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- February 23, 2017
- David Hearn
- Spend Management
In my previous post, I talked about why procurement groups should be looking beyond the traditional metrics of cost savings and process efficiency. They should be measuring themselves using a four-part balanced scorecard that also includes metrics around customer service and organizational development.
In this post, I’d like to share some success I had building a scorecard to measure organizational development.
Step one: Current state
The first thing to do is figure out what the current state is. Fortunately, most companies now do annual satisfaction surveys quizzing employees about how satisfied they are with the company. It's anonymous, but if you can get your hands on it, the data can be distilled down to a group level.
That’s what I did at the most recent company I worked at. Looking at data related to our procurement group, we found a couple of clues about how people in the group felt. One, we were scoring low on people feeling that we were developing them. Two, they didn’t feel that they had a clear career progression at the company.
Well, those are two important metrics that directly relate to the organizational development part of the balanced scorecard. If you're not developing your people and they don't see a clear path to career progression, you're not building a stronger organization. In fact, you're probably going to lose people and you may have a hard time attracting new ones, because employees will talk about whether this company is good to its people.
I’m a fan of simple, two-question surveys. So, focusing on addressing the responses to those two questions seemed like as good a place to start an initiative to improve our organizational capacity as any.
Creating a career roadmap
Our survey respondents were right. We didn't have written, anywhere, a career progression or roadmap. Creating one was the first order of business, because that would drive the rest of our organizational development efforts.
Don’t let this task overwhelm you. While it is true that not everyone comes to procurement by the same path or progresses in a straight line, it is nevertheless possible to sketch out a general roadmap.
A person can come out of college as, maybe, a junior buyer. A talented person can be developed through coursework and on-the-job training, and become a buyer, then a senior buyer, then an associate commodity manager, or a sourcing manager. Then they might become a director of sourcing, move on to become vice-president of a region, and then a leader of an entire indirect procurement group.
We created a document that showed eight boxes with these different jobs, the kind of responsibility associated with each, and the skills needed to perform that role. Then we listed the types of training that would be needed to develop those skills. Some of it was class work, but a lot of it was also on-the-job training.
An organizational first
Next, we worked with HR to properly compare and level these positions within the different salary bands at the company. We didn't put actual salaries on the chart—just the bands—but it showed that as you moved up this career progression, your salary would increase along with your skills and responsibilities.
For the first time, no matter where you were in the organization, whether you'd just started or you'd been there 15 years, you could see what your next step was and exactly what you would have to do get there. That changed things.
People started asking questions about the roadmap and expressing interest in progressing. It was clear that people had been thinking about their careers all along, but this made it okay to talk about it openly, and gave us a framework within which to discuss it. And, they knew we cared.
We had to back it up, of course, by paying for people to go to the classes they needed to get to the next level. And, leadership had to work hard to give them opportunities to take on projects that might stretch them in a different area to grow a skill. That included sometimes calling on a higher-level person to teach or mentor them.
Moving the needle
We had a couple of great, visible signs that it was working – two people in the organization were promoted. We were happy for them and it sent a clear message to the rest of the group that the opportunities were real and if you were willing to step up and do the work, you could get move ahead.
We could also go back to the survey, every year and see how well we were doing and whether we were moving the needle. I'll admit that, in this area, the needle is hard to move quickly. Things didn’t change overnight, but we weren’t expecting them to. We were trying to build the organization over a three- to five-year time frame. We had focus, we had initiatives, and a way to measure outcomes. That's what a balanced scorecard for organizational capacity requires.
As leaders, when we looked at the scores, we did have a theory that people would never be perfectly satisfied, and that's maybe a good thing. Meaning, people should always be looking for leadership to give them more opportunities to develop.
We weren’t looking for perfection, but to move from dissatisfied to satisfied, which we did.
The domino effect
The impact of focusing on organizational development goes beyond just employee satisfaction with your organization. As you work with people individually, they may get promoted, but the other payoff is that the entire organization slowly up-levels. That has a domino effect on scores on the other three parts of the scorecard.
When people in the company start to have better experiences with multiple folks from the procurement group, the group’s reputation improves and other business partners want to use the group. That in turn makes the procurement group a better place to work, and that has a positive impact on internal customer satisfaction, process efficiency and financial stewardship in the form of savings.
And that’s exactly why procurement organizations need a balanced scorecard. We’ve been measuring process efficiency against benchmarks, and calculating savings for years, and that’s good and necessary. However, that focus is too narrow to get procurement the seat at the table they’ve long desired. Only when you focus on and measure progress in organizational development and customer service can your organization become more than a back office processing function, and rise to the level of strategic business partner.
David Hearn is a procurement consultant and a member of the Coupa Executive Advisory Board. He was the Indirect CPO at Juniper Networks, Sun Microsystems and Kaiser Permanente.