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- July 31, 2017
- David Hearn
- Spend Management
Over the last five or so years, there has been a dawning realization within companies that spending on indirect goods and services—everything that you spend money on to run the company, excluding salaries—is a big area of opportunity for creating efficiency and cost savings. Many companies today are becoming interested in developing advanced spend management capabilities, elevating the procurement function to one of strategic importance.
This is a development those of us in the profession have long desired. With senior leaders beginning to recognize the incredible opportunity for innovation, efficiency and cost savings, what could possibly hold us back now?
A talent shortage. This increase in interest has caused a scarcity of talented people at all levels of the profession, but most particularly of senior professionals skilled in strategic sourcing, which is the very thing organizations need to do more of. I have four suggestions for winning the war for top spend management talent, which I’ll outline in a series of posts.
The first is, before you go out hunting for more people, make sure you’re making the most of the talent you already have. It’s possible you may discover that you don’t need more people, at least not yet.
Why do I say that?
If your organization is not using modern spend management tools that automate activities such as purchase order workflows, approval processes, RFP’s, reverse auctions and contract management, there’s a good chance that your current folks are spending too much of their time on administrative activities, or on helping the rest of the company navigate through an unnecessarily convoluted process.
The wakeup call
If you do a time analysis, you may be surprised to find that they’re spending only a fraction of their time doing the highly skilled, strategic work you hired them to do.
That’s what I found when I did a time analysis of an organization that I ran back in 2000. We looked at every role and how people spent their time over a two-week period, which we felt would come close to covering their full range of activities. What we found from that exercise was that our more senior people were spending only about 30 percent of their time on strategic sourcing.
It was a big wakeup call. As a leader, I could see that I wasn’t running an effective organization because I wasn’t getting the most out of my people. And, people weren’t happy because they came to do strategic sourcing but were spending the majority of their time doing something else. With their skills in high demand, that meant that we were at risk of losing them to another company.
What were they actually spending their time doing?
Breaking down the time
We found that 20 percent of their time was spent meetings, HR issues, and other office activities. There’s not much you can do about that.
Another 20 percent of people’s time was spent helping end users—not people in procurement, but other business people in the company. Now, that's not necessarily a bad thing. This is an internal customer service function, and you want your people to be invited in to help. That’s how you build partnerships that deliver value.
But, when we looked at what our people were helping with, only about half of it was complex sourcing or other activities to influence buying decisions. The other half was basic blocking and tackling: How do I get a PO? How do I find a list of preferred suppliers? Our strategic sourcing people were just fielding customer service requests, which clearly should not have been on their plate.
Then there was a big chunk of time, about 30 percent, spent on sourcing implementation. There are a lot of clerical implementation details that follow in the wake of strategic sourcing, to make sure that those suppliers get used and you get the full benefit of your sourcing activities. How do you set up the contracts? How do you set up the pricing structure, and the purchase order structure? How do you advertise internally work that this is the new preferred supplier? How do people find the supplier?
If you don't have a modern set of procure to pay tools or source to pay tools, those activities are mostly manual. Contracting is a laborious back and forth process, and then the contracts end up in filing cabinets or on people’s hard drives where no one can find them.
Without automated purchase orders and catalogs, it’s hard for people to even know about your preferred suppliers. You have to create and maintain static web pages that tell people who the preferred suppliers are. Then you have to go to your business partners to tell them, because it’s difficult to communicate this kind of information effectively to the whole company. Then you have to develop templates, maybe in Excel or Word, for people to create purchase orders against your contracts.
That’s what people in my organization were having to do. But, those tasks clearly can be automated if you have a good spend management platform, or performed by folks with those skillsets. They don't have to be done by someone as senior as that strategic sourcing person. Those people you want out studying the marketplace, looking for new ideas and fantastic deals.
Acting on the findings
Based on our findings, we decided to zero in on taking that 30 percent implementation work and 10 percent tactical customer service work off their plates to make sure that at least 70 percent of their time could be devoted to their core competency of strategic sourcing.
We did that by implementing of state of the art source to pay tools, including contracting tools, that automated the implementation tasks. These tools also guided end users at the company through the use of catalogs and purchasing tools in a simple, intuitive way, giving them pre-filled purchase orders for strategic suppliers so the sourcing manager would never have to be involved. That took the tactical customer service piece off their plates.
Once we had the system up and running, we were able to give the back that time to spend on strategic sourcing activities. Not only that, we improved our prospects for job satisfaction, employee retention and future recruiting efforts, because really no one wants to do that kind of manual, repetitive work, and no one should have to with the tools that are available today.
If you’re in a position of where the senior leadership at your company is interested in doing a better job at spend management, don’t let that opportunity pass you by because of the daunting problem of finding talented people.
Look at the people that you already have, and see what percentage of their time are they’re spending on strategic work now. If it’s not 70 percent or better, find the root cause. I would expect that if you haven't implemented new spend management tools in the past few years, you're going to find that that's one of the primary causes of peoples’ time being not well spent.
Tackle that before you go hire more people. Hiring more talented people in a role where they only spend 30 percent of their time on strategic activities isn’t a good investment. It’s just going to lead continued inefficiency, unhappy people and a continual need to hire in an already tight market for talent.
David deployed Coupa at Juniper Networks and has been a Coupa evangelist ever since. He led indirect procurement at three companies (Sun Microsystems, Kaiser Permanente, Juniper Networks) and now helps procurement teams transform the way they add value to the business. His procurement advisory firm is called CPO Advisement Services, LCC. Contact him at: [email protected], 510-304-3380.