A n E m p t o r i s a n d P r o c u r e C o n W h i t e P a p e r

Emptoris, Inc.www.emptoris.com

ProcureCon www.procureconindirect.com

POOTF-11/11

The Procurement Organization of the FuturePlanning for Growth, Managing Talent and

Improving Supplier Collaboration

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© 2001 - 2011 Emptoris, Inc.

About this Whitepaper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Part I: A Holistic Corporate Mindset on Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

So what does that mean for procurement? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Part II: Internal Talent Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Changing the Approach to Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Training for the Greater Good . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Redefining what it means to be a Procurement Professional . . . . . . . . . . . . . . . . . . . . . . . . 6

Part III: Collaborative Supplier Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Table of Contents

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© 2001 - 2011 Emptoris, Inc.

About this Whitepaper

Conversations within procurement organizations have been striking the same or similar chords for years. The phrase “a seat at the table” is bordering on cliché as it’s been thrown around and discussed at nearly every procurement event and discussion in memory. But the dialogue is shifting because fortunately, in many cases, procurement teams are now more established and recognized, and are being called upon by the broader organization more than ever before.

The 14th annual PriceWaterHouseCoopers (PWC) Global CEO Survey showed more than half of C-level respondents from major corporations see a trend in growth focused on innovation and talent – and increased investment in critical growth areas like infrastructure, education and sustainability. At a recent meeting with 25 senior procurement executives, that same sentiment was echoed.

The meeting took place February 2011, when Emptoris hosted an exclusive, invite-only luncheon and interactive discussion for some of procurement’s leading executives at the ProcureCon for Corporate Sourcing event in Atlanta, organized by Worldwide Business Research. Chief procurement officers and directors of sourcing operations from companies like Boeing, The Home Depot, Cushman & Wakefield and Paramount Pictures were guests at the event, and contributed valuable insight into the top issues facing procurement professionals. From this lively discussion, we have collected a view into a few of the top drivers for procurement organizations today: Positioning for Growth, Developing Talent and Improving Supplier Collaboration. This whitepaper explores those topics.

This whitepaper was derived from thoughts, ideas and statistics expressed by the following executives during the Emptoris boardroom meeting:

Roy Anderson, former CPO, State Street Bank

Jeff Ariz, Executive Director, Strategic Sourcing, Paramount Pictures Corporation

Jill Bossi, VP & CPO, The American Red Cross

Chuck Kinnebrew, Director of Purchasing, Home Depot

Jason Kwan, CPO, VP Global Strategic Sourcing, Manpower Inc.

Ed Maino, VP, Procurement, Capital One

Joanna Martinez, CPO, Cushman & Wakefield

Linda Winter, Director Corporate & IT Sourcing, Pacific Gas & Electric

A Holistic Corporate Mindset

Internal Talent

Leveraging and

Development

Collaborative External

Partnerships

A Holistic Corporate Mindset

Internal Talent

Leveraging and

Development

Collaborative External

Partnerships

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© 2001 - 2011 Emptoris, Inc.

As evidenced by the PWC survey and industry research, confidence levels are rising in most organizations, even though action and approach may be more cautious.

“A year ago we were in ‘weathering the storm mindset,’” said Ed Maino, VP, Procurement, Capital One, during the Emptoris boardroom meeting. “Now we’re saying, ‘Are we well-positioned to grow? How are we positioning ourselves to be partners in the business?’”

With a growth mindset, Maino noted, there is opportunity to find value in growing scale and spend. The challenge, however, is whether procurement teams can focus attention on things they care about as core competencies of their job functions.

Jason Kwan, CPO, VP Global Strategic Sourcing, Manpower Inc., described a similar environment at his organization. “We spent the last two years preparing for today,” he said. “We made cuts but made significantly less cuts because we knew today would come. We had to earn the right to grow and we have.”

He further stressed the point by noting that Manpower has started on the path toward growth with a new IT program, expanded workforce, employment of new strategies for time management and a reorganized business unit. Like many companies, Manpower also sees potential in China and India and is positioning for global growth.

