Procurement is facing a turning point, one that gives it the opportunity to become more integral to the success of businesses than ever before, according to a survey by Efficio, a consulting firm that works with procurement professionals around the world.
Technology, like it does in many other internal departments, plays a major role in procurement’s transformation, but the Efficio survey states that a focus only on technology misses the point: People and their ability to capitalize on the benefits of technology will be vital to success.
“The procurement function can become more effective through an operating model that achieves the right mix of technology, insights and expertise” and puts people at the center, according to the authors, who analyzed feedback from 500 procurement professionals who participated in the survey, “The Human Factor: Strategic Procurement and the Leaders of Tomorrow.”
The experts at Efficio recently teamed with the UK’s Cranfield University School of Management to poll the procurement pros and find out how to craft that operating model. Researchers looked specifically at the need for future procurement leaders to have people skills, strategic abilities and digital fluency.
According to Simon Whatson, principal at Efficio, procurement leaders are seeking workers with “a wholly new skills profile” built around “soft skills, creativity, leadership and investor mindsets.”
But finding these workers isn’t easy.
“We’ve seen time and time again,” Whatson said, “that truly effective digital transformations require people with the right skills to deliver on technology’s promise.” Since technology can’t deliver value on its own, the survey highlights the “crucial and evolving role a digitally literate and strategically minded procurement workforce is playing.”
The survey’s global respondents — all senior procurement officials from the U.S., UK, Germany, the Middle East and Nordic countries — are responsible for shaping their company’s procurement departments. They are from a range of industries, including information/communications/technology, financial services, retail/wholesale, and healthcare/pharmaceuticals.
Even though Efficio’s experts found that regional differences create unique situations, key findings that can benefit procurement teams across geographies are:
- The number one strategic business priority with regard to the success of procurement is to access workers with the right skills.
- The majority of respondents feel soft skills will be either essential or very important for procurement workers of the future to succeed.
- Having a structured training program that “ensures knowledge, skills and competencies developed support the strategic direction of the company” is vital to attract and retain highly skilled talent.
Where to Begin Building the Future?
For procurement organizations to become more relevant and effective, operating models need to change. But any change has to be built on more than merely structural improvements.
This can only happen, the survey found, if people are working on activities that add value and are in positions to make fact-based procurement decisions more quickly. “This is made possible by a model that combines the generation and reuse of insight, expertise providing guidance and control, and technology to manage this in a global environment,” the Efficio authors said.
For technology to become truly transformative, it has to move beyond automation to harnessing data for better decision-making. Procurement organizations that have readily available data on cost and performance that is easy to understand are able to make better decisions about complex procurement matters that can bring greater value, often moving outside procurement to the larger business.
“This means taking on a more commercial role, perhaps working on mergers and acquisitions, or projects around monetizing intellectual property. Procurement will play a much greater role in adding value, managing risk and maximizing returns,” according to participant Lucy Harding, partner and global head of practice, procurement and supply chain at Odgers Berndtson.
Procurement is often the conduit between suppliers and other internal departments. About 20% of respondents agreed that “improving engagement between procurement and the wider business” was the greatest internal matter requiring attention. Realigning supplier relationships to more closely mirror a supplier’s culture and staff is one way to start.
Survey participant Michelle Baker, chief procurement officer at the Dutch telecommunications firm KPN, said in the report that “procurement needs to become the eyes of the organization, scanning the supplier landscape and ensuring that the business doesn’t miss out on any potential opportunities.” Not taking on this meaningful, influential role creates a risk of being replaced by technology, she added.
The procurement skills of even the past few years are not sufficient to implement and sustain the new model needed for this transformation. As technology’s role changes, it is becoming the keeper of process information and knowledge about products and markets, which were previously managed by people. The procurement workforce of the future will need to have soft skills for effectively “interpreting and applying this knowledge.”
The top-rated soft skill is the “ability to influence and lead,” followed by “the courage to challenge conventional thinking” and “innovation, creativity and problem-solving.”
