Spend Management's Top Three

Every couple of days in the past few weeks, Michael Lamoureux has been politely giving me a kick in the rear to post my top three Spend Management issues. Today, I'm finally getting around to it. So here goes. My top three issues are: insight, talent/recruiting, and strategic planning.

First, let's tackle the issue of insight. The more time I spend with procurement organizations these days, the more I see that most are in kindergarten when it comes to truly having insight not only into their own performance and operations, but that of their suppliers and customers. Inadequate insight manifests itself in multiple forms which can take the form of enhanced supply risk, nagging and irresolvable performance management issues, and miss-mapped organizational structures and incentive programs.

And these elements only begin to scratch the surface of the broader issue. Consider how a lack of upstream insight can not only create increased costs, but can incent sourcing and operations organizations around exactly what they should not be doing in certain cases (e.g., focusing on unit cost issues at the expense of driving up supply risk). I could go on for hours about the issue of inadequate insight, but for the sake of brevity, I'll keep it to these two paragraph for today.

Second, I continue to see a talent/recruiting miss-match inside many procurement organizations. And this is despite the rising salary trends for strategic -- rather than tactical -- professionals. Given the strong interpersonal and analytical skills required to thrive in today's Spend Management environment, I'd go as far as to suggest that until procurement organizations begin to recruit more like consultancies -- looking at the whole person and how the candidate thinks versus just on paper experience and qualifications -- then the talent miss-match will continue.

I still love the old FreeMarkets case interview where we dumped a bag of bolts / fasteners in front of a candidate and we asked them how they would structure and lot them. No engineering knowledge required – just analytical horsepower, creativity and a willingness to ask questions to arrive at the best possible outcome. It's these types of thinkers you want in your group. You can "nurture" them in your methods, categories, processes. But there’s a certain amount of "nature" that is set by the point in time in which you're talking to a candidate.

The third issue I'll tackle is strategic planning -- or what I'd call a lack thereof in most organizations. Quick, when was the last time your procurement and operations leaders got together to examine contingencies and scenarios for what might happen in a three to five year window from a business perspective and how, specifically, these areas could impact the role of Spend Management? I'm betting that you've probably not had this sort of meeting or workshop -- in a formal or informal way. That's because strategic planning in procurement is, at best, an "up and to the right plus or minus 5 percent" type of exercise -- a thumb in the wind designed to identify goals, not proactively change behavior, structures and even entire roles.

In contrast, real strategic planning goes far beyond this type of check-the-box and CYA approach. It should be about identifying potential future scenarios, understanding how procurement can impact them, and charting or "mapping" a flexible course with clearly identified sign posts or proxies that will signal that the world is unfolding in a specific way -- either expected or unexpected. Exercises and processes like these not only can help make procurement a truly strategic (read: beyond cost-focused element) of the business, but can also create a common mental model or shared understanding between team members, strategic suppliers (who should play a role in the process), and the rest of the business. Now that's strategic planning!

Jason Busch

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