In that same global vein, the PWC survey shows that CEOs plan to grow revenues in global regions and that beyond China and India, high expectations are being placed in Latin America and Asia.

So what does that mean for procurement?

Executives recognizing their companies’ footing for growth are preparing their entire procurement organization for that footing, and are securing more resources internally. The prevailing view among executives is that success will come if the procurement team’s priorities align with the CEO’s priorities, which in turn determine the priorities for the rest of the organization.

CPO’s say alignment with finance is particularly key. The procurement team and the CFO have to establish agreed upon metrics and measurement, and discuss what the broader organization plans to accomplish with the achieved savings. When the organization is in growth mode, this can be trickier because the CFO and procurement teams may still have a lingering tendency to be overly cautious with spend. If there is a holistic approach to growth throughout the organization, and goals are aligned toward growth, all teams will be more likely to advance with confident steps toward expansion.

Part I: A Holistic Corporate Mindset on Growth

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© 2001 - 2011 Emptoris, Inc.

Part II: Internal Talent Development

Changing the Approach to Growth

If and when the internal goals of each team have been aligned with the CEO and other stakeholders to move toward growth, there are definitive steps that must be taken at the outset. Building out organizations for growth mode means investing in new talent and reinvesting in current talent. This is one of the first steps toward expansion both for the procurement organization and the broader organization. In many cases reinvesting in current talent is the preferred route, as large corporations tend to have a diverse workforce, many of whom are young, flexible, and eager to diversify their skill sets and climb up the corporate ladder. In these situations, there are lots of possibilities for procurement to tap into the knowledge base of its internal staff and create a sharp and strong team. But there are also challenges that come with a youthful workforce whose ideas of success are different than those of older staff.

At many organizations, as the Baby Boom population ages, the issue of retirement is looming large. “More than 50 percent of the workforce is eligible for retirement now,” said Linda Winter, Director Corporate & IT Sourcing, Pacific Gas & Electric. “Not everyone is used to staying 30 years at a company.”

This feeling aligns with the overall belief that people are looking to job hop in order to bulk up their resumes and ultimately earn more money. A Generation X/Generation Y study conducted by Worldwide Business Research where respondents were surveyed about their job functions, plans, roles, etc., showed that 60 percent of respondents planned to stay in SCM/Procurement for five years or more. However, in the survey, 70 percent of respondents were Generation X, defined as born between 1974-1980, and only 30 percent of respondents were Generation Y, born between 1981-1990. Therefore, the idea that younger people are moving around may still hold true, and the question then becomes: is this bad for procurement?

Some CPO’s say no; procurement teams expect their staff to move around. However, the goal is to make sure they’re as well-rounded as possible, both when you hire them and throughout their careers. It’s important for procurement to identify high performers early on and use them to their best abilities, while realizing they may not be around forever.

“I have a robust talent management process that forces me to identify who my high performers are and realize there’s going to be turnover,” said Chuck Kinnebrew, Director of Purchasing, Home Depot. “If you train and give them the right skills they’re not always going to stay.”

“I’d rather have a really talented person for a year than a less talented person that stays,” said Jeff Ariz, Executive Director, Strategic Sourcing, Paramount Pictures Corporation.

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© 2001 - 2011 Emptoris, Inc.

Training for the Greater Good

That’s the Catch 22. Procurement must train staff to be the best it can be, but also realize that employees may take those skills elsewhere. In order to reach a happy medium, an option worth considering is implementing a departmental rotation program where employees are put on an 18-month rotation track and spend a certain amount of time in each department. If individuals within the organization can spend 18 months in the procurement department, they will get hands-on knowledge of what the team does and why procurement is so crucial to the organization at large. At the end of the rotation, the staff member will have an improved skill set and will enter another team within the company as an ally to procurement.

