All posts by Hugo Britt

Measuring Value – All That Glitters Isn’t Necessarily Gold

The Five Gold Rings might be the most expensive of the gifts listed in the carol, but does that mean they’re the most valuable? Not necessarily. It depends on how you measure value.

five gold rings

The traditional 12 days of Christmas might not start until the 26th of December. But this festive season, we’ll be bringing you the 12 days of procurement Christmas in the run up to the big day. Catch up with the story so far on the Procurious Blog.

“On the fifth day of Christmas, my true love gave to me…five golden rings.”

In 1982, the late, great Irish actor and singer Frank Kelly released a hit single called “Christmas Countdown”. The song is a parody of the 12 Days of Christmas, where the hapless narrator writes a series of thank-you letters to his over-indulgent true love, getting increasingly frantic as each day passes.

As his small home fills up with various aggressive birds (doves and geese in the living room, swans in the bathtub), he and his elderly mother become overwhelmed with the noise, the smell, and the veterinary bills.

By the time the maids-a-milking, drummers drumming and lords-a-leaping add to the pandemonium, the singer’s letters have turned from thanks to abuse, and his mother has been taken to a home for the bewildered.

But, amongst all the inappropriate gifts of birds and musicians, there’s one gift that makes him pause.

“Your generosity knows no bounds! Five gold rings! When the parcel arrived I was scared stiff that it might be more birds, because the smell in the living-room is atrocious. However, I don’t want to seem ungrateful for the beautiful rings.” 

Finding Gold Among Feathers

As procurement professionals, we often need to take a step back and look at the true value of the product or services we’re procuring. Below we’ll take three different approaches to the measurement of value – according to price, utility, and cultural value. 

Value Based on Price

To be clear, judging the value of an item based on price alone is not good procurement practice. It’s a gross oversimplification of the concept of value. But sadly, it’s still an ingrained way of thinking for many practitioners.

If you want a chuckle in the lead-up to Christmas, check out PNC Wealth Management’s “Christmas Price Index. The Index totals up the cost of the 364 gifts (including all the repetitions) listed in the carol. The total cost is a staggering $156,506.88 for 2016, which is a rise of 0.7 per cent over last year.

The tongue-in-cheek economic indicator pulls its prices from a range of local sources, including a Philadelphia nursery for the pear tree, a local jeweller for the golden rings, and the Pennsylvania musicians’ union for the drummers’ wages.

Value Based on Utility

The 18th-century mathematician and physicist Daniel Bernoulli hit the nail on the head with this memorable quote: “The value of an item must not be based on its price, but rather on the utility it yields.”

Apart from the potential egg yield of the three French hens and six geese a-laying, the only other material return to be had from this gift bonanza would be quite a lot of milk from the eight maids a-milking and, possibly, a few pears. All the other gifts have little to zero utility, but do have significant cultural value. 

Cultural Value

This carol is packed with cultural value. There’s atheistic value in the ornamental birds, sentimental value in the golden rings, and artistic value in the performing musicians.

Think about some of the goods and services you’ve procured for your organisation. Which ones have had cultural value? Cultural value tends to attract a price premium, but often pays off in raising customer perception of your brand. 

From the Value Experts

According to the experts, organisations are also increasingly using the concept of value to define their strategies. Alex Kleiner, General Manager, EMEA at Coupa, explained more at Big Ideas Summit 2016:

Different companies will view value in different ways. This concept of Value-as-a-Service takes in everything from usability, to lives saved, and everything in between. It’s down to each individual organisation to decide how to measure this.

From a procurement point of view, it’s also good to remember that we shouldn’t be constrained by one particular definition. All that glitters isn’t necessarily gold. The profession just needs to define the stakeholder needs, and go from there.

While value might be difficult to define as one concept, we like to think procurement is worth its weight in gold. But can the profession survive in its current form? Or will the golden goose meet its end? Find out tomorrow.

Do Labels Matter? The Debate That Just Won’t Go Away

Purchasing? Procurement? Strategic Sourcing? Supply Management? As the profession continues to evolve, old labels tend to come unstuck and peel away.

chrysalis labels

Getting Out of the Back Room

It started in the 1990s. Like drab caterpillars transforming into magnificent butterflies, purchasing professionals left their brown cardigans draped over the backs of their uncomfortable chairs in dimly-lit back offices and emerged, blinking, into the bright hub of the business.

No longer a service department, we were suddenly business partners. We talked strategically rather than tactically, proactively seeking to understand what the organisation was trying to accomplish, and find ways to contribute to its competitive advantage.

But, what did we decide to call ourselves?

Almost thirty years later, the only thing that has really been agreed upon is to leave the term “purchasing” behind. Perhaps if there was one global, all-encompassing professional body, the decision would have been made for us, but unfortunately this isn’t the case.

In the U.S., the National Association of Purchasing Agents (founded 1915) changed its name to the National Association of Purchasing Management (1968). It finally became the Institute for Supply Management (ISM) in 2002.

In the UK, CIPS changed its name from the Chartered Institute of Purchasing and Supply to The Chartered Institute of Procurement and Supply as late as 2014.

Across private businesses and government departments there’s a bewildering array of labels and job titles. This, of course, makes the standardisation of job descriptions and salary levels unnecessarily difficult.

Getting Out of the Box

I’m half-way through ISM’s “Fundamentals of Purchasing” guided learning (e-learning) course under the tutelage of Dr Wade C. Ferguson, President, Erv Lewis Associates, LLC. The course begins with some of ISM’s definitions around Supply Management and what the profession actually entails. It led to one of the class (me, actually) asking Wade’s opinion on the term procurement versus supply management.

