engineering continues to intensify. One hallmark of talented people is that they love to learn and will often tolerate lower compensation as long as they are gaining in some other tangible way either through learning or resume building. In a recent Harvard Business Review article titled, Why Top Young Managers Are in a 10
Nonstop Job Hunt , researchers noted that, “Dissatisfaction with some employeedevelopment efforts appears to fuel many exits.” The researchers report 'large gaps' between what employers do to help young managers grow in their jobs and what those young managers would actually like their employers to do. “Workers reported that companies generally satisfy their needs for on-the-job development and that they value these opportunities, which include high-visibility positions and significant increases in responsibility. But they're not getting much in the way of formal development, such as training, mentoring, and coaching — things they also value highly.” However, while training and development is widely cited as a strategy for coping with the 11
emerging talent crisis in procurement and supply management, the 2012 CAPS study
finds companies spending, on average, just US$982 per year to train and develop each supply management employee. That is less than the cost of a single typical college course or of attending a single educational/professional conference, including travel. To retain procurement and supply management talent over the longer term, CPOs may need to lobby for more direct training and development funding, but can also find creative and inexpensive ways to accomplish the same results, for example: n
Promote job rotation into other functions,
Formalize coaching and mentoring, and
Co-locate procurement and supply management professionals within other related functions throughout the corporation.
MOTIVATE TALENT While talent is generally self motivated, the talent crisis in procurement and supply 9 10 11
(Wade, 2012) (Monika Hamori, 2012) (Wade, 2012)
management means CPOs need to be exceedingly careful, systematic and consistent around how they set performance objectives, motivate people and manage performance in their organizations. Key questions to consider:
n Goal setting. Are performance objectives high enough to motivate while still being
realistically attainable? n
Generational/cultural variability. Does the system for performance motivation and management account for variability within the employee constituency? For example,
Creative ways to motivate talent include: control (over work hours, work methods, etc.), authoruty, recognition and so forth.
does it assume everyone is motivated mostly by pay? Or does it consider other motivators such as time, work-life balance, location, empowerment, recognition, career path and so fo
n Performance measurement and reporting. How clearly are peoples' goals and
objectives aligned with and linked to larger corporate objectives? Can people see themselves having an impact on corporate performance? n Incentives. Are there clear incentives for people to differentiate themselves in terms
of performance? Incentives have long been a sore subject for CPOs (why should people have incentives to do what they have been hired to do?). However, a real shortage of procurement and supply management talent may force the issue of incentives to the forefront. But,
Disaggregation will be an important strategy going forward for improving talent utilization and, by extension, attraction and retention
incentives do not always need to be monetary. Creative ways to motivate talent include: control (over work hours, work methods, etc.), authority, recognition, and so forth. Actively encouraging and even financing talented employees to build their resumes with certifications and hard skills â€” for example, solutions certifications offered by wellbranded technology providers â€” are another great way to offer incentives that benefit the procurement organization as well as the individual. And, while it can be tempting to block people from acquiring hard resume skills for fear they will leave the organization, doing so rarely serves to retain talented employees over the longer term.
UTILIZE TALENT Another hallmark of talent is that it dislikes being underutilized. The brilliant negotiator hates wasting time on paperwork. The genius forecaster wants to be steeped in data not stuck in meetings. And the spend-analysis savant cannot cope with the constant phone, email and instant messenger interruptions associated with other less value-adding aspects of his or her job. Disaggregation will be an important strategy going forward12 for improving talent utilization and, by extension, attraction and retention. For CPOs, this means breaking down existing procurement and supply management jobs into component activities and either automating or outsourcing the activities that are the least attractive and/or motivating to truly talented individuals.
(McKinsey Global Institute, 2011) (Wade, 2012)
According to the 2012 CAPS study,13 procurement executives feel they will be more likely to automate than to outsource supply management work, ranking the former at 3.8 on a
likelihood scale of 1 to 5 and the latter at just 2.2. And there are certainly plenty of great options for automating mundane, often mind-numbing procurement tasks, for example: n E-Sourcing and collaborative contract authoring solutions can liberate huge
numbers man hours from supplier bid solicitation, analysis and contract negotiation processes. n
Automated spend classification and spend-data mining tools can shift talent's focus from finding performance improvement opportunities to pursuing them.
And finding ways to deliver critical information â€“ such as spend, market and supplybase intelligence â€” consistently and automatically to talented individuals frees up the nonvalue adding time they would otherwise spend hunting and gathering the information they need to do their jobs.
EQUIP TALENT Nothing is more frustrating to talented people than not having the right information and tools to do their jobs well. Part of building a strong brand that can attract and retain top procurement and supply management talent will involve creating a work environment that is better than what the competition offers. In addition to freeing up the talent's time, CPOs must also be thinking about how they can deploy technology in ways that make talented people even better at their jobs. For example, the right technology can empower talented people to: n
Extract valuable business intelligence from millions of unstructured data records,
Perform sophisticated, multivariable optimization calculations, or
Demonstrate how procurement activities connect to key business performance metrics such as profitability and cash-flow acceleration.
To get where they need to be on the technology front, CPOs should be asking themselves these questions: n How good is our information infrastructure for procurement and supply
management? Is it as good as our competitors and as good as other industries? Upgrading information quality is often the first step to equipping talent. n Is our technology state of the art? Does it empower our people and help them to do
their jobs better? Or is it a constant source of frustration? If the latter, it may be time to consider upgrading and/or adding new functional capabilities. n Are we failing to use the technology we have? Do people mistrust it? Affirmative
answers here may indicate that either the wrong technology has been chosen or more training and development is needed to improve utilization.
n Are we likely to outgrow our technology? Will our technology scale as the people
in our organization gain knowledge and skills? If the answer is negative, CPOs may wish to put a future roadmap into place and start building their business cases for future investments.
CONCLUSION If the prognosticators are correct, the significant talent troubles that procurement executives are experiencing today are going to get much worse as the decade progresses. As with any sourcing category, CPOs need to be thinking in terms of defining requirements, creating attractive 'lots' or sets of job requirements and becoming a most-favored customer to the suppliers of future labor. To find out more about how Zycus can help you to attract, teach, motivate, utilize and equip talent, contact us via firstname.lastname@example.org.
Works Cited Economist Intelligence Unit. (2011). Lloyd's Risk Index 2011 - Executive Summary. London: Lloyd's. Lloyd's . (2011). Risk Index 2011. London: Lloyd's. McKinsey Global Institute. (2011). An economy that works: Job creation and America's future. Chicago, IL: McKinsey & Company. Monika Hamori, J. C. (2012). Why Top Young Managers Ae in a Nonstop Job Hunt. Harvard Business Review . Towers Watson. (2012). 2012 Global Workforce Study (At a Glance). New York, NY: Towers Watson. Wade, D. S. (2012). Director of Benchmarking Programs. Tempe, AZ: CAPS Research.
CAPS Research Report : Talent Management 2012 - A Benchmarking Perspective