Survey participant Jorden van de Riet, group procurement director at the Europe-based bicycle maker and parts dealer Accell Group, has built a diverse team that can interact with a range of suppliers. (In the U.S., Accell’s bike brands are Diamondback, Raleigh and Redline.)
“Working in procurement nowadays is about being able to talk to people from different levels of an organization, get your story across, think independently and make an impact,” he said. “These aren’t typical procurement skills, but without people that think and act like this, I don’t think the procurement function in any business has a very bright future.”
Hard Data, Soft Skills
While it’s a common belief that technology has the ability to dramatically change procurement, digital literacy might be the linchpin. Researchers believe the “digital skills gap,” if not mitigated, will hinder the transition’s success. The digital skills gap is defined in the survey as “the lack of skills required to do strategic tasks that technology cannot perform and a lack of digital literacy that undermines investments in the technology itself.”
In the past, procurement leaders didn’t know much about technology. That has not changed enough, resulting in a lack of digital literacy among the leaders who need to make decision around technology investment and appropriately-skilled workers. As technology automates the acquisition and analysis of data, workers are freed up to take on more strategic roles. New skills are required, though, for workers to successfully apply the insights from this data and fully realize the benefits of technology.
Efficio’s survey said the leading ways that businesses plan to attract and retain skilled workers are through clear and structured training, clearly communicated internal growth opportunities, peer networking, and clearly communicated impacts and outcomes of work.
Training programs and other opportunities to learn, the survey found, should become embedded into a company’s culture and be offered in ways that workers want. There should also be an expectation that “individuals will take ownership for… self-learning” accompanied by easy access to knowledge. In-house education programs may need to provide options, such as onsite e-learning portals and mobile-friendly tools, for workers based on individual needs. Fostering an “inquisitive mindset” in an atmosphere where workers can ask questions provides the opportunity for workers to guide their own progress.
As roles become more multi-faceted, companies may have the option to move workers into different roles to expand their skill sets and interactions.
Attracting Younger Generations
Beyond expanding the skills of experienced workers, companies need to have a plan to attract and retain younger workers who will become the procurement workforce of the future.
Generation Z, young people born starting about 1996, and Millennials, now about age 25 to 38, are already in the workforce with their own parameters. Both groups bring a different perspective and understanding of technology as it has been a ubiquitous part of their lives.
Younger workers often look beyond a paycheck, seeking to align themselves with companies that are socially conscious. Corporate social responsibility (CSR) is vital for many younger workers since they have grown up in “turbulent geopolitical and environmental times.” Companies are listening — 21% of respondents said that “procurement’s role in sustainability and CSR was the most attractive element to prospective young talent.”
Procurement organizations can take an especially strong position here because they can bring in “products and suppliers that comply with policies on sustainability, biodegradable packaging, waste, carbon emissions, fair pay, modern slavery, corruption and other issues.” Beyond that, they can develop new policies (and change existing ones) that eliminate what can be viewed as harmful practices.
“CSR is no longer a nice to have; it has become a vital advantage in the war for talent,” the survey said.
Reality Sets In
More than 65% of respondents in the Efficio survey said their main approach to retaining this new crop of talented workers is to “provide clear and structured training opportunities.” In reality, this is a work in progress for many companies that may make it harder to recruit and hold on to top procurement workers. Additionally, clearly communicated internal growth opportunities and flexible work environments must also be part of the plan.
“When I’m recruiting, I look for three things in a candidate — curiosity, confidence and courage,” survey participant Julia Brown, chief procurement officer at the global cruise line Carnival Corporation, said in the report. “I don’t just want people who can bring procurement to the table, I want them to be able to give it a voice too.”
Her experience can be a guide for other companies. She’s found that younger workers want recurring challenges, so her department is structured non-traditionally.
“Originally, we had sourcing analysts supporting specific spend categories, but in order to give people the breadth of experience they want, we’ve created a work pool,” Brown said, adding that giving workers the opportunity to expand their skills in interesting ways has proven to be a successful means of retaining employees. By implementing this and other opportunities that make procurement attractive to younger workers allows companies to create procurement teams for now that can also meet the needs of the future.
Click here to download a copy of “The Human Factor” report.