His reply: “Changing definitions represent the evolution that the profession has gone through. In the company I worked at for over 30 years, we changed our name from “purchasing” to “procurement”, but it didn’t really change anything, as procurement is basically a subset of supply management.

“It’s a necessary and important subset, but if you want to be more encompassing, we prefer the term ‘supply management’. It underscores the recognised breadth of the modern supply chain and the need for coordination and value optimisation.”

Wade argued that the reason for dropping the old label was a profession-wide effort to, “Get out of the box. Out of the myopic purchasing view, to understand what the organisation is really trying to accomplish. When we can do that, we’re perceived as being strategic, not just a tactical cost centre.”

Pigeon-Holed by Labels?

This argument makes sense when you look at ISM’s definition of responsibilities under the Supply Management umbrella:

  • Purchasing/Procurement
  • Strategic sourcing
  • Logistics
  • Quality
  • Materials management
  • Warehousing/stores
  • Transportation/traffic/shipping
  • Disposition/investment recovery
  • Distribution
  • Receiving
  • Packaging
  • Product/service development
  • Manufacturing supervision.

If you wanted to keep things in separate boxes, then I’d estimate that roughly half of the components above belong to Procurement, while the other half belong to Supply Chain.

This separation of responsibility might work in a company where, say, you have a Chief Procurement Officer working closely with a Chief Supply Chain Officer. But why not combine those two roles into one? It’s all interconnected, and it makes sense. And Head of Supply Management could be the label that encompasses the whole picture.

Here’s the thing – maybe, just maybe, the narrowing effect of “Procurement” labels is one of the contributing factors holding Chief Procurement Officers back from that coveted spot at the boardroom table.

Even for those CPOs out there who do in fact have responsibility for the supply chain as well. It’s possible that their very title means that this vast part of their role isn’t actually recognised by the people that matter.

Don’t Abandon the Progress We’ve Made

In a previous article, Procurious founder Tania Seary also called upon the profession to stop worrying about what we call ourselves:

“In my opinion, re-branding procurement is a distraction, especially since we’ve made enormous progress in educating businesses about what procurement does. Rather than having to re-educate the C-Suite about what a Commercial Director or Chief Relationship Officer does, that energy could be better spent actually showing people what we have and can achieve.

In line with why we created Procurious to begin with, we know that the procurement and supply chain profession has struggled to overcome outdated stereotypes, so it’s time we join forces to become collectively valued. By empowering future procurement leaders, we can change the face of the profession from the inside out, rather than worrying about the label itself.”

Things Certain to Change Again

“The only constant in life is change.”

…just as the only quote that the Greek philosopher Heraclitus will be remembered for is the one above.

The Procurement/Supply Management/Whatever-you-want-to-call-it profession has changed so much in the past thirty years that there’s no reason why it shouldn’t change again. By the time we’ve settled our current labels debate, it may already be outdated.

5 Reasons Why Your Organisation Needs to Offer Sabbaticals

Sabbaticals were once confined to a few professions such as academia and the clergy, but are increasingly working their way into the HR policies of businesses across every sector.

quitting-job sabbaticals

You’ve just lost one of the most valuable members of your team because your organisation’s inflexible HR policies meant she couldn’t take six months off to travel with her family. Offering a sabbatical would have saved you the time and expense needed to recruit and train a replacement.

Does this sound familiar? How many of your best workers have quit for this reason? Where once sabbaticals were only offered to a select group of people, more and more organisations are offering them as part of their employment strategy.

Here are five reasons you need to offer sabbaticals to your team. 

  1. Retention

Let’s face it. Businesses across the board are struggling with retention, with millennial staff generally jumping ship every 2.5 years.

A sabbatical policy might just be the magic bullet you’ve been looking for to increase retention and longevity of employment. For example, you could offer a short sabbatical (paid or unpaid) after 5 years’ employment, a longer sabbatical after 10 years, and so on.

Remember, the alternative is having the employee quit to pursue their dreams, while you’re left with the expense and trouble of finding a replacement.

  1. Rejuvenation

There are so many reasons employees may want to take a sabbatical: study, travel, volunteering, health, family and so on.

But one of the underlying motives for people to take a career break is that we’re not machines – after a few years in the same role it’s natural to start feeling burnt out or stuck in a rut.

That’s why sabbaticals are essential for revitalisation, giving employees an opportunity to rediscover their mojo, rebuild their enthusiasm for their career and come up with new ideas.

  1. New ideas

As mentioned above, sabbaticals are traditionally associated with academia, wherein researchers take a paid break to spend time on activities related to their career or research, usually in a different geographic location.

The reasoning behind this is that people can’t be expected to come up with new ideas or creative thinking by simply sitting in their office – they need to find inspiration in other parts of the world and meet colleagues who are approaching shared challenges differently.

There’s no reason why this same concept shouldn’t apply outside of academia. A sabbatical will give your employees the opportunity to bring new thinking and creative ideas back to your organisation, even if they didn’t engage in any strictly career-related activities on their break.

  1. Expect career breaks to become increasingly popular

According to Elizabeth Pagano, cofounder of YourSabbatical.com, “the concept of working for 40 years and then retiring is outdated. People should be able to inject bursts of time off into their career paths.”

Putting off the pursuit of dreams such as travel or studying until you’ve retired (and over 60 years of age) can mean that you run the risk of no longer having the health or energy necessary to do those dreams justice.

Another reason sabbaticals will become increasingly popular is the security they offer for people taking a career break. Knowing that your job is being held for you is immensely reassuring.

