The Myth of Trust? Procurement careers and mutual loyalty

(We're delighted to publish a guest post from Guy Allen. Guy has been a CPO in several industries and now runs Real World Sourcing Ltd, a procurement consulting firm).

Last week I attended the Procurement Talent 2013 conference, and I have to admit I wasn’t sure what to expect from a single subject conference. I mean after all what more is there to say other than there isn’t enough talent, we should spend more time developing and nurturing it, and someone should go into the universities to promote Procurement as a profession.

But once there it became evident that the big advantage of focusing on a single subject allows for far greater development of a topic than the normal conference where we get a range of 45 minute sessions on subjects as diverse as eAuctions and Sustainability, which can only scratch the surface of the subject due to time constraints. Consequently there was good debate, helped by Peter’s flexible approach to timing and sticking to the agenda!

The presentation that really caught my imagination though was Chris Taylor’s of brewer, SABMiller. They clearly expect a lot from their new young hires, with an expectation to metaphorically get their hands dirty analysing a category, and then to have spent time out in a different country, understanding how procurement works out in the field as well as the ivory tower of Group Procurement, before progressing to category manager.

I think it is an excellent approach, requiring dedication, sacrifice, loyalty and commitment from its staff. But for it to be sustainable, that loyalty does need to be two way, reciprocated by the company, evidenced by a degree of protection during harder times and a policy to (nearly) always recruit internally. After all if their talent development scheme is failing to produce suitable successors for vacant roles, it is the company’s scheme that is failing as much as the employees that are in it.

This model was common in corporate life, up until the late 80’s. I used to work for IBM at the time, and then, once you joined them, there was an assumption on the part of both parties that you were there for life. You became an IBMer. There were very few hires who were aged 25 or more, people came in from school, as graduates or after a couple years working elsewhere after graduation. Almost every single senior post was recruited internally.

This model was based on mutual loyalty and trust, but it broke down in the late 80’s following 2 events. First IBM hired its new CEO from outside the company, in the shape of Lou Gerstner. Second IBM launched its first ever redundancy programme, the euphemistically titled Career Transition Programme.

IBM broke the bond of loyalty it had built up with its employees over decades in a couple of years. Inevitably, pretty soon the loyalty those employees felt towards IBM (and therefore the commitment and sacrifice they were prepared to give) broke a few years later. But this is not just an IBM story. You could substitute IBM’s name with any large corporate.

This break down in loyalty also changed the perception a company had of its staff. In the past they were seen as long term assets, worth investing in (through training and development) and taking a few risks in the course of that investment. In the modern world those long term investments in people in the learning stages of their careers have largely gone. The first thing that goes when you are under budget pressure? The training budget. The result of that is our workforce is now less well trained and prepared than it could be and consequently we are all struggling to recruit from a limited pool of talent.

So I wish SABMiller well. There is no reason why it can’t succeed, but the firm will need to remember that loyalty and trust are two way streets and on occasion it may have to make some compromises to maintain its side of the bargain.

 

Voices (4)

  1. Guy Allen:

    All,

    Yes, IBM’s problems were in part (largely?) created by its insularity. As I was writing the piece I knew IBM wasnt the best example, unfortunately it was the company I knew best! Also I think only an outsider such as Gerstner could have been able to fix it..

    However my point wasn’t really that organisations should be closed shops, but that the pendulum has swung too far back the other way, and now it seems that when there is an opening, many companies believe it is better to look outside than take a calculated risk on the staff they have internally and know. Going to this other extreme has broken the bond of loyalty and I am not sure that is a good thing.

    And Paul I saw your presentation with Pat, and it was very good. I’m not suggesting that all Procurement roles should be filled by people with 20 years procurement experience. Rather an organisation that nurtures its talent, and accepts the costs and constraints that comes with that approach, can provide a great opportunity for cross functional fertilisation. After all they may not have the Procurement knowledge, but they will know the company culture and style.

  2. Paul Vincent:

    I’d like to make a couple of points on this post. Firstly in relation to IBM. Too much ‘in-breeding’ within an organisation can cause complacency and I think the history of IBM in the 1980’s proves that. Secondly with respect to the question of nurturing talent in the procurement ‘profession’. I have never regarded myself as belonging to the procurement ‘profession’ because I have never seen how you can professionalise something that everyone does in their day to day lives, which is spend money. If anyone reading this came along to the eWorld Procurement event last week you may have heard my lunchtime keynote on ‘skill vs style’ with Pat Law. I told the story of my 74 year old mother who did a ‘procurement job’ on her upstairs bathroom. She wrote a specification, she sought and qualified potential tradesman, she asked them all round and short listed on a set of criteria that mattered to her, she agreed a price and payment schedule then a timetable for the work. When I told her that she had effectively done what companies pay me for helping them with she thought I was joking! To her it was the most obvious thing in the world to do. So my point is do you need to be a professionally qualified procurement person before you can be talented at spending money wisely? I believe that the most talented people in procurement roles are expert at facilitating people and situations. They will appreciate that unless they take the trouble to understand how their organisation consumes and deploys things then they are highly unlikely to be taken seriously when suggesting alternative buying strategies. Their buying strategies will be designed to deliver best value business outcomes rather than simply doing a ‘great deal’ on inputs’. I firmly believe in the value add of procurement (and amongst other things help service providers to see it too) but we will never get to deliver that value properly if we imply that by professionalising ourselves that means we can spend the budget holders money more wisely than they can themselves.

  3. Dan:

    I would really recommend Who Says Elephants Can’t Dance by Lou Gerstner to anyone with a passing interest in business – it was ‘the IBM way’ that was causing a lot of their problems

  4. bitter and twisted:

    But did IBMs insularity cause the problems in the first place?

    Some staff turnover is a good thing. Outsiders bring new ideas: ands its better to leave (and maybe return) than stagnate.

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