However, with the raised expectations on procurement to deliver sustainable bottom-line savings, the need to nurture top talent is more acute than ever. Some 65% of respondents rated capability development and talent management as a key objective area for the coming year, and further augment their functions with the right blend of category, supplier and market expertise with the usual contracts and pricing knowledge. However, as highlighted by the Capgemini survey, the CPO continues to see a dearth of talent as a major challenge to their ability to meet these expectations.
from Chances and Challenges for Buyers by Leon Smith, Supply Chain Europe (November 2009)
Talk surrounding the talent gap is nothing new, especially when the economy went into a tailspin resulting in significant layoffs throughout all industry sectors. In fact, the impact associated with this recent decline had considerable reach into job areas that were at one time considered to be if not untouchable, certainly somewhat insulated.
Nowhere was this new reality more apparent than it was in the world of Lean Six Sigma. In an April 2009 interview with expert author Forrest Breyfogle III titled “Unemployed Excellence – Why Lean, Six Sigma Have Left Some People Out in the Cold” we discussed what at the time was the surprising job loss trend amongst Six Sigma Black Belt and Master Black Belt professionals. The irony of the revelations that were revealed during the interview with Forrest is tied to the belief that Lean Six Sigma expertise during an economic decline would become essential. The reasoning of course is that one would think that process efficiencies would become increasingly important as workforce size was pared down and the remaining employees would be called upon to pick up the workload of those who had been laid off.
I guess process efficiencies and cycle time reductions become less attractive when faced with the cold reality of diminishing revenues.
While those in the Six Sigma realms were considered expendable, the procurement world was going through an evolutionary period of it’s own based largely on the growing recognition of purchasing’s strategic importance in delivering what Smith referred to as “sustainable bottom-line savings.” The problem, which was the polar opposite of those associated with the Six Sigma Black Belts sudden trek to the unemployment line, was the paucity of experienced buyers. In other words and, after so many years of being viewed as a functional adjunct of finance, purchasing’s phone rang but no one was home to answer the call.
Suffice to say there are countless challenges in finding “the right blend of category, supplier and market expertise with the usual contracts and pricing knowledge.” A point that was raised during our recent Live Event Feed Roundtable discussion from the 3rd Annual Government of Business Summit in Washington, D.C. Our guest panel, which included the former U.S. Goverment’s CIO Karen Evans, IACCM’s Founder and CEO Tim Cummins, 30 year public sector veteran and author of the seminal paper “Towards Tesco – improving public sector procurement” Colin Cram, and Washington-based expert author Judy Bradt, talked about the impact that the talent gap has on government’s focus on creating a transparent procurement process.
Evans’ response to the question regarding the impact that the talent gap has had relative to transparency in the government procurement process, extended beyond a mere head count – increased workload perspective to include the differences between compliance and achieving results.
This is a noteworthy distinction, especially in light of her statement that the “process-laden” procurement practices of the government is not inherently conducive to effective collaboration in the first place. When combined with what the former top CIO in the country referred to as the steadily decreasing number of acquisition people who understand that there is “an art to doing procurement,” and therefore can properly leverage the available tools to stimulate important dialogue with key stakeholders, we begin to see the very real problems caused by the growing talent gap emerge.
Specifically, a much heavier reliance on the very belt and suspenders contractual terms resulting in what IACCM’s Tim Cummins called “a highly lopsided risk allocation” born mostly by the supplier.
The need for creating and complying with these “lopsided” terms and conditions, which ironically diminish rather than enhance transparency is, according to Evans, driven by the prospects of having to stand before a Senator or the House of Representatives and explain why a project has or is failing. In short, this means that best value decision-making is confined to an adherence of guidelines that ultimately center on avoiding blame versus achieving optimized results.
At this point Evans’ past experience and understanding came to the forefront when she revealed the number of times she was called in to get a particular project back on track. In fact, and as Evans put it it, “during my tenure I can go through project after project that had failed” in which my direct intervention was required.
The first step she took towards implementing a remedy was “putting in clear and concise requirements” where everyone was provided with a “solid understanding and expectation of the performance metrics” by which they would be measured. This approach according to Evans, removed the chief cause of the blame game especially with time and material contracts, in that a precise target or objective was established that eliminated the disconnect in stakeholder expectations that plagues many public sector contracts. This “coordinated understanding” as Evans calls it means that everyone is reading from the same book.
Through a coordinated understanding the acquisition official, who is almost always called to task when a project runs off the rails and either more time and/or more money is required to move forward, will not be subjected to the heightened scrutiny of a poorly drafted contract.
The question that this raises of course is why was a poorly drafted contract put in place without clear deliverables in the first place? The answer brings us right back to the opening paragraphs of today’s post where CPOs are lamenting the “dearth of talent as a major challenge to their ability to meet these expectations.” In essence, and making up for the absence of “the right blend of category, supplier and market expertise with the usual contracts and pricing knowledge,” acquisition officials tend to incorporate into contracts onerous, one-sided terms and conditions that are designed to reflect blame rather than achieve the desired results.
That being said, this is not a single, unilateral issue flowing out from the government side of the transaction alone. Citing a segment from my 7-Part “Seven Steps to Success” Series with Judy Bradt, I likened the contractual compliance issue in which the outcome is obfuscated by avoiding blame to the suppliers “winning contracts instead of money” analogy.
