Your Procurement Team is Too Old, and becoming Too Young
This past weekend my family and I arranged a 90th birthday party for my Grandma.
Not to get all existential, but it really puts life into perspective when you’re sitting next to a person – eating ice cream and cake – that has lived 6 decades longer than you.
As the saying goes, we know what we know. And, in this case, my grandmother and I have had completely different life experiences. I was a child of technology, information and stability. She was a child of the depression, living in poverty, circumstance and uncertainty.
Realizing that I had never really asked my grandma about her childhood, I took the time to inquire as we shoved our faces with cake.
She was born and raised in a borough of Washington DC. Her mother was an immigrant and her father came to America as a young child. They owned a grocery store in the Jewish ghetto, and lived over top of the store in the same building. She lived and worked there for 16 years. During WWII, owning the store was an advantage because her mother was in charge of rationing. People were so unimaginably poor. There was an ice factory across the street and the workers would want to buy cigarettes, but they couldn’t afford a 10¢ pack, so her mother would sell ‘loosies’ (single cigarettes) for 1¢ a piece. Flash forward 30 years, and she lived through the Vietnam War and the American Civil Rights Movement. While segregation was a not-so-distant memory, flash forward another 40 years and she saw an African American man become President of the United States. For her 89th birthday she got an iPhone. Three months ago I taught her how to use Facetime and order an Uber. The year she was born, sliced bread was invented.
It made me realize, sharing our life experiences through story was the closest we would ever come to understanding each other’s reality and past. She doesn’t know what Instagram is, but she remembers the assassination of Ghandi in 1948. She admires my ability to utilize technology, and I admire her surplus of experience and knowledge despite her ability to use technology. We’re from different times, and we’re consequently hardwired to think and act differently. She can aspire to become more technologically savvy, and I can aspire to learn about the history and experience she’s lived, but we’d never be able to achieve an innate level of knowledge.
The vast majority of people retire from their careers long before the age of 90, but there are plenty of executives, VPs, directors and managers in their 60’s and 70’s. At the same time, there is plenty of 20-somethings starting at entry-level positions. It’s a head on collision of two different worlds. How do these two age groups align in the work place? How do they overcome the natural chasm in technological competencies? How do they share knowledge and experience without discounting the abilities of the other group?
It’s time to start finding answers to these questions, because your procurement team is too old, and it’s about to become too young!
Traditional procurement typically gets a bad rap for exuding non-agile attributes.
While these notions may be fair, the bottom line is, most organizations still have core elements of their procurement teams that are rooted within ‘traditional’ practices.
“A traditional procurement process is characterised by manual events, including many small, repetitive tasks. These tasks could be anything from approvals, writing RFxs contracts, negotiations and discussions of bids” (Claritum).
Often, traditional procurement practices are time consuming or demanding of resources. Paper trails of approvals or invoices, physical document management, and calling between buyer and supplier are some classic signs of traditional work processes. Do you recognize your own organization in this description?
Traditionalists within procurement have been seen to work with suppliers within a framework of price-based procurement. Price-based procurement is when a manager purchases focused solely on cost (from the lowest bidder), turns a blind eye to quality, tries to control the contract, and disregards the suppliers’ competencies.
Organizations are moving away from the price-based procurement, and beginning to focus on value-based procurement. While this is a good sign for the creation of shared value across industry sectors, there are elements of traditional procurement that were rooted in a useful practicality and pragmatism.
It raises the question…Will the new generations of procurement professionals disregard the significance of traditional procurement all together? Could the toolbox of traditional procurement (negotiation, relationship building and price-focus) be useful for modern teams to revisit?
New Wave of Talent
In the 2018 CPO Survey by Deloitte, 87% of participants agreed that talent should be held as one of the key indicators of driving procurement performance.
Digital transformation, data-driven procurement, implementation of cloud-based technology and shifting ideologies of value are forcing procurement organizations to look towards younger generations to shake up their teams.
Procurement organizations have historically had trouble recruiting new talent, and the millennial generation is no different. Laura Formigo, a procurement transformation analyst at UCB sees the marketing towards young talent as a major issue for enticing young procurement professionals.
“Procurement isn’t promoted well enough. From my experience, there wasn’t an option to study the function itself. In some universities, you could get some insight, but there isn’t enough focus on procurement. For this reason alone, young people don’t know about it. If it was better promoted and more visible, the function would be really appealing. Especially nowadays, where everything is evolving so fast and we need everyone to be connected to the market constantly, I think procurement will be really attractive to Generation Y,” Formigo remarked.
Existing management teams are beginning to understand the necessity of recruitment, and this new wave of talent might be the perfect fit for procurement, especially milennials.
