The Uninitiated might have been shocked by the harsh ratings Procurement leaders gave their teams in Deloitte’s 2019 Global Chief Procurement Officer Survey.
According to the responses, 76% of the 481 CPOs queried (managing over US$5 trillion of spend) rated the effectiveness of their teams as strategic business partners as fair (69%) or poor (6%).
Also, a decreasing number of procurement leaders rated the skills and capabilities of their current teams (49% in 2018; 46% in 2019) as sufficient. A simple online search for “procurement talent gap” will richly confirm these results by highlighting the complexities, variety of stakeholders, and entrenched nature of this talent challenge.
In short, this talent gap isn’t new but is certainly not getting solved. This article aims to provide answers to the first of two key questions:
1. What is the nature of the talent gap and why it continues to be an issue?
2. What can executive (C-Suite) leadership do to address it?
The Persistent and Growing Talent Gap
Like all support functions, procurement is being “challenged” to evolve to more tangibly support and align with the respective businesses’ strategy. In this regard, there is a twofold challenge that procurement leaders face. On the one hand, the function’s role is changing by becoming more strategic; on the other hand, the technology software and microservices are sophisticated and evolving fast but lack sufficient support from internal partners or leadership.
The ability to effectively address these challenges within the framework of the existing procurement skill sets is a contributing reason for the growing talent gap. Let’s understand why.
Talent Gap Reason 1: Procurement is Becoming More Strategic – But is Not Prepared
The consensus is that best-in-class procurement teams are an enablement function that brings external expertise and functionality in-house safely and efficiently. With ever-growing consumer expectations and cloud-enabled tech stacks, this in-sourcing is more relevant than ever for several reasons. To start, best-in-class teams measurably shorten and expedite the go-to-market strategies of diverse groups ranging from marketing, to IT, to data science, to logistics while also protecting customer data and enabling respective test-and-learn agendas.
In this current business cycle, supply chains are the focus of most companies’ leaders who are challenging procurement departments to provide perspectives and solutions in several critical areas. Of particular urgency is assessing the relationship with core or essential suppliers regarding business continuance plans, liquidity challenges, financing needs and savings target.
In the context of this new or broader focus procurement’s transformation from a “Cost-Savings” Department to a strategic resource and partner is both elevating its importance and increasing expectations.
Talent perspective: The question that remains is: Can procurement meet this ask? Most CPOs will likely agree that the answer is No. The reason is one of heritage and maturity. Since procurement has evolved out of purchasing functions and often reports into Finance, cost savings are the most prevalent and relevant deliverables. Inefficiencies are often seen as “controls” by Finance needed as hurtles to slow other departments’ spending. Different, more value-add contributions such as supporting innovation, enabling a test & learn agenda, smart contracting etc. are often incidental or unvalued. Hence, few procurement practitioners needed to develop or have the skills to be strategic partners.
Talent Gap Reason 2: Procurement is in Need of Tech Support – And Lots of it, too
In a 2017 McKinsey Quarterly article, the authors shared survey results of 310 companies, in which it found that only 2% focused their forward-looking digital strategies on supply chain enablement.
However, is it solely a technology adoption issue? Technology has made significant advancements in critical areas such as user interface and much shorter implementation timelines. That said, systemic inefficiencies, including poorly aligned data governance models, seem to present the most significant obstacles to both adoption and implementation of digital strategies.
In other words, to get to the point of capitalizing on promises of improved efficiency procurement teams must first chase down and align lots of unstructured data sources for which they hardly have the necessary resources and cycles.
As a result, procurement’s ability to invest in strategic, value-add sourcing activities such as tail spend management and partnering with suppliers on their innovation investments is significantly hampered. Such limitations would seem to explain why the 2019 global CPO survey by Deloitte’s found that the majority of CPOs are not satisfied with the results of their digital initiatives.
Talent perspective: With procurement professionals spending an excessive amount of time on low-value-add tasks, few will be able to take the time to develop the skills, competencies, and relationships required to be effective in the digital age.
The Solution: Bridging the talent gap isn’t a matter of merely acquiring new skills. While there are new areas of competency to develop, the issue is not one of a lack of will or ability, but a lack of time and resources. Specifically, emerging technologies may provide the opportunities for procurement to become more strategic, the persistent and inherent systemic inefficiencies to get to the point of leveraging said technology is the main challenge.
Unless procurement gets the needed support to accomplish the latter from senior management, the gap will continue to exist unnecessarily. In a follow-up article, we will focus specifically on what leadership needs to do to provide the necessary support to address the talent gap in procurement.
Our Guest Blogger:
Sören Petsch, Vice President, Global Procurement – Alliance Data card services
Decisive leader with two decades of highly complementary PROCUREMENT, FINANCE & CONSULTING experience in banking and retail. Proven ability to lead complex transformation initiatives by leveraging significant cross-functional experience. Past positions include consulting with Bain & Company, Director of Finance with Spiegel & Victoria’s Secret and Director of Procurement & Associate VP for L Brands.
We would like to invite you to also listen to the first podcast in a five-part series of lectures on How To Find And Hire Your Next Great CPO. In this segment, former procurement executive for Vodafone, T-Mobile, Pearson and Philips, Stephen Day provides a detailed overview of the four main reasons why we are now experiencing a talent shortage in the procurement world.