Still fighting the talent war

(No I don't know anything about this comic - but it has great cover art for this article on the talent war)

The topic of recruiting and retaining procurement “talent” is a perennial favourite. Here are a bunch of articles:

Here - European Leader Net

Here - European Leader Net
Here - Procurement Central

Here - Supply Excellence

Here - A comment on Jason Corsello's blog, which is comprised of links to articles on procurement talent!

and

Here - Shared Services BPO

It was top of mind during a discussion this week about estimating strategic sourcing savings. In short, for the situation under discussion, we had two options to consider. The first was to provide training and technology support to a group of corporate buyers. The second was to engage “world-class” consultants to do the strategic sourcing for the client. Should we estimate a difference in savings between the two options? The consensus answer was that we should expect higher savings if we use the consultants. If you accept that the world-class consultants are more “talented” than a group of corporate buyers it appears that we were betting on talent.

In my case, that’s not true. I was betting on market knowledge.

A quick digression. I use the concept of “Market Power” to indicate the ability to negotiate favourable supplier contracts. The more market power you have the better the deal you can negotiate. Several things can contribute to increasing your market power. In my experience the most powerful are:

* Purchasing Volume - the most common approach (not the best, merely the most common) to strategic sourcing is to aggregate as much of the company’s spend as possible into a single contract
* Compliance – the ability to shift demand within your company to your preferred suppliers (and to credibly communicate this ability to your suppliers)
* Market Knowledge – the amount of information you have on current market conditions and suppliers

As I discussed, here, many organizations both over-estimate the degree to which volume will drive better prices and also often fail to understand what are the price/volume economics for a particular good or service.

Your suppliers' view of your compliance management ability (not your internal view) will strongly impact your market power.

In my experience, market knowledge is the strongest contributor to market power. Knowing what others have recently paid for a good or service, what the production capacity or utilization rates (goods, services) a supplier and their industry are experiencing and can support, what T&C’s impose non-standard costs on a supplier, etc, do more to allow great contractual terms to be negotiated than simply adding and delivering volume to a supplier.

Back to the discussion on relative savings rates. I was betting that the consultants would have more market knowledge by the simple matter of their firm frequently going to market for their clients as opposed to the corporate buyers who generally would only go to market every few years.

It would be fashionable, often true, and egalitarian to also say that consultants are rarely more talented than corporate employees. I don’t believe that, I think good consultancies often have very talented people on staff. What I do believe is that reasonably competent people who are provided with the right tools to build market power will out-perform highly talented people without those tools.

This raises some interesting conclusions. First, if you're going to bring in sourcing consultants, make sure the ones who show up have access to their firms recent market experience, and don't assume just because they are from a well-known sourcing consultancy that that is true.

Second, if you are fighting the “talent wars” you must also consider the environment in which that talent will be deployed. Can you offer talent an environment where they can promise and deliver on compliance commitments to suppliers? Can you provide them with the information they will need to remain market knowledgeable?

If the answer to either of those questions is “no”, “maybe”, or “we hope the talent will bring that to us”, you maybe showing up to a gun fight with a knife – talent will migrate to where they can be successful and remain talented.

Cheers,

David Rotor