Posts Tagged ‘strategic procurement’

Gluing myself to the TV news seems like all I’ve been doing in every waking moment at home this week.  The daily developments are painful to watch, and it just appears as if the worst is always yet to come.  At work, we all are beginning to reflect upon how this epic disaster will have its effect toward our companies and commodities.  Business continuity plans need to be in-effect.  What about our staff, suppliers, partners, stakeholders, and customers in the zone of terror?  How will the utility crisis brought by the Fukushima Daiichi nuclear power plant turn out for the rest of the world?  Regardless of which line of work you are in, believe me, you will be affected. 

Jason Busch from Spend Matters has the following to say in how procurement and supply chain practitioners should be prepared for in this latest crisis.

“Spend Matters suggests an earthquake/tsunami procurement, commodity management and supply chain action plan based on the following steps for companies anywhere in the world in the following industries: automotive, diversified manufacturing (including transportation equipment and electrical machinery), aerospace and defense, high technology, consumer products, chemical/process. A plan should include at least the following steps:

  • Fully understand your extended supply chain and supplier locations and facilities — two, three or even four levels down
  • Stay in constant communication with your suppliers and send resources, if possible, to monitor production ramp-up at key facilities. Lessons from supply chain history suggest that what suppliers might be telling you on the phone in situations like this might be very different from reality. Those buying organizations who are on-the-ground first working closely with their suppliers are likely to receive more favorable treatment in capacity-constrained situations
  • Understand the geographic concentration of suppliers in potential regions in the area (and potential geographic concentration from a port standpoint as well). Even in a multi-source arrangement, natural disasters can help cancel out most of the insurance a split-of-business sourcing strategy provides when geographic concentration exists
  • Offer to help purchase raw materials and lower tier parts/components if necessary on a demand aggregation basis (your purchasing power as a larger organization may help secure supply given the constraints created by the disaster); provide resources to support the sourcing of materials necessary to get supplier facilities back up to production levels and understand, on a bill of material level, the raw material specifications that comprise a finished part, component, SKU or product (i.e., what your suppliers must buy)
  • Monitor the situation (and your supply chains) in neighboring countries as well as those throughout the Pacific that may be impacted by the disaster
  • Prepare to rely heavily on airfreight in the coming weeks and offer to step in and help suppliers from a logistics standpoint — despite the high costs, those who can rapidly secure sufficient capacity and favorable terms with airfreight working closely with carriers directly or indirectly through their 3PL partners are likely to face less; move quickly in general and consider charter situations based on industry, volume and the degree of impact
  • Put friendships and relationships with supplier personnel first — factories can be rebuilt, facilities can be overhauled, ports can be brought back online. Human lives and the spirit of connection are temporal. We must all remember that relationships need to come first — not the bottom line.”

I cannot agree more to the last advice, ever. 

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Do I believe in bonuses for procurement professionals?  Why wouldn’t I?   And it’s not just because we don’t want to be singled out as the only profession not getting any, it’s more toward the pay-by-performance concept that I believe in.  Otherwise, it’s human nature to be complacent.

Yet there are still many opinions within my profession who opt against the idea because of integrity, measurement and benchmarking concerns.  I acknowledge those concerns, but I think they are addressable through rigorous control mechanisms rather than taking away the incentives for precision, innovation, effectiveness and efficiency.

The issue is well addressed in the following article by Rima Evans, projects editor for CPO Agenda.   The pros and cons of bonus schemes are covered, together with an implementation checklist.  For those organizations who are not convinced of rewarding their champions of change, I hereby recommend this article to them.

“Because You’re Worth It

By Rima Evans

Procurement has been widely credited for showing its mettle during the downturn and delivering value to businesses, but has this been supported by adequate financial reward?

Amid the current period of fragile and uncertain recovery, now is not a great moment for pay rises – in fact, the latest CPO Agenda economic survey showed a considerable drop in the number of companies approving pay increases (from 25 per cent in May 2010 to 9 per cent in November 2010.) But bonuses may be an option for CPOs currently wanting to redefine or improve the way their teams are rewarded while having to adhere to strict mandates to keep salary bills under control.

Although bonuses are not uncommon in procurement (sector and level of seniority are obviously big influencing factors), there is still some way to go in terms of catching up with other professions.

Andrew Coulcher, director of business solutions at CIPS, says its annual salary survey with Croner Reward in 2010 showed about a third of procurement and supply professionals received a bonus.