The alternative is to quit your role, which could mean you’ll worry about your financial future during your precious time off and spend the last three months of your break on the phone to recruiters.

  1. Win the war for talent with attractive sabbatical offering

As sabbaticals become more widely accepted, expect job-seekers to ask about your sabbatical policy as they consider if your company is right for them. I

f a star candidate is choosing between your company and a competitor, a generous sabbatical policy might just be the factor that gets them over the line.

Remember, sabbaticals will not only help you attract talent, but retain people for years longer than the rapidly shrinking average term of employment.

Five tips for HR when building an offering for sabbaticals

1. Create a policy

A sabbatical policy will help you attract and retain talent, give employees a goal to work towards, and lay out a clear framework about how sabbaticals work.

It’s important to be absolutely clear on what activities would constitute a paid sabbatical, but keep in mind that for unpaid sabbaticals, the reason for the employee requesting the career break isn’t relevant.

2. Be flexible

A sabbatical could be your best way to retain a valued team member who was otherwise likely to quit.

Flexibility is key – even if that person hasn’t met the criteria such as the minimum period of employment, offering a sabbatical may still be a better alternative than letting them go.

3. Plan ahead to fill gaps

Ask the employee for a detailed handover plan well ahead of their career break, and consider involving them in the hiring process if a replacement is needed to fill the gap while they are away.

4. Discuss contact during the sabbatical

Many sabbatical-takers would choose to have zero contact with their workplace while away, and that’s fine.

Others, however, may want to retain a level of contact through regular emailed updates, or simply through social media.

5. Organise a return-to-work interview

Bring the employee up to date on organisational developments, projects, and new goals and targets that have occurred while they were away. A return-to-work interview will also enable you to capture any new ideas they will bring back to the team.

Does your organisation offer sabbaticals? If not, how would you convince your boss to offer one? Leave a comment below!

Would You Couchsurf to Make Business Travel Savings?

Splitting travel savings with employees may be the best way to encourage travellers to treat every dollar of company money as their own.

Couchsurfing - Travel Savings

A New-York based consultant, Geoff, has to visit a client in Seattle. He logs onto his organisation’s travel management system to book his flight and hotels.

The app recommends a flight that’s within budget and suits his timeframe. However, Geoff ignores this, scrolls through a list of other options, and selects a flight leaving later for a cheaper price.

Similarly, he chooses not to go with the 4-star hotel recommended by the system. He instead chooses a slightly cheaper hotel that’s still convenient to his destination.

Upon arrival in Seattle, Geoff walks past the cab rank to the bus stop. He’s thinking about where he can get a cheap but healthy meal to avoid ordering room service.

As he makes each travel-related purchase, he’s scanning receipts into his travel app, which subtracts the costs from his total travel budget.

Geoff is behaving like he’s spending his own money rather than his organisation’s travel budget. Why? Because in essence, it is his own money. His company has an arrangement in place where employees are allocated 50 per cent of the savings if they come in under their allocated travel budget.

It’s entirely automated. At the end of his trip, the travel management system takes the difference between the budget and Geoff’s actual costs, splits the savings, and adds half to Geoff’s next pay check.

Sharing travel savings encourages a cost-conscious culture

Why aren’t more organisations sharing travel savings? Possibly, it’s due to a myopic attitude where travel managers are reluctant to part with any savings whatsoever, preferring to allocate every dollar straight back to the bottom line.

However, there’s a much bigger prize at stake. Building a cost-conscious culture and creating that critical mind-shift where employees start treating company money as their own.

Shared travel savings might also fix the multi-billion dollar “open booking” problem. In the US, for example, 50 per cent of hotel bookings and 24 per cent of airline bookings occur outside corporate travel programs. This presents a significant compliance challenge and visibility problem.

Creating a policy wherein shared savings can only be claimed when bookings are made through the approved system would provide a major incentive for employees to comply.

Where can employees save on travel costs?

Here are a few ideas for frugal travel across transport, meals and accommodation:

Flights

Even if your organisation allows you to fly business class, do you really need to? What about flying at a different time of day to get a cheaper fare? A common reason employees go outside approved travel management systems is a belief they can find a better deal themselves.

The TripScanner start-up (acquired last year by Coupa) provides a clever way around this issue. Employees can book travel options via any website they like, so long as they sync their purchases with TripScanner. The software then automatically checks each booking against the company’s travel policy.

Ground transport

Can you take the train or a bus rather than a taxi? How about Uber? There’s always going to be a trade-off between the convenience of being taken directly to your destination and having to walk from the bus stop. However, with the prospect of an extra $25 in your pocket, employees might just choose the bus.

Meals

Consider grabbing a cheap meal rather than paying inflated prices for room service. Keep in mind that “cheap” doesn’t necessarily have to mean “unhealthy”. Eating well and affordably takes planning, as room service is most often ordered when busy travellers run out of time.

Accommodation

This is where your company’s travel policy need to be absolutely clear, because accommodation (and to a lesser extent, transport) involves a safety factor.

Having an approved list of hotels will stop truly frugal employees from trying to save drastically by booking hotels in undesirable parts of town. Or even (in extreme cases) going for an unconventional option such as Couchsurfing.

Setting it up

There are some things to bear in mind when setting up a system such as this.

