While purchasing general or professional services, agreements can generally be categorised as being either manpower-based or outcome-based.
More than half (51%) of jobs could be performed by machines in the next few years, according to research by consultancy McKinsey. While this sounds extreme, it is important to understand that predictions like this refer to job activities, not actual roles or positions.There is no doubt that jobs and roles, especially in procurement, will evolve because of the opportunities new technologies will bring to the workplace.
When you are involved in an RFP process to fulfill a specific business need, one of the most critical factors while negotiating agreements with shortlisted suppliers is the duration of the contract. The business could be awarded for one year or for multiple years. While there is the obvious benefit of a one-year contract (“What if prices in the future go down as compared with the current price?”), there are multiple benefits that come out of a multi-year contract.
Certain professionals are expected to adhere to higher standards for behavior: doctors, accountants, and country presidents are a few that come to mind. Procurement professionals should also “be presidential” in their behavior.
Over the past year, there has been a lot of conversation and debate about what presidential behavior is. I’ll home in on what it means to be presidential in procurement with this list of five “do’s” and five “don’ts.”
Recruiting, developing and keeping the very best talent in your function is no easy task. To clarify your thinking around the issue, there are a few questions you should be asking yourself to get where you want to be.
1. Who are you?
It’s natural to take pride in your company’s brand and to sell a role to potential recruits based on this brand identity. But, unless you’re a multinational organisation with an internationally renowned brand – and perhaps not even then – you shouldn’t rely on the brand alone to sell a position.
Instead, you should consider what procurement’s brand is within the company, and compare that with other functions in other companies. You need to think about what makes the function stand out to candidates. Identifying the strategic imperative that makes your company and function an exciting place to work will help strengthen your unique selling point.
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Talent is one topic that is always on the radar of CPOs (chief procurement officer).
Sometimes procurement chiefs discuss a ‘shortage of talent’, which can refer to a lack of appropriately qualified candidates for open positions or headcount shortages. Other times, they talk of a ‘talent mismatch’ between the people in their teams and the projects at hand. ‘Talent maturity’, which requires investment in order to upskill the whole procurement team, is another challenge function heads face. Regardless of their focus at any given time, CPOs (chief procurement officer) are always on the lookout for new talent.
We use the word talent in place of many other words: headcount, capabilities, intelligence, knowledge. It is easy to forget talent is often naturally possessed, rather than learned through experience. This may be a difficult notion to accept because it places control directly outside of a procurement chief’s reach, but they need to assess the natural talents of each person in their team.
Once these talents are identified, individuals can be positioned in the most value-adding places within the team, which will help the function build closer relationships with stakeholders and add value beyond cost savings.
CPOs (chief procurement officer) should look out for the following traits.
Ability to read people
For some professionals, there is a second language being spoken in every meeting. From recognising changes in tone and body language to perceiving silent dynamics such as interpersonal friction or suppressed ambition, those able to read the signs can understand what lies behind the actions and words of suppliers, executives and stakeholders. When these underlying motivations are factored into plans and strategies, procurement professionals can identify and address core issues. Staff who can read other people are best placed in high-stakes negotiations, spend categories with difficult stakeholder personalities and complex cross-functional projects.
Being able to react quickly to changing circumstances in the right manner is critical to the function’s long-term success. This includes everything from speedy mental calculations to controlling one’s emotions so actions align with the function’s overarching priorities and philosophy. Fast thinking is effective if a professional can instinctively balance procurement’s quantitative goals with an enterprise’s qualitative objectives. Fast thinkers are best placed in categories with dynamic cost models or in which pricing is index-based, where suppliers have substantially greater leverage, or where supply chain risk is considerable.
Not to be confused with fast thinking, actionable optimism opens a window when a door is closed. Having the drive and creativity to find a way forward when the expected path is blocked moves a procurement professional out of the realm of qualifying available options and into the realm of creating alternatives. Action-orientated optimists are best placed in categories with a constrained number of supplier options, where enterprise specifications leave little room for negotiation or where change and innovation are required.
A CPO (chief procurement officer) can teach process, technology and even category expertise but the natural talents that transform teachable skills into enterprise value are harder to learn. Not only should this be a primary consideration from a recruitment and retention perspective, it should also be leveraged when positioning procurement internally in the business. After all, you can always enrich a team with new skills and experiences, but the natural talents they possess determine the total potential of their impact on the organization.
When it comes to running competitive events and soliciting suppliers, electronic sourcing (e-sourcing) tools can be a procurement professional’s best friend. With so many e-sourcing tools on the market, selecting the right tool can be a challenge and requires a firm definition of what your company is looking to get out of its e-sourcing tool. For example, there are a variety of tools on the market that range from relatively simple bid collection systems to fairly complex embedded solutions that extend far beyond the core sourcing process. As a general rule of thumb, the more features a tool has, the more costly the tool will be, and the more time and effort it will take to integrate the tool into your daily sourcing practices.
In today’s business world, there’s a desire to have your good suppliers stay in business. This desire often tempers how aggressive procurement professionals are when negotiating with certain suppliers.
Most suppliers could remain solvent even if they anointed your organization the one customer they no longer charge. But some suppliers’ viability could be threatened by offering their biggest customer an unprofitable price structure.
In procurement, you don’t always know if the deal you negotiate for might be fiscally unhealthy for your supplier. So, they question is: how hard should you push certain suppliers?
People are often surprised, and a little intimidated, when they learn that my research expertise is in negotiations. They remark, “but you are so personable … transparent… straightforward.” And I think, “It’s too bad that’s a surprise. . .”
This is probably because most people think of negotiators, and by extension negotiations, as showy and cut-throat, a game where one side wins and the other loses. So it’s not surprising that many people dread having to negotiate, whether for a car, a house, a new job or a business.
Ah, after summer breaks. It’s that glorious time when kids go back to school. Time for them to refocus on improving skills related to the “three R’s” of education: Reading, ‘Riting, and ‘Rithmetic.
It might also be a good time to pay attention to the reading, writing, and arithmetic involved in your procurement. Here are ideas for what you can do in each of these areas right now in this back-to-school season.