Most FTSE organisations offer bonuses ranging between 10 and 30 per cent as the average value, although these figures don’t just apply to procurement staff.

Mark Childs, director at Total Reward Group, points out that the higher the salary, the higher the bonus procurement can command. “If you are earning £60,000 you might expect a 15 per cent bonus, but on £100,000 you might be offered a 50 per cent bonus,” he says.

This type of financial incentive has its obvious advantages – it promotes improved performance and results by being tied to personal objectives.

Jonathan Bean, managing consultant at Purcon, an executive recruitment company specialising in procurement and supply chain management, says: “Do bonus schemes work? Ordinarily they do.

Procurement professionals are tasked with delivering results – not always savings, but often performance that is quantifiable – and a bonus is a great way to acknowledge performance.”

He adds: “The size of the achievement does not always correlate to the size of the bonus and as long as the mechanisms for bonus entitlement encourage sustainable solutions rather than short-term actions, there is no reason why bonuses should not motivate over-achievement.”
Childs agrees. “Bonuses work – partly because people believe they work. In procurement if the lifecycle of the thing or service that is being procured can be measured over time then bonuses are worth looking at.”

A recruitment tool

There are added benefits, Childs explains. Not only can they increase the retention value of reward packages – which is an advantage for CPOs trying to keep talent from walking out the door – they can also be used as a recruitment tool to differentiate your organisation from the competition. 

For employers, bonuses are an effective way of keeping a proportion of employment costs variable, which offers flexibility when employment costs need to be reduced quickly, for example, during a downturn.

At an individual level, “providing a line of sight between their activity and earnings promotes a healthy psychological contract”, Childs also explains. “Often the consequences of not providing a bonus are more detrimental than the positive effects.”

Not all procurement leaders, however, are convinced by their worth and they remain a contentious issue for some practitioners.

CIPS also warns that while bonuses do have their merits, it is a particularly sensitive issue given the austere economic cutbacks being implemented in many countries, and employers should tread carefully.

Performance incentives

Coulcher says: “In times of recession and economic turbulence, retaining good staff and keeping them motivated can sometimes be a challenge. Of course procurement and supply management professionals should be offered incentives in the way other professions are and it’s just one way of keeping the high performers. Yet, with all the controversy around bank bonuses, naturally there is a degree of uncertainty on how this should be approached, and with public sector cuts even more sensitivity is needed.”

Martin Blake, head of corporate procurement at London Probation Trust, a UK public sector organisation, admits to much deeper concerns about the principle of bonuses, describing them as incompatible with the aims, integrity and effectiveness of procurement.

“They can create a negative effect for an organisation, especially when buying services. Reducing cost and making savings is easy – but at what cost to quality? Procurement professionals must act with integrity and in the interests of the greater good of the organisation rather than merely looking after their own interests. A salary should be sufficient.”

However, Blake concedes that the effectiveness of a bonus depends on the nature of what is being purchased. “If you are buying commodities or products that are very discrete, bonuses may not be so detrimental. But in services it’s a different kettle of fish. How do you put a bonus on such intangible aspects as creating robust contract terms to protect the business, or important factors such as flexibility? Procurement adds a lot more value to the organisation, for example risk management, but how do you measure that for a bonus?”

Motive to influence

By contrast, Dirk Zemke, director of strategic procurement, ESAAP, at Sensus, thinks if other departments such as sales are offered bonuses, procurement should be included in the deal too. “Purchasing has to convince other departments to change so why not motivate them with a bonus to change the thinking of others? As service levels are defined and agreed with other departments I do not think a bonus creates negative effects for an organisation.”

Zemke says there is a bonus scheme in place at his company, offering 10 per cent. “It does work. It helps to define the priorities clearly and helps people focus on these priorities. I think it’s important with a scheme such as ours offering 10 per cent to keep people focused on two or three projects a year. With a team of five that is at least 10 major projects or activities you can achieve per year.”

So what elements make bonus schemes work, how can they be structured and what criteria should CPOs set down for the individuals’ and organisation’s benefit?

First of all arrangements will differ according to role and job. Childs explains there is a key distinction between a bonus, and commission or incentive plan. A procurement manager is likely be on a more general bonus plan, driven by the profitability and results of the company, as well as having to meet personal objectives. Whereas more junior staff carrying out transactional work might more commonly be on a commission-based arrangement, directly linked to individual results.
“For junior staff, where there is a more direct relationship between what they do and results achieved in the short term, they tend to want to see the reward more quickly. So they might earn £20,000 basic but be able to increase that to £500-£1,000 more per quarter in commission,” says Childs.