  • Better planning: Saving money when travelling takes planning, because needlessly expensive flights, taxis and meals are usually chosen due to tight schedules.
  • Get the budget right: Travel managers need to do their research to get the travel budget right for their organisation, as setting it too high will mean losing money unnecessarily. Fortunately, there’s software available to help with this task. A sophisticated travel management system will allocate a unique budget to each trip, rather than a blanket dollar figure for all travel.
  • Make sure your travel policy suits your risk appetite: Travel policies can vary wildly, from tightly-controlled lists of accommodation options, to a free system where employees can do as they like. Again, encouraging frugality may cause some employees to select unsafe options, which is why couchsurfing or ridesharing may need to be excluded from the system.
  • Frugal travelling isn’t for everyone: For some, saving money when travelling might not be a priority. Having a comfortable flight or good night’s sleep in a nice hotel might be much more important than winning back a few hundred dollars extra per month, and that’s fine. Again, it’s important to set the budget as accurately as possible, and be clear in your travel policy about what happens if employees go over budget.

Does your company share travel savings? What are your tips for beating the travel budget?

How The Space Elevator Could Open Up Interplanetary Supply Chains

The prohibitive cost of lifting payloads out of the Earth’s atmosphere is hamstringing humanity’s conquest of the solar system. The space elevator may soon make chemical rockets a thing of the past.  

space elevator

At the Coupa Inspire conference in May this year, keynote speaker Richard Branson announced plans to have Virgin Hotels orbiting the planet within 40 years.

Branson’s famous “anything is possible” attitude was on display, as he breezily talked of shuttle trips between his space hotels and the surface of the moon, and observatory domes where guests can marvel at the Earth from above.

Branson’s audience predominantly consisted of procurement professionals, many of whom were turning their minds to the challenge of maintaining a supply chain in space.

Considering the vast amount of goods and services that flow through any mere terrestrial hotel, the prospect of supplying a space hotel, or any other off-planet settlement, is daunting.

The Payload Challenge

It’s unbelievably expensive to send cargo into space. These days, all eyes are on SpaceX. Elon Musk’s company is leading the way in reducing the cost of payload delivery through lean operations, integrated engine production and reusable spacecraft.

At full capacity, the Falcon 9 rocket can lift cargo to low-earth orbit at US$1233 per pound ($2719 per kg). NASA is paying SpaceX $133 million per mission to resupply the International Space Station. This equates to $27,000 per pound ($59,500 per kg) of cargo delivered.

Reducing the cost of payload delivery is one of the highest priorities for Musk, who has stated that $500 per pound ($1100 per kg) or less is an achievable goal.

Even with payload cost being driven ever-lower, the expense still makes the prospect of a regular delivery service (such as a space hotel supply chain) prohibitively expensive.

Tech Insider recently published a playful article working out the hair-raising costs of some of the unnecessary items NASA has launched into space. They calculated that astronaut Kjell Lindgren’s bagpipes, for example, would have cost anywhere from $54,600 to $259,000 to deliver.

The International Space Station’s espresso machine weighs 44 pounds (20kg), and would have cost between $400,400 and $1.9 million to deliver.

The Space Elevator – A Better Way to Lift Cargo into Space

Arthur C. Clarke predicted that the space elevator would be built “about 10 years after everyone stops laughing”. That’s because at first glance, it seems like pure science-fiction. The thing to understand about how the space elevator would work is that it isn’t a tower or ladder to space, but rather a tether.

Space elevator structural diagram

The Earth-end of the tether would be attached to the surface near the equator, while the other end would be anchored to an object in space (most likely a space-station) beyond geostationary orbit, or 35,800km in altitude. The tether would therefore be held stationary under tension as the space station tried to “pull away” from the planet.

At present, no material exists with the tensile properties required to construct the tether, but teams all over the world are working on the challenge.

Recently, carbon nanotubes, boron nitride nanotubes, and diamond nanothreads have all been considered viable new materials, enabling scientists to inch ever closer to the required tensile strength.

There are many other challenges involved, but commentators agree that once the tether question has been solved, the other components of the elevator will be relatively simple to design and construct.  

A Freight Train to Space

Once constructed, laser or solar-powered ‘climbers’ would ascend and descend the tether, taking materials and passengers to geostationary orbit. Payload prices could be as low as $100 per pound ($220 per kg), with two added advantages.

Firstly, proponents predict a working elevator would be significantly safer than chemical rocket technology. And secondly, the climbers would operate continuously.

Journalists often write about the space elevator in the singular, but there is no reason why the planet would only have one. In fact, it’s likely that multiple competitive nations (and private enterprises) would insist on having their own.

Opening Up Space

With working space elevators, the enormous expenditure of fuel used in boosting chemical step-rockets up through our atmosphere will become a thing of the past.

Spacecraft will no longer be needed for surface-to-space lifts or descents. Instead they will only be needed to move from point to point in space. After an initial boost, a craft in space simply falls freely along its trajectory, with only short-term adjustments and deceleration required.

Space elevators need not be limited to Earth. Within the next century, we may “drop” shorter tethers to the surface of the moon and Mars, with regular cargo and passenger services plying their way between the space stations at the top of the elevators. The complex task of keeping a Moon or Mars colony supplied would become much more feasible.

But that’s thinking a long way ahead. In the medium-term future, Branson’s luxury space hotel may well sit atop a space elevator, supplying its every need.

In the short-term, any day now we may read that scientists have discovered materials strong enough to construct the tether. At which point – as Arthur C. Clarke predicted – everyone will stop laughing.

Can We Agree to Stop Calling Them “Soft Skills”?

How did soft skills become to be known as this? And does calling them this underplay their importance in the modern procurement world?

House - Soft Skills

The English language is full of misnomers. Just ask the killer whale (actually a dolphin), or the horny toad (actually a lizard). Once a word or phrase has entered common usage, it’s near-impossible to change it, even if the population generally understands that the term is misleading.