“Give me some of the best people and let them come to procurement and when I bring them back to you, they’ll be better, bigger, more enabled,” said Roy Anderson, former CPO, State Street Bank. “[Employees] are used to networking within one line of business. When they go to procurement, they are networking across every line of the organization. In the old days – four months ago – there was a concept about keeping people. That needs to change.”

Rather than believing that people need to be “kept,” procurement must start to think about how to get the most out of its team. The current business model of many procurement organizations doesn’t offer much opportunity for growth, which proves yet another challenge for procurement to overcome.

“The issue at my previous organization was that I had a blank check…but what do I say to someone who has aspirations for senior management,” said Joanna Martinez, CPO, Cushman & Wakefield. “My response was honest: ‘You don’t have a long term position – you’re going to come here and learn a whole bunch of things, you’re going to learn about sourcing and how to apply it in places you never thought you’d use it. But you’re not going to be the CFO.’ One person on my team will end up replacing me, the others won’t. Honesty helped a lot right at the get go.”

Redefining what it means to be a Procurement Professional

Procurement used to be solely about getting bids and working the best prices out of the supply chain. Over the past five to 10 years, however, more has been expected of procurement professionals. While the recession helped procurement, proving how important its functions are to the bottom line, it also meant more responsibility fell into procurement’s lap, and despite certain global economies recovering, those responsibilities are still there. As in many professional environments today, staff is expected to do more with less, which can be a stress on employees. But it can also serve as a great catalyst for individual development.

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© 2001 - 2011 Emptoris, Inc.

“If procurement is ever going to become what it needs to be, it can not have people who are stuck in supply chain,” said Jill Bossi, VP & CPO, The American Red Cross. “Procurement needs to have visionary people who can adapt to meet the business’ overall needs.”

While the core functions of procurement still hold, today’s procurement professional is charged with strategic sourcing; working with suppliers in a way that requires additional skills that reach beyond what a typical procurement professional might expect.

“We’re re-defining what it takes to be a procurement professional,” said Maino. “It’s part consultant, part analyst, part sales. They will have [to have] general skills. This is a great stop along the way for development. What does it look like to be a long-term procurement pro?”

Being a long-term procurement pro looks a lot different than it used to, and people need to start adapting, said many executives. Not only do procurement teams have to learn and work with rapidly evolving technologies, they also must answer to the CEO’s expectations of how they’ll use that technology to advance the company’s objectives.

In an Emptoris survey, 80 percent of CEO’s reported they believe innovation will both yield efficiencies and lead to competitive advantage, while 78 percent said they expect it will generate new revenues. Nearly 70 percent were investing in IT to reduce costs and become more efficient, while 54 percent said they were funneling funds toward growth initiatives, including emerging technologies in mobile devices, social media and data analytics.

Naturally, this means procurement teams will rely more and more on cutting-edge skill sets that are more common among younger generations who are eager to learn and adopt such skills. As more companies expect to add jobs than they did in 2010, they will need to focus on tapping into the talent pool, which will get scarce as job seekers get swooped up with more enticing offers from corporations who recognize their potential.

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© 2001 - 2011 Emptoris, Inc.

Much of the reason why today’s procurement professionals are expected to have such a diversified skill set is due to the changing ways procurement is working with suppliers. Strategic sourcing requires a different sort of communication, and has become critical to the way procurement successfully conducts its business. Going beyond spend management, procurement must now master supplier development and supplier relationship management.

“One of the things I’ve been talking about is the ability to unlock the innovation of the supplier base,” said Anderson. “Every supplier has a marketing team, an IT team, a real estate team that we’re not talking to.”

Anderson went on to explain how procurement must effectively tap into the know-how of suppliers because valuable insight can be gleaned from suppliers who are already implementing procedures that your organization might be researching. For instance, if procurement is dealing with a supplier who has opened operations in a country where its own organization is looking to expand to, that supplier may have useful and practical information to share. It’s up to today’s procurement professional to identify and understand the value the supply base can offer.