Broadly speaking, there are a number of criteria or KPIs that may be common to procurement bonus plans:

1. Savings
On the face of it, this is a logical way for procurement’s performance to be measured, but there are challenges. According to Bean: “As savings can be captured in a variety of ways, such as negotiations, cost avoidances or specification changes to reduce costs, it is not always a clear-cut issue. One problem often experienced within procurement is of course the validity of savings and how they are measured or recognised within the business. If you change the specification of a material used in production, is that a saving that can be banked against procurement for identifying an alternate grade, or against finance as the cost of manufacturing the product is reduced?”
Bean also warns that the contribution by procurement can also be muddied if savings are reinvested but overall budgets stay the same.

Childs says procurement enjoying a share of the savings they make is not as common as one might expect. “It’s more likely to happen among outsourcing procurement providers, where their revenue is tied in with savings achieved. Where procurement is not the core activity of the business they are more likely to be on a conventional management scheme.”

2. Contract compliance
Candidates are often measured on this, says Bean, as well as spend coverage managed or influenced by procurement. “It can be quantifiably measured while at the same time showing how much leakage there is in contracts set up with suppliers.” It’s not completely watertight however. Procurement can often bank a saving based on anticipated budget. But the savings might not be fully realised as compliance or buy-in to a deal is poor.

3. Customer or internal stakeholder feedback 
This can often be used to validate activities and satisfaction levels and can be used as a KPI, especially if the business is encouraging experts in their field and wanting customers to have full confidence in procurement, says Bean.

4. Compliance to follow the sourcing process
A measurement that can be adopted especially within organisations keen to make sure their interaction with suppliers is fair, auditable and transparent.

5. Quality and outcomes

Offering bonuses that hold individuals to account for outcomes is an area of opportunity for innovation, explains Childs, particularly in long-term, major contracts or purchases of large capital items.

“An element of the bonus could be deferred and remain at risk subject to long-term outcomes. So if a person cuts a deal and claims a certain amount of success, but 18 months later there were outcomes or quality issues that were not so great, that person can be held to account. So a person can’t just walk away after a deal has been cut.”

Childs adds: “This is much like what is going on in the financial services. I haven’t come across a scheme like this in procurement yet.”

The value of bonuses is hugely variable – some meritocratic organisations offer up to 98 per cent bonuses, according to Bean, but he adds that it is not usual for companies to directly relate the bonus value to value of savings delivered. “Ordinarily it is a combination of company, function and individual performance,” says Bean.

Coulcher thinks the split should be about 75 per cent/25 per cent with reward linked to overall company performance and supply chain performance.

However, Bean also advises: “A typical CPO will have a pot of money that will need to be sliced and diced for team members and the exact value an employee receives is affected by whether they have hit or exceeded expectations. There is no guarantee that a higher performer will always get a generous bonus, especially if peers are also performing well and the pots needs to be divided equally.”

Ensuring an effective bonus scheme requires there to be clarity about its purpose and reason. Being clear to staff on what the bonus represents – reward for contribution over and above a job or role and how it differs from salary, which is an employers’ contribution for doing a job, is paramount to avoid confusion. Its benefits should also be clearly spelled out.

They also have to be part of a long-term strategic approach rather than about encouraging short-term wins, says Coulcher. “Otherwise it may not encourage the right behaviour in staff. There may be consequences with supplier relationships if any incentives are based on cost savings.”
Childs warns that many managers place too much faith in bonus plans and are over-reliant on them as a tool for management control. “It’s the combination of the bonus plan and management support that makes a difference to performance. You can have the most generous bonus in the world but if you don’t enjoy working at an organisation it won’t make any difference,” he says.

He also advises that plans be designed so targets can be easily modified when necessary, which will also avoid allowing schemes to get stale.

Can bonuses be taken away? Usually they are discretionary, but not always. However employment contracts rarely refer to bonuses being guaranteed, says Bean.

They are usually cut when people are more concerned about job security than they are about earnings. “It’s very difficult to take bonuses away in boom times,” Childs warns. 


Five tips for implementing a bonus scheme

Align performance measures to your procurement function needs for both now and the medium term.