Which brings me to “soft skills”. I work for an organisation that provides training for procurement and supply chain professionals. As such this is one of the terms that I hear bandied about many times a week.

My argument is that defining this skill-set as “soft” actually devalues an essential part of every procurement professional’s toolkit.

To quickly summarise, soft skills are those used in dealing with other people. These include skills such as communication abilities, language skills, influencing skills, emotional empathy, and leadership traits. In contrast, “hard” skills – such as tendering or IT competencies – are readily measurable and (importantly) easier to train.

How Did They Come to be Called Soft Skills?

I’d be interested to hear if anyone has been able to pinpoint the first usage of this term.

The concept has been applied to business environments since at least 1936, when Dale Carnegie’s famous self-help book ‘How to Win Friends and Influence People was published. Carnegie’s work, which has sold a phenomenal 30 million copies to date, is essentially the definitive guide to soft skills. However, it stops short of actually using these words.

Recently, there seems to have been an explosion of articles and training courses focusing on soft skills, particularly in procurement. My theory is that procurement – having moved from back-office to business-partnership status only a decade or so ago – is, in effect, late to the soft skills party, and is currently playing catch-up.

It’s possible that the term “soft skills” simply came about as an antonym to hard skills. Perhaps it reflects the “softly-softly” approach, where managers choose to influence, rather than confront, and to make suggestions, rather than issuing orders. Whatever the reason, I believe it’s a misleading term due to the other connotations of “soft”.

These Skills are Anything But Soft

To my ear, “soft” means easy, pliable, or yielding readily to pressure. Yet a procurement professional with excellent communication abilities, who is adept at reading people, will be a “harder” opponent in negotiations, than a colleague lacking these skills.

Similarly, the connotation with “ease” is deceptive when it comes to trying to train for skills like change management or leadership. And quantifying the results of that training is more difficult still. Hence we’re hearing more and more that employers are hiring people based on their attributes (cultural fit, communication skills, willingness to change), recognising that hard skills can be easily picked up later on.

This has changed the approach recruiters are taking in job interviews. There is now less emphasis on hard skills, and more behavioural questions about how you would react in certain situations.

It’s worth considering whether, in the future, soft skills will become so vital, they’ll become a requirement for procurement roles. That situation already exists in some professions. Look at Medicine, where aspiring doctors are interviewed for qualities including maturity, communication, the ability to empathise and collaborate. Hugh Laurie’s Dr House, with his acerbic bed-side manner, would in reality never have gained entry into medical school, no matter how brilliant he was.

There’s a school of thought that when it comes to soft skills, you’ve either got it, or you don’t. Soft-skills training, therefore, is ineffective because you can’t change someone’s personality. Personally, I disagree because I’ve witnessed colleagues who have worked hard to develop skills like effective listening. There’ll always be hard cases, but the days of people dismissing these skills as “fluffy” or otherwise useless are over.

Three Alternative Names for Soft Skills

As I wrote at the beginning of this article, it’s nigh-impossible to change a term once it’s in common usage. However, if professional organisations, training providers, and the like, were to phase out the words “soft skills”, and call them something more accurate instead, we might see this phrase begin to disappear.

Here are three suggestions for a more accurate description of “soft” skills.

1. Essential skills: I’ve borrowed this one from ISM CEO Tom Derry, who also isn’t a fan of the term “soft skills”. Tom used the term “essential skills” when launching ISM’s Mastery Model to describe the many interpersonal attributes required on the journey to achieving accreditation.

2. EQ: “Emotional intelligence quotient” is the technical term for soft skills. I like this term simply because it contains the word “emotional”, which pretty much sums up what soft skills entail. Calling it a “quotient”, however, raises the argument that EQ, like IQ, is something you’re born with, and can’t be improved upon.

3. People skills: The simplest, and possibly the most accurate alternative for soft skills is “people skills”. After all, every one of these skills involves dealing with people, while hard skills can generally be put to use sitting alone at your computer.

If you have other suggestions, or already use a different terminology in your workplace, please add a comment below!

Need help with your people skills or EQ? Want to get your procurement career in shape? Stay tuned on Procurious in September for our Career Bootcamp. More information coming soon!

Loud and Proud: Displaying Accreditations on Social Media

Displaying your accreditations on social media? It’s a tribal thing.

Tribes and Accreditations

I’ve noticed recently that more people are displaying professional accreditation after their names on social media.

At first, I was confused by those jumbles of letters that mean so much to people in the procurement world, but so little to anyone else. On Procurious alone we have hundreds of MCIPS, FCIPS, CPSMs and CPPOs. But why do people put their credentials up in lights?

Pack as Much Information Into Your Name as Possible

There’s a lot of information available about optimising social media profiles to make them attractive to potential business partners, recruiters, corporate headhunters and so on.

LinkedIn has a pretty sophisticated profile builder that guides you through the steps to raise your profile to “superstar” status. This includes adding all sorts of detail, ranging from experience and education, to recommendations, skills and even influencers.

The reality is, however, that unless there’s a good reason to do so, people aren’t actually going to click on your profile very often. In fact, you can ‘connect’ with people on LinkedIn, and here on Procurious, without even visiting their profile. Simply clicking on their face does the trick.

This means there’s not much value in diligently adding your accreditations to your profile page if you don’t also display it next to your name.

A Picture Says a Thousand Words

So, if people aren’t going to see your profile, what do they see?

Well, first (and arguably foremost), they’ll see your profile picture. It’s important to have one, and it needs to look professional.

Secondly, they’ll see your name. On Procurious that’s all, though LinkedIn shows a very brief job and company description. It’s not much – and you’d really be flattering yourself if you think people will want to view your profile just for your good looks or interesting-sounding name.