In the latter instance, Judy had referenced a GSA70 IT contract worth billions of dollars from which only a very small percentage of suppliers actually generated meaningful revenue. A good percentage of the total number of “winning” suppliers, many of whom did not receive a single order despite being certified and approved, did not achieve their outcome simply because their expectations and subsequent efforts did not align with the reality of the situation or, in this case opportunity.
Judy attributed this supplier-side disconnect to what she referred to as “a gap in the total process” which is largely due to the absence of the tangible and meaningful relationship with the government buyer that is essential to gaining a clear understanding of what winning suppliers actually do to win government business.
The reciprocal misalignment in which suppliers erroneously chase government contracts in the same way that acquisition officials chase deflecting compliance means that all parties are at crossed purposes. No wonder Evans’ can point to “project after project that had failed.”
UK-based, 30 year public sector veteran Colin Cram raised a valid point when he expressed the opinion that “there is an issue ” at how stakeholders arrive at the point of “a shared understanding.”
While Colin shares similar sentiments with Bradt regarding the importance of suppliers getting in the game long before an RFP has been issued (or chasing government contracts as it is called), he was also quick to point out the need for the government “to effectively engage with the supply base market,” and not just issue tenders “willy nilly.”
This according to Cram means that government has to gain a better “understanding of the market,” which was also an opinion expressed by Evans in the May 11th excerpt when she “stressed the importance of reaching out and engaging as many suppliers as possible, especially with large IT acquisitions, as it is virtually impossible for a buyer to “know what all the technologies are in terms of what is out there (in the market).”
It is also interesting to note that with both Cram and Evans, this better understanding of the supply market begins with the procurement professional. It is also at this point that the talent gap also comes into play according to Cram as “the difference between the top class category procurement professional and the average buyer,” is reflected in the “value for money” purchases each makes.
In this regard according to Cram, the “top notch person knows how to handle procedures that are appropriate to the business at hand,” versus what he called “the procurement hacks who simply follow procedures.” These top flight professionals “engage properly with the industry consistently delivering brilliant outcomes” compared to the average buyer whose idea of engagement is myopically confined to the specifications they are given, in essence merely filling an order.
What is worth noting is that many of the up and coming procurement professional’s who have chosen the profession rather than just falling into it by chance, are graduating from accredited institutions with the necessary skills to which Cram had referred.
However, and referencing the Smith article, there is an “increasing trend amongst procurement professionals,” to move into the “interim/contractor market to maximize their earning potential.” Thus retaining “top notch” talent to the point where their expertise can have the positive impact that Cram indicated is necessary to effect the required changes can be problematic.
IACCM’s Tim Cummins, while expressing his belief that many, many interesting points were being raised, cautioned that “government deals with a full portfolio of different relationship types.” From the “commodity transaction” suppliers in which relationships are more direct and basic, to “mega defence deals or outsourcing arrangements” that by nature are complex, and therefore when they fail tend to grab headlines, Cummins stressed that a “sense of proportion” be maintained in that the actual rate of contract or initiative failures “falls into the minority.”
This however emphasizes the importance of Cram’s observations regarding the difference between the top notch procurement professional versus the everyday buyer. Specifically, and with commodity type purchasing, following specifications will likely suffice. Although I would contend that effective supply market engagement is key regardless of the size and type of the acquisition, if an organization is to avoid the one-two punch of an eroding supply base coupled with the phenomena of creeping margins that can slowly lead to the financial bleeding that is tantamount to a death by a thousand cuts.
Whether in the majority or the minority, Cummins still recognized that project failures – especially with complex projects (which the IACCM CEO indcated are “areas of vulnerability”), are often times due to unclear or misaligned requirements. However, Cummins added an interesting variable into the mix when he suggested that a lack of “adaptability”in terms of an “acquisition strategy” is another factor that should not be overlooked. In particular, a “good supplier match today, may not be down the road because of market changes.”
In this regard, the talent gap also has an important impact in that rather than address the question of adaptability through greater transparency relative to “risk sharing,” Cummins expressed the opinion that “one of the biggest problems with government procurement today” is that it is in reality heading or “gravitating” towards the self-protecting, belt and suspenders mindset associated with a paucity of top notch procurement professionals.
Lacking expertise and the related understanding of the market, the most “frequently negotiated terms and conditions” that represent the greatest “sticking points” continued Cummins, relate to what he called “the blame game,” and what ultimately happens when “things go wrong.” The “rigid positions that the government takes over things like indemnity, intellectual property rights, and Liquidated damages,” present real and enduring problems stated Cummins.
“If we can’t get to a more balanced position on the economic gains and losses, or the understanding that there needs to be mutual benefits,” then government procurement is going to “continue to struggle to get value for money and, positive outcomes on many of these high profile projects,” concluded the IACCM CEO.
Next White Paper Excerpt: An Over Reliance on Technology Versus Scalable Intelligence
NOTE: The following post came from the new Essential Connections Blog. For complete summit information including additional articles, visit the Essential Connections Blog
About the Summit:
The PI Window on Business took its show on the road on April 27th and 28th thanks to sponsor Elcom and the tremendous work of the 2010 Business of Government Summit’s organizer, Shared Services and Outsourcing Network (SSON).
It was a first rate venue that saw us broadcast “live” 5 incredibly informative sessions centered on “Building a Transparent, Collaborative and High-Performance Government Capable of Addressing the Challenges of the 21st Century.”The attendees of mostly senior officials and executives from the public sector world were exposed to an incredible array of thought leaders, whose shared insights and experiences provided much needed (and welcomed) perspectives on both the challenges and potential strategies for effective government practices in the 21st century.