Millennials come from a fast food world rooted within quick decisions, instant gratification and a restless attitude. While this can cause issues within a function where experience and risk assessment is valued, it can also create circumstances for a complimentary fit.
Procurement, as a business function, is in the midst of a digital transformation. Hungry millennials are looking to make their mark professionally, and what a better way to leverage their technological competencies – and interests in social and environmental impact – than to let them run with transformation projects. “The best procurement professionals and organizations are always looking forward to diverse cutting edge solutions. Directing millennials’ impatient tendencies towards finding these solutions will keep them focused on growing within their companies rather than looking for opportunities elsewhere” (Jagger).
Negotiation vs. Information
Hard skills vs. Soft skills
It’s a classic dichotomy of business savvy that every team is looking to find their happy medium within.
While both older generations and younger generations of procurement professionals can exude hard and soft skills, there can be gaps in their capacities because of their generational circumstance. As I hinted at earlier in the article, methods and processes can be taught and learned, but innate ability trumps acquired ability the majority of the time.
Your procurement team’s veterans are most likely well versed in interpersonal skills from years of traditional supplier relationship management, tendering, negotiation, and supplier development. These same attributes may be harder to see in your Millenial workforce considering they’re raised with digital forms of communication. When the basis of interaction can be edited, reworked and even ignored it’s harder to have a knack for interpersonal communication.
The act of negotiating a price point on a product or raw material has long been rooted in technical and soft procurement skills. It’s all about personal relationships and being able to put hand-on management into practice. A milennial’s first instinct, when negotiating, would likely be to reference the empirical data, and make a decision rooted in fact. But, the simple fact is that suppliers’ data sets aren’t always complete, and relationships can’t always be quantified. Transformation takes time, and procurement teams need to work in a world where negotiation and information run in parallel. For this reason, focus needs to be put on training the younger generations of procurement professionals within soft procurement skills.
77% of CPOs believes that negotiation and soft skills should be of the top two training focuses for their procurement teams this year.
“Nearly three-quarters of procurement leaders have said that their procurement teams possess little or no capability to maximise the use of current and future digital technologies, but only 16 percent of procurement leaders are focusing on enhancing the digital skills of their teams” (Delloite CPO Survey 2018).
Why is this the case?
Young talent is on the way in and they are innately technologically savvy. There’s little technological capability currently present in procurement teams, but high competency within technical and soft procurement skills. Management teams recognize that there is an opportunity to harmonize these competencies of old and young, and that’s exactly what elite organizations will figure out how to do.
Transactional vs. Transformational
As mentioned above, procurement organizations are moving from price-based practice to value-based practice. It’s not just about price point and delivery times anymore.
Procurement is in a transformational stage technologically, but also within it’s processes, activities and strategies.
“Procurement teams have started to take a more strategic approach. As a result, Procurement began to have other needs. Now, under the new business environment, Procurement needs all stakeholders on board in order to operate at its maximum efficiency. They need to work more closely with the various silos that are present in each company. Additionally, Procurement must find ways to provide more value to the company. They have to focus more on lowering the total cost of ownership, rather than just the upfront costs. They have to claim more control over the company’s purchasing practices” (Charles 2016).
Is this shift in direct correlation with the changing generations of procurement professionals? Maybe not, but it will pose new challenges for both older and younger procurement pros. For this reason, an alignment of internal stakeholders is crucial for success. A pooling of competencies, between old and new generations, is required to attack this transformational era of procurement.
For older generations, they can’t be reluctant to change. Beating out that 3 % in production costs from a supplier won’t ensure quality and performance for your value chain. Suppliers should be aligned as strategic partners, and treated as partners. For younger generations, it’s important to not get lost in the terminology of ‘transformational’. There are forms of business transformation that are completely aside from digital transformation. For this reason, it’s important to understand the practices, strategies and challenges of their older coworkers. Without understanding the past, it’s impossible to contribute towards building a structured vision for the future.
When it’s all said and done…
Your procurement team is too old; face it. And, they’re not getting any younger. But, there’s a new wave of talent on the way in, and they’re about as blue eyed and bushy tailed as they come.
Millenials’ talent and knowledge may be contemporary, but their competencies aren’t as superior as they’d like to believe. There is knowledge to be shared, and skills to be learned between the generations.
And, when it’s all said and done, the older generations of procurement teams are responsible to do their best to ensure a bright future. It’s a new time, worthy of a new style of procurement, but we can’t forget the old. “You cannot rely on traditional procurement mechanisms to build things that have never been built before. Despite that knowledge, our profession has a tendency to keep pushing the same principles, precepts and axioms — recasting the same set of actors — while expecting different results” (Finn 2017).
Until next week.