You need to pack more into the limited space available, and an accreditation does the trick.

Why? Because, for those who understand what accreditations actually entail, it says so much about you.

It signals that you’re backed and accredited by a respected professional organisation. It means that you’ve got industry experience, up-to-date qualifications, and are engaged with peers in your profession. It’s like a shorthand version of a CV, which you can expand into more detail in your profile itself.

Professional Accreditations Trump Academic Qualifications

As any frustrated job-seeker knows, experience is everything when it comes to getting hired.

You might be academically qualified up to the eyeballs, but your average recruiter is more likely to be interested in the practical skills you learned as Junior Shift Manager at McDonald’s. And this (sadly) is what the interview will focus upon.

This experience ‘Catch-22′ has led to the situation where unpaid internships have become almost mandatory in many professions, in order to get some experience under your belt and improve job prospects.

That’s where professional accreditations come in. As a general rule, they can’t be gained without having spent at least three years in the industry. They therefore flag to colleagues (and potential recruiters) that you do at least have a few years’ experience.

Some accreditations require both experience and tertiary qualifications. ISM’s CPSM, for example, requires three years “full-time, professional supply management experience, with a regionally accredited bachelor’s degree,” or 5 years’ experience without a degree.

This seems fair to me, as it gives some level of recognition to the bachelor degree (not a completely worthless piece of paper after all!), while still leaving the door open to those who choose not to attend tertiary education.

That being said, there’s a fair share of Bachelors, Diplomas and especially MBAs on display after people’s names on social media.

You’ve Earned It, So Why Not Flaunt It?

Why not? It’s good to be proud of your achievement and important to visibly support your professional association.

Jim Barnes, Managing Director for ISM Services, agrees that displaying your accreditation sends a signal to your peers. “ISM’s CPSM certification helps others identify that the person displaying the credential has deep knowledge, and can apply it.”

There’s also the tribal factor. People love to identify with different ‘tribes’ or groups. Having your professional membership or accreditation on display helps others identify you as “one of us” – a group of professionals who have all been through the same accreditation process, and therefore have the same knowledge and experience to draw upon when dealing with shared challenges.

Procurious itself is one such large ‘tribe’ of connected procurement professionals, further broken down by the members themselves into groups and sub-groups.

On a side note, accreditations have been proven to translate into real-world rewards. ISM produces a salary survey that consistently shows CPSM-accredited professionals earn salaries approximately 7 per cent higher than non-CPSM’s.

“The higher salary demonstrates that having an accreditation carries practical benefits, as well as credibility”, says Barnes.

Show Your Currency

Imagine you’re a recruiter. You’ve been trawling social media for the ideal candidate, and you hit on what looks like a perfect fit. They’re in the right industry, their experience looks good, and they have a postgraduate degree in supply chain management…completed in 1989.

You’d be hard-pressed to find someone who will agree that procurement is the same now as in 1989. And if you can’t find any evidence of more up-to-date education, you click on the next candidate.

Accreditations highlighted on social media profiles (and indeed on CVs) would have reassured the recruiter, because most credentials require recertification. This means that you’re forced to stay up-to-date and valid.

The CPSM, for example, has to be maintained. It automatically expires every three years unless holders complete 60 continuing education hours, which may include sitting exams, conference attendance, corporate training or contributions to the profession.

Do you think a comment posted on social media by a professional with their credentials on display has more “weight” than other comments? Share your thoughts below.

The Pareto Principle Has An Expiry Date

Has the Pareto Principle finally reached its expiration date after 110 years? Why the tail wagging the dog heralds the end of the 80-20 rule in procurement.

Pareto Expiry Date

This article was first published on EBN Online.

When Vilfredo Pareto observed in 1906 that 80 per cent of the land in Italy was owned by 20 per cent of the population, little did he know that this 80-20 rule (or Pareto Principle) would be enthusiastically embraced by the procurement profession and still be applicable 110 years later.

The term was popularised in the 1940s by the engineer Joseph M. Juran, who famously wrote of “the vital few and the trivial many”.

In procurement terms, the Pareto Principle means that 20 per cent of the average organisation’s suppliers account for 80 per cent of spend, and vice-versa. I’m a big fan of explaining procurement concepts with relatable imagery, so let’s picture your supplier base as something that we’re all familiar with – a dog.

The Tail Will Soon Be Wagging The Dog

Picture a Labrador. Or an Alsatian, or a Sheep Dog if you prefer – whatever takes your fancy. The head of the dog could be said to represent your top 1 per cent strategic suppliers. This is where you commit most of your time and energy.

Your procurement systems are optimised to work with the head of the dog. You make a significant effort to communicate face-to-face, and you spend a large amount of time worrying about what’s going on inside that head.

Let’s move down the neck to the dog’s body. Think of this as the next 19 per cent of your strategic suppliers. While the body isn’t nearly so important as the head, you recognise that this group accounts for the majority of your spend and deserves almost as much attention. As such, you dedicate time and resources to ensuring the body is in optimal health, and these “vital few” are being properly looked after.

Finally, the tail. Depending on the amount of suppliers you have, this could be a short stubby tail, or an extremely long one that tapers to a tip. Into this tail you’ve crammed 80 per cent of your suppliers – Juran’s “trivial many” who represent only 20 per cent of your spend.

You’re so busy looking after the dog’s body (and especially its head), that you’ve adopted a set-and-forget approach to the spend tail. You automate what you can, and call upon the smallest suppliers only when you need them.

And that’s a mistake, because in terms of innovation potential and risk profiles, the tail will soon be wagging the dog.