Keep bonus schemes fresh. Periodically change performance measures and be prepared to revise targets to reflect changing circumstances.

Align payment frequency to the procurement cycle. If you are letting long-term contracts then consider deferring some element of the bonus to be able to measure on outcomes and quality.  If you are trying to incentivise short-term, tactical, small-scale results, consider monthly or quarterly payments.

Think about the total reward package on offer to staff. It’s not just about earnings from a bonus. Personal development is also important, so too are opportunities to climb the career ladder, and the culture of the business plays an important part in motivating teams.

Be situational. Don’t look for best practice or compare with another organisation’s bonus plan. Have the confidence to do what’s best for your own business.”

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One of the keys to surviving before excelling in the corporate world is knowing how to read hidden agendas.  As an agent of change, I need to interact with a large number of internal colleagues before I can go about exercising what my clients want with the outside partners and suppliers.  What we call stakeholder management skills need to come into play.  However, never, ever assume people’s intentions with only the titles on their name cards.

Do you want to be judged by the book cover?  Of course not.  Do you like to be stereotyped by the function or line of work you take part in?  In order to ensure that one genuinely adds value to a decision, he or she has been prepared to announce something new, something bold, or something clever.  Whether you agree with that or not never is the issue.  It is the individual’s hidden agenda that you want to uncover through the conversations you carry out with each and every one of them.  Listening, and reading minds, therefore, is the real key to success.

A newly on-board executive who is badly in need to prove himself.  A neighboring department head who is plotting to eat up your team or even the department.  An overworked manager who cannot be bothered by another new initiative.  A VP who tries to make influencing decisions in using a partnering firm that he has close ties with. 

It doesn’t take a genius to come up with tons of examples like the above, but it does take one to identify and draw such agendas out of everyone before designing tactics accordingly.  It is not easy to be seen, since most of your colleagues have been in the corporate workplace for years.  They are masters of sugar-coating intentions.

So whenever we go about talking with business partners, always consider these questions:

  • Why is this happening?
  • Who are the players?
  • What are the benefits?
  • What are the players each benefiting from, and how?
  • What can I get out of it?
  • How do I go about getting what I want?
  • What are the risks?
  • Are my benefits worth the risks?
  • Is this really what it appears to be?

In my experience it is always this last question that is most valuable, and it isn’t too hard to figure out once you conduct your share of due diligence. 

Last word of advice:  If you want to stay in one piece, you better keep these hidden agendas in the wraps, as long as they are legal!

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I came across an excellent article on CPO Agenda written by Tom Lawrence, strategy director at European procurement specialist buying team.  Those of you who have read my earliest posts on procurement branding will understand my frustrations and aspirations of my profession.  If you are keen in hearing another person’s views, I have taken the liberty to honor Mr. Lawrence’s work by copying his article here.  I will read it again and again as it echoes my views and vision exactly.  For those of you in my profession who would like to get in touch with Mr. Lawrence and his consultancy, please feel free to visit his company’s website.  The bold formatting is done by myself in highlighting the parts that resonate with me most.


What’s In A Name?    By Tom Lawrence
“The profile of indirect spend has grown considerably in recent years, but it is currently receiving more attention than ever before. There are two principal factors behind this rise.

Businesses are struggling to grow their top-line revenues. While forecasts do predict growth, this is weighted heavily towards 2013 and beyond. The outlook for the next two years is very sluggish. Therefore, to increase shareholder value, organisations are focusing on the bottom line, and on cost management.

Procurement is making headlines. Three recent government reports – Sir Philip Green’s efficiency review, the Strategic Defence and Security Review and the Comprehensive Spending Review – have turned the spotlight firmly on procurement and the consequences of not managing it effectively.

Procurement has come a long way in the past 20 years. However, the journey is far from complete. The renewed focus presents us with an opportunity to redefine procurement as a key strategic support function at the very heart of business. Yet indirect procurement’s value is frequently misunderstood, and this ambiguity leads to business leaders undervaluing it.

There are several fundamental questions which, as a profession, procurement simply does not provide consistent answers to. If we are unable to clarify these issues ourselves, it’s no wonder ambiguity occurs elsewhere.

It’s all in the name. First, perhaps surprisingly, is the terminology that we use – indirects, overheads, goods not for resale (GNFR), and non-core. All these words are both negative and imprecise. Indirects are simply the opposite of directs. The same goes for non-core and core, GNFR and GFR. Using only negative terms immediately relegates them to the second division, where they are perceived as secondary and unimportant, if not irrelevant, when in fact the complete opposite is true. Procurement is crucial. Without it, an organisation simply cannot function.

