(2/6/2014) More Strategic Procurement Through Time, Measurement and Talent
Procurement organizations understand the need to become more strategic, but making it happen is not as simple as flipping a switch. Often, procurement organizations don’t know what strategic looks like; they don’t know what strategic does. Although an increasing number of companies are considering the option of outsourcing tactical work, the internal transition to strategic remains a struggle.
In response to the needs of procurement organizations trying to overcome this hurdle, Denali Group has launched their own Academy dedicated to balancing the development of skills and transition of thinking from a tactically driven approach to one that puts strategy at the center of every effort undertaken.
Although the preference for strategy over tactics seems to indicate that the one is more important than the other, they are complimentary ideas. Procurement should not turn their backs on tactical work; tactics are critical in making the chosen strategy a reality. Tactical work can’t be the focus of procurement’s efforts, but it is a means to a strategic end.
In a recent interview on Blog Talk Radio, Denali Academy Director Susanne Wrage described three critical points that evolving procurement organizations need to address in their transition to strategic: perspective on time, performance measurement, and talent management. Each of these points may create tension internally, and must be resolved in order for procurement to achieve its goal of becoming a strategy-driven organization.
Tactical work is predominantly focused on the short term; what tasks need to be completed in the coming days, weeks, and months. Whether these tasks involve other internal functions or suppliers, they are transactional, and rarely offer the opportunity for value creation. Strategic thinking involves a longer time frame, such as three to five years. The plans that may be put into place over such a length of time reward bolder approaches such as backwards integration, process redesign, or outsourcing an entire function. Once a strategy is selected, all tactics should be prioritized with the right end goal in mind. When tactics are overly dominant, the result is too much fire-fighting on the part of procurement – in other words, they are so focused on surviving the short term that there is no time remaining to invest thought or effort on the long term.
Regardless of what an organization wants from its procurement function, it will get what it measures against and rewards, because incentives drive behavior. For instance, if procurement rewards quarterly cost savings, that doesn’t give team members an incentive to develop and implement a long-term strategy, where the benefits only start materializing in a year or more from now. These incentives -- and the KPIs that track them -- must be aligned (if not shared) across the organization. Procurement is typically measured on its ability to generate cost savings, while finance is measured on profitability. While the two concepts are related, without an explicit connection, the two groups will not always be working towards the same goal. This challenge is only further complicated by the addition of operational groups and their unique performance metrics.
Once the right perspectives on time and measurement are in place, procurement must ensure that it has the talent required to operate strategically. Proper training is an ongoing requirement. This is particularly true when the desired mode of operation changes. Traditional procurement skill sets must be augmented with the communication and sales skills necessary to have productive relationships with stakeholders and suppliers. Transitioning procurement’s focus from price-driven outcomes to collaboration and value creation requires an increased awareness of each party’s position, background, active listening, and lots of practice.
Denali Academy provides the necessary skills development by catering to different learning styles, personalities and environments through a modular curriculum available to individual students or custom team sessions. The category management model taught through Denali Academy is the same one used by their own internal team on behalf of clients: a proven methodology that is constantly being refreshed.
Since many Academy students are part of an effort to transition their procurement organization from tactical to strategic, this is the core focus of the curriculum. In many cases, an over emphasis on analytical capabilities in candidates vying for procurement positions has under valued the importance of pro-social skills such as listening and modifying the delivery of one’s message to best motivate its audience. Denali Academy helps balance these critical analytic capabilities with the soft skills needed to manage stakeholders and executives.
Procurement needs to elevate conversations with stakeholders and suppliers to the relationship or partnership level. It is common for both sides to fall back on comfortable but tactical topics rather than to focus on long term planning. Day to day operational issues are important but they cannot be allowed to obscure the larger picture. As Wrage said in the Blog Talk Radio interview, “Procurement should lead by example by understanding what other functions do and why. In order to communicate effectively, procurement must hit the right topics soon enough in the purchasing process to have the right impact.”
Current plans to expand the Denali Academy offerings include eLearning for remote or new team members as well as an interactive category management ‘game’ that allows Academy participants to walk a mile in the shoes of their colleagues and stakeholders.
For more information on Denali Academy:
Listen to the Blog Talk Radio Interview on Making the Shift from Being Tactical to Strategic
Download the recent Denali white paper ‘Procurement’s Transformation from Tactical to Strategic: Retooling Your Organization for Better Category Management’
About Denali Group
Founded in 1996, Denali Group collaborates with supply chain and Procurement professionals to deliver more value, faster and more efficiently. Denali Group's innovative solutions help Global 1000 companies transform organizational capabilities, improve execution efficiencies, increase spend under management, and accelerate time to savings.
Denali Group services include:
Denali Consulting: Procurement transformation and supply chain optimization
Denali Sourcing Services: Managed sourcing execution and Procurement outsourcing
Denali Academy: Strategic procurement training and development
Denali Intelligence: Subscription and custom supply market intelligence
Denali Recruiting & Staffing: Supply chain recruiting and staffing
For more information on Denali Group services, visit http://denaliusa.com or call 888-824-8866.