First, the bad news.
A poll of attendees at a Corcentric and Art of Procurement (AOP) webinar Could the Great Resignation Lead to BETTER Procurement Talent? asked, “When your procurement team is short on headcount, how would you fill the gap?”
Of the 250 responses:
- We just work harder – 59%
- We accomplish less – 17%
- We hire freelance contractors – 13%
- We work with consultants – 11%
This (unsurprising) situation is not only abysmal, but unsustainable. Especially as supply chain and business disruptions show little signs of abating, at the same time the global economic situation seems increasingly volatile. Ironically, the most common response of “just working harder” feeds the vicious cycle of disillusion and burnout that causes even more headcount to head for the doors.
Unfortunately, when you have one person doing the job of two or three, that also sidelines one of the most effective remedies, which is technology implementation.
But, as the webinar explored, this unfortunate state of procurement is really an unprecedented opportunity to take stock and objectively review current operating models, investigate and embrace new organizational design potential, and even research how to take advantage of the situation from a personal career perspective. In fact, maybe there’s never been a better time to leverage adversity to achieve new levels of procurement efficiency and effectiveness.
Procurement needs to be better at investing in procurement
In many ways, the pandemic served to exacerbate procurement conditions that were already in place. Top talent shortages, finding quality candidates in a fluctuating labor market, upskilling/reskilling and employee retention – in fact, the whole area of talent acquisition and talent management – have long been challenges, though admittedly less daunting. Remote work, the rise of Gen Z, and shifting expectations around work-life balance are just the latest dynamics thrown into the mix.
But there’s a more pervasive issue.
As those poll results above show, only 24% of procurement organizations are seeking any kind of outside help or third-party resources, regardless of how much extra work (and rising expectations) is being placed on existing team members. This reluctant mindset serves as much of a procurement optimization roadblock as any other factors, and it pre-dates the great resignation by quite a while.
The reticence stems from several factors, among them the ingrained habit of having to achieve hard dollar savings to show that procurement is living up to its value proposition (why would we waste good money on ourselves?). The fear then is that a diminished ROI might encourage the perception that procurement is less effective than it should be or doesn’t have adequate skills or capacity, causing a loss of influence and a seat at the table with senior management.
As Joe Payne bluntly states, “Procurement is really bad at investing in procurement. There’s an old-school mentality associated with outsourcing — and a stigma associated with it — that’s part of a history of procurement being gun-shy around spending money on external third parties.”
But, as the great resignation made clear, it can be a very short trip from “we got this” to “we got problems.”
If the first step in solving a problem is admitting you have a problem, then once you admit that procurement does indeed need help, the next step is finding the right people or partner firm who are best suited to help solve it. Or, better yet, replace your old way of doing things with something better, more sustainable.
And that something better may be choosing a hybrid procurement approach.
Hybrid procurement: Optimizing processes, eliminating job reqs
Getting over the “we need help” hump can definitely be a challenge. As we discussed in the webinar, “the stigma that goes with outsourcing is from bad experiences that are very real.” But outsourcing – or hybrid insourcing – shouldn’t be written off. It just needs to be done right.
Finding a procurement partner to work with should be approached like finding a full-time employee: It requires a methodical search that, at its heart, comes down to culture and cultural fit. Remember, these are people you’re going to be working very closely with, day in and day out.
But it’s not an all-or-none proposition. A key takeaway is that it is generally never recommended to outsource your entire procurement function. An effective outsourcing strategy starts by identifying your biggest gaps and areas where you need specific help. As the webinar makes plain:
Procurement is a strategic function. It can create a competitive advantage when it’s done properly. You want to have a dedicated in-house team that is the procurement organization, but also think about the best spots to use a hybrid model and a third party to support it.
Thanks to the great resignation, there is a significant need for procurement talent at all levels, from the highly strategic — which you want to keep in-house — to tactical and operational roles that are ideal for outsourcing. According to Phillip Ideson, it requires taking a surgical approach. For instance, the heavy lifting around analytics, much of the logistical back and forth with suppliers, developing RFPs and refining templates can all easily be handled by a third-party in the right support model. Or maybe it’s a case of filling in some specific industry or category expertise, or onboarding resources to handle periodic or cyclical projects.
A good example is telecommunications, where contracts come around every three years. Do you really need a full-time expert when you can tap a third-party that knows exactly what the current market is, knows the pricing, players, contract structures, etc.? To the CFO, it’s going to make a lot more sense to bring in expertise, leverage their value to get the best deal, and move on. That variable cost versus fixed cost is incredibly attractive, especially heading into or during times of economic uncertainty.
One of the distinct advantages of finding the right hybrid procurement provider is that they often bring in a range of best practices that come from outside of a specific industry. This ability to incorporate methods that you may not have seen before can bring great advantages, both in internal process refinement as well as competitively in the market.
What this also does is generate a high degree of skills transfer. It makes a solid business case to show that tapping a third-party procurement outsource for a finite project or ongoing needs will demonstrate to in-house teams how those particular processes are done so they can be replicated in the future. Even if your company continues to work with outside help, your procurement function will be that much more knowledgeable which increases efficiency.
In essence, a hybrid procurement approach can be leveraged from a transformational standpoint to fill a skills and/or talent gap, or from an ongoing managed services capacity where you need rapid, highly-qualified scale.
Finding the right hybrid procurement partner
A big question submitted during the webinar was, “How do we assess a third party’s culture in the valuation and selection process?”
The answer is simple: “Ask to talk to the people that are actually going to deliver, the ones you’ll be working with on a regular basis. Do you click? Is there chemistry? First impressions mean a lot.
Size also matters — some providers will have ample staff to take on new clients, others will have to bring people onboard. Make sure you know whether or not you’ll be working with a dedicated team, or at least dedicated account leads, or subject to a rotating cast of who’s available at that particular time. Bigger isn’t always better, as with a smaller firm you may be able to assess more quickly and accurately what the working relationship will be like, and have easier access to senior key players.
As the webinar showed, finding the right hybrid procurement partner is akin to filling an internal job role. It requires trust, openness, and very clear communication at all times. You need to know that any issues can be resolved quickly, who to escalate to when problems persist, and have confidence that you’re receiving the focus and commitment you need.
If you’re ready to turn the Great Resignation into a Great Opportunity for your organization, explore all the advantages of hybrid procurement and contact us to get started.