Procurement Systems Optimised For Large Suppliers

At ProcuriousBig Ideas Summit in May this year, Coupa Software’s Gabe Perez told the assembled group of Procurement thought-leaders that there are untold millions of suppliers in the world.

And yet most of our systems, or proprietary networks, only give us visibility of a few hundred thousand. We need to develop open networks to give unhindered access to all these suppliers who could potentially be the source of game-changing innovation.

The problem is that our processes and systems are set up to work with the big players at the expense of SMEs. “We can’t have our bureaucracy, our complexity, our layers of organisation impact suppliers’ businesses,” says Perez. “The cost of business goes up”.

Yet, that’s classic procurement, and it takes a culture shift to change the way we do business and encourage a truly open network. Think about the hurdles your organisation is putting in place for SMEs; whether they’re prohibitive insurance requirements, or crippling contractual terms that could bankrupt a small player.

Are they really necessary? Are you closing the door on opportunity because you see yourself as too big to play in the small supplier space?

Building Culture Of Agility And Innovation

Have you ever requested a last-minute change from a large supplier and watched in frustration as the creaky wheels slowly begin to turn? By the time the suppliers’ emails have bounced around to tick all the bureaucratic boxes, a smaller supplier may have found and implemented a solution.

What you want is agility. And small suppliers will expect you to be agile in return.

In her workshop on innovation in procurement, former Deutsche Telekom CPO, Eva Wimmers, stressed the need for nimbleness when working with SMEs. She discovered that the existing processes at her organisation were skewed towards the largest suppliers. 

Processes were changed to encourage innovation through diversifying the supply base to include more SMEs and start-ups, cutting new contracts down to a maximum of five pages, and holding supplier meetings exclusively around innovation.

Eva also implemented what she called “dialogue-rich procurement”. This encouraged her team to greatly increase their communication with both internal stakeholders and with suppliers. Her team discovered that SMEs, in particular, were very eager to share their ideas when they found that procurement was willing to listen and learn.

In Eva’s words, “We do not care how big an organisation is, as long as both the solution and the organisation are scalable and financially solid.”

She used Dropbox.com as an example of a small organisation with fewer than 50 staff that wouldn’t even have shown up on many organisations’ radar. And yet now it has world-wide take-up.

Compression Of The Supply Chain

Paul Markillie, Innovation Editor at The Economist, talked at the Big Ideas Summit about the compression of the supply chain driven by recent technological megatrends.

Robotics, 3D printing and computer-aided design are demolishing the old economies of scale, and separating a big supplier from an SME. This is ushering in no less than a “Fourth Industrial Revolution”. What this means for procurement is that third or fourth-tier suppliers can find themselves rapidly rising to first-tier producers of end-products.

“There will be huge opportunities for companies further down the supply chain to innovate,” Markillie said. “Second-generation robots are more affordable for medium and small companies; 3D printing processes are less wasteful of raw materials and allow greater production flexibility at lower volumes.

“I think we will see some companies grasp these opportunities, which could re-order supply chains, and lead to some companies that were previously suppliers of components making the leap to become producers of final products.”

Lots Of Risk In That Spend Tail

The dilemma many procurement professionals face is that although you can’t afford to spend much time with suppliers beyond your top 20 per cent, every single vendor in your supply chain presents a significant risk to your brand, reputation and bottom line.

Think about a small supplier that you only use sporadically. Have you investigated their suppliers to ensure compliance to standards? What are their second-tier suppliers up to? What about the third, fourth and fifth tier?

Even though your spend with this supplier may be minimal, it can cause just as much damage to your organisation as the top 20 per cent. Child labor, slavery, cyber security, unsafe practices – the list is endless, and frightening.

My point – apart from trying to scare you – is that your risk mitigation and audit processes that are in place for the top 20 per cent, should be extended to the remaining 80 per cent.

End Of The Pareto Principle?

So, does this mean that the Pareto Principle has finally reached its expiration date after 110 years? In my opinion, yes it does.

If you measure the importance of suppliers purely by spend (and that’s very old-fashioned thinking), then you should indeed spend the majority of your time with the 20 per cent.

But modern CPOs know how badly a bottom line can be hurt by a risk event, and the huge potential of disruptive innovation to grow a business. And both of these factors reside in suppliers of every size, including those in the tip of the tail.

Why Wait? Come to Training in Your Pyjamas

Have you ever had that nightmare where you’re wearing your pyjamas in class? With new training from ISM, your nightmare can be a reality (in a good way!).

Training in Pyjamas

I’m in training. I’ve got my laptop open on the table in front of me, a nice warm drink, and I’m waiting for the trainer to appear. A striking-looking instructor comes into view, walking slowly and deliberately in heels.

She’s wearing her ginger-coloured hair pulled back in a ponytail, quite a lot of blue eyeshadow and vivid red lipstick. She appears to have had eyelash extensions.

I sit up a bit straighter in my chair, before glancing down and realising with a shock that I’m wearing my pyjamas.

What is Micro-Learning?

But that’s okay, because it’s 9pm and I’m comfortably ensconced in a warm study in my own home. The kids have finally gone to bed and the dishes are done, so I’ve taken the opportunity to squeeze in one of ISM’s Just-in-Time Learning sessions, led by a flame-haired, animated instructor.

I’ve chosen a session called “Sourcing Strategy based on Forecasted Data”. At 8 minutes and 30 seconds, it removes my usual excuse about being too time-poor to invest in training. According to ISM’s Senior VP of Programs and Product Development M.L. Peck, this is what micro-learning is all about.