We need to shift fundamental perceptions, replacing the perception of procurement as a cost to one where it is valued as a business-essential activity. And it might be time to adopt a new name for this activity – one that reflects its importance and which will help to change mindsets. At buyingTeam, we have been using the term ‘Enabling Spend’ for several months.

If you look at text books or read market research to answer the question ‘what is procurement?’, you will find much around the source-to-pay process (eg, supplier relationship management, contract management, strategic and tactical sourcing, spend analysis, etc.). All of which is true and accurate. But business engagement – a key ingredient for successful procurement and an essential catalyst, in fact – is almost completely ignored. Procurement’s potential is released when it looks not only outwards to the supplier community, but at its own organisation, acting as an internal consultant or analyst, challenging and influencing behaviours, business rules and ways of working.

Beyond an almost cursory acknowledgement of the need for change management, business engagement is ignored by most textbooks and research and, to be quite frank, by many procurement functions. Procurement will only ever be viewed as a function to secure the best deal if that is all it focuses on, or all that it is tasked to achieve.

There is no common or industry-wide understanding of the areas that make up Enabling Spend. In some organisations, professional services such as audit fees or bank charges, for example, fall outside the remit of procurement. In almost all of the organisations we work with, there are areas of spend over which procurement has little influence, and these can include large spend marketing and IT.

The function may be engaged by the business to negotiate a deal, but all too frequently buyers are not trusted with any further involvement. The root cause of this attitude is the ongoing lack of understanding, even among the CFO community, of how procurement’s principles should be applied to all areas of spend. This is a missed opportunity.

What works for direct procurement doesn’t necessarily work for Enabling Spend. Enabling Spend contains hundreds of diverse categories, with thousands of suppliers serving a very wide range of stakeholders, all of whom have different needs. In comparison, directs has far fewer areas of expertise, suppliers and stakeholders. So a totally different approach is needed – yet many organisations apply their directs approach to Enabling Spend.

The range and depth of skill sets that Enabling Spend requires, – such as commerciality, change management, communication, procurement and deep category knowledge – are vast. ‘Best in class’ is a misleading concept. What is right for one organisation is not necessarily right for another. Procurement must be tailored according to an individual organisation’s culture, structure, profile and strategic aims to deliver the best results. Rather than ‘best in class’, a more useful question to ask is: “What do I need?”

Which brings us to procurement outsourcing. Even here there is confusion. Procurement outsourcing has come to mean different things. To many people, it involves shifting work wholesale to low-cost countries using technology and streamlining processes, running the same processes for less money. It’s all about efficiency. Yet true procurement outsourcing – and where multiples of the value achievable through efficiency are possible – is about how to do procurement better. The benefits are all about effectiveness.

Given all the above, it should come as no surprise that business leaders remain unaware of what is achievable by getting this right, and are therefore failing to prioritise it above other initiatives.

Finally, organisations are simply not investing enough in the management of their Enabling Spend. This is certainly preventing large elements of the above from improving, and is possibly the root cause of much of it. In our experience, procurement can and should be generating a return on investment of between 8 and 15 times. This is a huge benefit and one that substantially outperforms the ROI generated by most other investment decisions. Moreover, it goes straight to the bottom line. We see time and time again that the opportunities to improve shareholder value and operational performance are great – and way beyond the expectations of the senior executives.

The value that most procurement functions deliver is simply not good enough. Yes, much of this is due to the lack of investment in procurement. Yet we, as a community, must shoulder our fair share of the blame.

If procurement is to take its rightful place as a key strategic support function and be recognised as one, it’s time for us to address some of these fundamental issues. In doing so, we can continue to push procurement to front-of-business leaders’ minds as a powerful strategic asset that can deliver real business improvements.

The time has come for us to raise our game and, in doing so, release procurement’s true potential.”

If you have read my earlier posts, you will remember that I have written about delivering solid ROIs to my employers (my commitment is 7 times and up, comparing to Mr. Lawrence’s 8 to 15 times), as well as constantly expanding our span of involvement to areas of above-the-line marketing, consulting, sponsorship and professional services so as to further maximize the author’s definition of “Enabling Spend”.  If you are interested in joining my (and Tom’s) vision of “raising our game”, I am more than happy to hear from you!

