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.
By 2020, millennials, or Generation Y, will make up over half of the global workforce. Attracting the best and brightest of this group is key to procurement’s future success, yet many of this generation still don’t know what procurement is or what it does, making it more challenging to bring those people in.
Procurement must begin to change its thinking if it wants this to change.
“Not many people go to university saying they want to be in procurement. I didn’t know anything about it when I was at university and I fell into it while I was looking for jobs. This is because of a lack of awareness,” says Martin Smith, senior manager at recruitment company Procurement Heads.
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One thing procurement has often struggled with is selling itself to the rest of the business. While the temptation is to focus on facts and figures that demonstrate value, perhaps it may be better to take a more creative approach.
Marketing teams have tended to use stories rather than statistics to help raise their profile and this technique is certainly something that procurement could adopt.
According to a study conducted by Washington University in St Louis, the human brain is more engaged when reading a story, as the human element of the situation helps people connect with the information more easily.
There is an art to storytelling and if procurement gets that right it could finally see itself gaining greater recognition from the rest of the business.
Have a beginning, middle and end
Like any good story, you need a beginning, a middle and an end. A story with no structure risks losing the audience and missing important information. The aim should be to demonstrate a problem procurement has solved or a situation where it has brought value to the business. Start with the problem (the beginning), then what the team did to overcome it (the middle) and finish with a positive outcome (the end).
Be customer focused
Whatever the story, it is essential to have the audience in mind.
For example, if you are presenting your story to a business function, like finance which is focused on numbers, then it is more appropriate for the angle of the story to centre on how procurement has impacted revenue or delivered savings. If it is marketing, the focus should be on service delivered. Begin with the customer in mind and let that shape the structure of your story.
Keep things simple and honest
There is no need to use overcomplicated language if it does not serve a purpose. Keep things simple and appropriate to the audience. Also, the best stories are the ones that are honest. Don’t be afraid to share the struggles or mistakes made; if anything these will further engage the reader.
Whether telling it to a stakeholder or internal staff member, the power of a good story is something procurement can leverage and use to prove its worth to the business.