“We continue to learn that there’s more capability to be tapped into in the supply base and how better to use it,” said Rick Gross, Supplier Management Leader, Boeing. “It’s about having the right forum in the company to talk about it and share it.”

“If you’re not leveraging your supplier’s resources, your competition is,” said Bob Hellem, VP, Indirect Procurement, ConAgra Foods, Inc. “It’s crucial that procurement professionals understand how to build the supplier relationship and get out a one-track mindset, or they will lose out on potential savings, business development and more. “On the procurement end you get people saying, ‘This is what we want,’ instead of saying, ‘How can you help me get to where I want?’” said Brad Castedio, Assitant Vice President, Global Procurement, MetLife.

“It starts with leadership,” said Kinnebrew. “At the end of day I want to see competitive collaboration. If you don’t maintain competitive advantage, there’s no value for your partnership.”

Supplier relationships can no longer be simply about spend management. “Before I ever invite someone to an RFP process, I should be selling them on why they want to do business with me,” said Bossi.

The assembled executives agreed, in many cases, procurement has to learn how to operate more like its sales teams. That’s not an unnatural process as more and more frequently procurement is being invited to sit in on sales meetings and broader organizational strategic planning.

Part III: Collaborative Supplier Relationships

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© 2001 - 2011 Emptoris, Inc.

Conclusion

The assembled senior procurement executives believed strongly that procurement organizations have “gained ground” and are increasingly recognized as integral to the broader business. In order to maintain and even improve this position, procurement must make sure its goals align with other teams’ goals, and particularly with those of the CFO and CEO.

A major part of managing that growth is the development and leveraging of internal and external talent. While younger workforces grow more and more advanced and eager to take on new challenges and advance their skills, older workforces are readying for retirement. Some professionals are caught in the middle, not ready to retire, but struggling to keep up with the younger workforce and the fast pace at which requirements and responsibilities are changing. In order to better train and retain staff, procurement should consider rotation programs where individuals can spend time in various teams within the larger organization. They also must invest in technology and training programs that teach procurement professionals how to look beyond the walls of supply chain and understand the value of adopting skills and practices that look more like those of marketing, sales and IT teams.

The reason these new requirements have arisen links to the increased complexity of relationships between procurement and suppliers. Procurement is required to work strategically with its supply base and needs to examine what value suppliers can present beyond just a cost saving. Of course, this wasn’t always a requirement for procurement, and this type of relationship building requires a different type of skills, and perhaps a different type of employee: the procurement professional of the future.

For more information about Emptoris,

visit www.emptoris.com

call 1.781.993.9212

or email sales@emptoris.com

For more information about ProcureCon,

visit www.procureconindirect.com

About Emptoris

Emptoris is a world leader in strategic supply management, enterprise

contract management, telecom expense management and services

procurement software solutions that empower enterprises to realize best

value and accelerate profitable growth. Emptoris solutions are consistently

recognized by independent analyst firms as the market’s leading solutions.

Most recently, Emptoris was positioned in the “Leaders Quadrant” in

the Gartner research report, “Magic Quadrant For Strategic Sourcing

Application Suites.” Emptoris solutions are used by successful Global 1000

companies in every industry; customers include American Express, Boeing,

GlaxoSmithKline, Kraft, Motorola, Syngenta and Vodafone. For further

information, visit www.emptoris.com.

About ProcureCon

Now in it’s 14th year, the ProcureCon series of events is pleased to

return to Atlanta for its flagship indirect Procurement event. ProcureCon

helps you keep procurement relevant in the midst of sea changes in the

economy and corporate focus. Ensure procurement does not become an

impediment to progress, but rather a key driver of supply availability

and continuity, business excellence and working capital for R&D

investment and tightly managed growth. For further information,

visit www.procureconindirect.com.

Emptoris, Inc.200 Wheeler Road, Burlington, MA 01803

tel 781-993-9212 • fax 781-993-9213 • www.emptoris.com