“People are craving content that address specific needs at specific times”, says Peck. “Micro-learning takes a ‘just-for-me, just-in-time, and just-enough’ approach”.

Training Essentials

This works for me, as my attention span seems to be diminishing rapidly as I grow older. The animated instructor’s voice has a slightly robotic quality, but she’s convincing enough.

She moves around the screen, gesticulating with one hands with the other resting on her hip. She (I’m not sure if the instructor has a name) even blinks and waggles her eyebrows as she drives each point home.

The instructor rapidly takes me through the advantages and disadvantages of the various types of sourcing – spot buying, buying to requirements, forward buying and speculative buying. As she talks, animated graphics appear and disappear next to her.

The content itself is drawn from ISM’s impressive global network of subject matter experts, who have created a remarkable library of digital knowledge.

The animation is interspersed with a video of Kevin from ISM, a (human) instructor who gives a real-world example of a restaurant owner who uses each of the four buying types as circumstances demand.

Sharing Essential Skills & Knowledge

Each Just-in-Time learning video has a different style. Some feature animated characters such as this, while others are led entirely by real instructors.

There are whiteboard animations, live interviews with executives and leaders in the profession, short lectures from industry experts, fun activities, games and flashcards.

This style of learning isn’t designed to be a deep-dive, but is a fast and effective overview of essential procurement skills and knowledge. Viewers can choose to explore further through eISM’s Guided Learning and Self-Paced learning options.

This particular video, however, is packed with fast facts, statistics, definitions from the ISM Glossary. It also includes real-world examples about sourcing strategies. By the end of the eight-and-a-half minute video, I have three pages of notes.

And what’s more, I even have time to sneak in another training video before my drink goes cold!

Learn More (in Pyjamas if you Want!)

Procurious now hosts three of the eISM Just-in-Time learning videos here on the website. Simply click on the “Learning” tab, or follow the links below to view:

For the full suite of eISM learning options, visit the ISM website.

A Seat at the Table, or Procurement to Go?

‘Procurement to Go’ is about building a fast, reliable and flexible function that’s always one step ahead of changing business needs.

Procurement to go

In her recent article, PASA’s Jeni Christensen shared her concern about the region’s “shocking” lack of Professional Procurement. The target, Christensen writes, is to have a CPO at every boardroom table, and she shares a series of very valid steps about how to get there. New-York based Justin Hughes (PA Consulting Group) has also recently written an article about how a seat at the top table is “something procurement has to earn”.

But is board membership really the answer? I’d like to present an alternative view.

You don’t need a seat at the table if you have the right level of influence

Let’s face it – getting a seat at the boardroom table has been a recurring theme amongst procurement professionals for nearly a decade now. It’s a consequence of procurement’s historical back-room role, and a perceived fix for a host of procurement frustrations, including organisational compliance.

Chris Lynch, Global CFO of Rio Tinto, told delegates at the 2015 Asia-Pacific CPO Forum that the focus on board representation wasn’t the answer: “Forget reporting lines – just put procurement in the ‘winners’ circle’”.

Getting into the winners’ circle is all about influence. According to The Faculty Roundtable member, and leading CPO, David Henchliffe, “Business leaders need to get the value good procurement practises can deliver, and be strong advocates for the function. It’s our job to make sure they get it.”

In Henchliffe’s opinion, the preoccupation with board or senior leadership team membership is misguided. Deliver value to the business and CPOs will be invited to join in broader business-level planning and decision making.

The situation may not be as dire as PASA and Christensen suggest. Procurement has made enormous progress from its formerly transactional, back-office position, to become strategic partners in the business, predominantly through strong performance and better communication of the value it brings to organisations.

According to The Faculty’s recent Benchmarking Review, procurement’s influence continues to grow, with managed spend at an average of 72 per cent this year, up from 68 per cent in the previous review. CPOs are regarded as “highly influential” by surveyed procurement teams, stakeholders and suppliers, again pointing to improved communication and articulation of value to the C-Level.

How to ensure board members and senior leadership team members “get” procurement

Relevance through flexibility and agility is key. Henchliffe has seen his own organisation shift dramatically from an emphasis on growth and delivery to a critical focus on reducing the total cost of the business.  Procurement’s role, therefore, is to always be in step with the business’s requirements and to make sure the function can rapidly respond to the constantly changing business environment.

To flesh out the “table” metaphor, the boardroom/senior leadership team menu itself never remains static. Procurement needs to position itself as an ultra-flexible function that’s always ready to deliver – at top speed – anything that is required. Think of it as ‘Procurement to Go’ – fast, reliable, flexible, and a world away from the old, glacial speed of delivery.

Ron Brown, a highly experienced CPO across the Resource and FMCG sectors, says that the importance of nurturing capability cannot be underestimated if you want to stay relevant. “Hiring for and building capability around flexibility, driving value and managing risks is now integral”, Brown says. “If you want procurement to remain relevant, focus on capability and relationship building to ensure you’re a key part of the business strategy and performance”.

In summary, CPOs should focus on staying relevant by offering the business ‘Procurement to Go’ through flexibility, adaptability and concentrating on ensuring board members “get” procurement. Once this is achieved, CPOs can use this influence to achieve their goals and enable the profession as a whole to move on from the unhelpful fixation on boardroom representation.

The Faculty Roundtable is an influential group of Australian procurement leaders, who gather to share their experiences and insights. In May, The Faculty will be hosting their ninth Asia-Pacific CPO Forum, the region’s premier procurement event dedicated to accelerating commercial leadership at the highest level.

For more information on The Faculty Roundtable or CPO Forum, contact Program Manager, Belinda Toohey.