Talent: The Skills Gap

With all the talk of a lack of properly trained procurement people with the right kind of high-level skills and business awareness, one fact is clear: poor procurement costs money.

In a recent report on the UK’s National Health Service, one of the world’s biggest organisations, inadequate skills and “sloppy” practices in the procurement of hospital private finance initiative (PfI) projects were blamed for wasting millions of pounds.

The confederation of British Industry employers’ organisation warned that the poor procurement planning was holding back the full potential for PfIs to deliver best value for money. It calculated – “as a conservative estimate” – that procurement delays add an extra £2.4 million to each major hospital project.

In a new version of the adage about the cost of education compared to ignorance, you might well say that if you think developing a properly trained and skilled procurement function is expensive, try not doing so.

Discussions of the “war for talent” often highlight the rising salaries caused as a result of a shortage of high-level procurement people. But at all levels, the failure to secure sufficient numbers of properly trained professionals is costing dear. Not only that, says Nicolas Kourim, head of Europe-wide procurement recruitment firm Big Fish, it is threatening the future of the procurement function itself. A continuing serious skills gap is creating a risk that people in other functions will take on activities which should fall within the procurement department.

He pulls no punches over how big a problem the industry faces. “It’s a very serious situation,” he says. “It’s a matter of life and death for the purchasing function. As procurement is becoming more visible and powerful, if they don’t have the right skills to position themselves properly within their organisations, they will lose the opportunity to grow and become one of the key functions. If purchasing does not take up the challenge, they will miss the train.”

Big Fish, based in Paris and with operations throughout Europe, uses a “skills ladder” to assess individuals’ competencies and, by aggregation of individual assessments, the skills requirements for whole organisations.

This assessment tool outlines ten levels of skill starting at the most basic level with “bundling” and category management, rising through negotiation, supplier development and global sourcing to supplier relationship management at the top.

Kourim estimates that only 10 per cent of procurement people in organisations he deals with have mastered the three top level skills. At the middle level – supplier development, sourcing and global sourcing, only 35 per cent have mastered the relevant skills. Even at the lowest levels of skills that might be expected of a competent purchasing professional, one in four people are found wanting.

There is, as might be expected, wide variation between countries. The UK, says Kourim, is relatively advanced in indirect purchasing skills but low in direct purchasing, due to the fact that it is now largely a service economy. France, on the other hand, is better at direct purchasing but not as good with indirects. Germany is generally at a middle level in all areas of purchasing. Poland is low in direct and general purchasing skills and just starting out in indirect procurement.

Interestingly, the US, according to Big Fish, is only at a middle level in direct and indirect purchasing, and is low in general purchasing skills, creating something of a brain drain as European procurement professionals are lured across the Atlantic to provide much sought-after expertise.

Clearly the current skills gap is the direct result of procurement being transformed in recent years. Generally, within the past two decades, the typical procurement department in large organisations has changed from being a largely administrative and “execution” function to one much more closely involved in strategic decision-making and responsible for higher level activities ranging from low-cost country sourcing to supplier relationship management.

This change has fuelled the need for procurement professionals with skills sets radically different to those of their forebears. The need is not only for the “hard” skills of procurement but also essential “soft” management skills in areas such as effective communication, leadership and entrepreneurship, together with an overarching awareness of business objectives.

Robin Jackson at UK-based ADR International, which works with companies in Europe, the US, South Africa and Asia Pacific says the number of people coming into the market with high-level procurement skills is not large enough to meet demand.

This has led many companies to adopt “grow your own” policies – developing personnel from within the organisation rather than recruiting from outside.

“The pool of available talent is growing, but not fast enough,” he says. “In the short term it will probably get worse because the demand for skilled people is increasing. It will balance itself out in the long term but that could take five to ten years. The major players are taking steps to remedy the situation but there is a long way to go.”

Jackson agrees that the most effective method of determining what topics and delivery method are key for which individuals for them to make a real change in performance is through a systematic competency assessment.

This, he says, should be personal, private and individually-focused. It should provide the individual with a clear personal development plan showing how to move to world-class performance in a structured way.

This can in its turn provide senior purchasing managers with a view of the overall purchasing skills gap and what action is needed to close it.

Given the shortage of talent in the open marketplace, Jackson argues, it is likely to be much more effective to develop people within the procurement department itself, or even to recruit them from other functions and train them. Relying on fully-trained and experienced top-level procurement professionals being available from outside the organisation through the usual advertising process or search and selection is less likely to be an effective strategy in an extremely tight labour market.

And in any case, making a “bad hire”, Jackson reminds us, can be a very costly mistake. A systematic competency assessment can provide the opportunity to determine the skills, interests, personality and work styles needed to assure a good fit with the position as well as the organisation.

This means a reappraisal of training and development strategies within organizations and a move, Jackson argues, away from traditional reliance on one-off courses and workshops. The “sheep dip” approach, he says, has been shown to be relatively ineffective in terms of learning outcomes. People tend to go on a two-day course and then forget what they have learned.

A better option is to go for a more allround strategy involving on-site clinics and surgeries in which individuals can sit face-to-face with a procurement expert to explore pressing issues, or mentoring schemes in which people can gain by drawing on the day-to-day experience of a senior colleague.

In the future, Jackson says, effective skills upgrading or skills gap reduction programmes will not be the “across the board” style events that dominated in the past, with entire teams trooping to identical training sessions. Instead, he says, capability development will be highly tailored to each individual’s needs.

Depending on their abilities, their role and the needs of their business, they will need tailored learning opportunities.

“There was a time when courses and workshops ruled, but this is now seen as only part of a development programme,” Jackson says. “Now there is a move towards action learning with an expert or mentor from within the organisation or from outside to guide the individual. You need a comprehensive skills development process, not a job lot of 20 three-day workshops.”

At the Basel-based pharmaceuticals giant Novartis, a plan to assess sourcing competencies was trialled last year in Europe and is now being extended worldwide among the company’s 350 procurement employees in 40 countries.

“We had moved ahead very quickly and were in serious need of a skills upgrade,” says Sammy Rashed, who heads up sourcing across Pharma’s global sites. “Our fast-changing structure and ever-growing expectations meant different requirements were needed from traditional procurement skills and gaps which we could previously overcome were becoming critical. We had also developed a solid strategy but found it challenging to execute with our existing capabilities. To compound the problem, there was no common understanding of the skills and abilities that were needed and no clear succession strategy.”

Novartis introduced an assessment tool consisting of a series of eight “leadership standards” covering the soft skills required by all employees and five “functional competencies” describing the core sourcing skills. Each set of skills was divided into four levels. Every job in the sourcing organisation worldwide was graded into one of 15 standard positions and then staff were assessed against these to determine where their strengths and weaknesses lay.

In last year’s pilot, involving 60 people, it was found that nearly half needed training in category management. They were sent on courses in different worldwide locations to train them up in this area of skills.

But Rashed is also keen to stress that formal courses are only part of the picture. The skills assessment approach has now been built into Novartis’ sourcing talent management programme and a range of learning opportunities are now available, including action learning projects where an individual is assigned a project to stretch and extend their capabilities; job rotation so that someone can experience a different role in a new location; and mentoring.

“We had assessment tools that were sporadically used, but the development process wasn’t consistently applied on a global basis,” Rashed says, “and we didn’t have a clear view of our talent globally. There was no overall plan to develop people and allow them to progress and reach their potential.

“Next year we hope to have a comprehensive plan to upgrade sourcing talent globally which will define the road map for individual career development. We want the best people to come and work here. We also want people outside of purchasing to consider us as a good career move.”