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I was reading the Executive Coach section of CPO Agenda when I came across a very interesting question for coach Dr Richard Russill, who is a business coach and author, specializing in supply, cost and relationship management.   The question is: “People are debating whether “procurement” is the right name for … procurement.  What do you think?”

Dr Russill replies are: “Despite its dodgy connotations the ‘P’ word is too well embedded in the business vocabulary for it to change. Where Google, even recently, suggested ‘Community Post Office’ or ‘Chief Petty Officer’ for CPO, it now comes up with what this journal stands for. Besides, it is perceptions within companies that matter. It is great if your CEO understands procurement as a key business driver. But re-badging procurement is a waste of time if company colleagues still see it as a function in which they are not involved.

Yesterday I was folding village newsletters into envelopes. Recalling Adam Smith’s pins, I found that it was faster to do all the folding, then the insertions, then the stamping, as separate activities. It was also totally mindless. That’s the problem with functions in business. Despite being functionally excellent they can seem mindless if the job is to follow instructions set by others, as distinct from influencing the process which creates instructions. Procurement is not a function but a cross-business team activity with purchasing and supply operating as a sub plot. The CPO’s dual role is to inspire intelligent commercially-aware decision-making as well as minding the supply task. Making this a reality requires story-telling and tangible supply successes…not a new label on the bottle.”

Well I can’t agree more.  Over the years I have personally lived through many names of our profession such as strategic procurement, operations procurement, procurement and supply chain, purchasing services, enterprise supply chain services, global procurement, and global real estate and purchasing services.  Every two or three years all companies are itching to do some rebranding, but the only thing that matters is how top management engages procurement and the rest of the business teams together.  When I used to be the head of procurement for Greater China in American Express,  I found myself in front of my senior business leaders and stakeholders every 8 months or so, reinforcing everyone that regardless of how our names changed, I would still be there to take care of the same duties.  Yes that is exactly how frequent our restructuring took place.

And this restructuring also means that our titles, levels, geographic and commodity responsibilities keep getting reshuffled.  New organization charts were drawn, and everyone needed to re-apply for the new posts, or even the same posts that they were assuming.  The job applications needed to go through the routine interviewing and grading process.  Some posts were added, and some were eliminated.  Such process lasted at least 3 or 4 months after it was publicized, and I had experienced it more than once druing my tenure.

At the end of the day, my core responsibilities were exactly the same.  The number of my superiors had expanded, and my local stakeholders simply could not care less.  The management consultancy engaged made a buckload of money.

And the world turns.

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Self-Mockery (Part Two)

There are definitely monkeys in my workplaces over my many years in the profession.   The worst thing is not with the monkeys who may be genuinely inexperienced, but with their lazy bosses who won’t move out of their desks and offices to face the customers.

So, maybe I should label them as zookeepers from now on?

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Self-Mockery (Part One)

If the above is what you are witnessing in your work place, call me, and send your colleagues the link of this blog. 

I will surely enjoy my chats with them.

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I think I am cursed.  Just two days ago I had to go to a new hair salon because my regular stylist was sick at home.  Aside from the obvious dialogue on styling preferences, the new guy asked me the one question which I dreaded the most.  You will know what that is from my very first blog post here.  “Sir, what do you do?”

This question is one of the very fundamental reasons why I themed this blog around my work.  Since I am not the type of person who will just mumble some ambiguous crap to dismiss such questions, watching other people’s blank stares has always been my biggest fear.  I therefore tried my best to describe my work in the most conceptual manner.

It seemed to be working.  My new stylist seemed to be genuinely interested and kept asking me follow-up questions (or maybe he was way too courteous to yawn in front of me).  Soon enough I found the other stylists as well as assistants eyeing our way.  I think they were just puzzled to hear some weird chap babbling about his career at a high decibel.  Also, you can clearly see from their eyes that they have never heard of such profession in their lives. 

“How can one enter this profession?”

“What are the qualifications for your job?”

“I have never met any client who do what you do!”

It’s exhausting to answer these questions as I never want to misrepresent my profession, if the other party is genuinely interested.  After hearing my elaborate answers, my new stylist jokingly said that I should start a teaching career.  I told him that was partly what I did on a corporate level instead of a commercial one. 

“So what is your title?” I think he was asking for what my company put on my name card.

When I answered “procurement” both in English and in Chinese, he confessed that he had never heard of it in his entire life.

Alright there is just something seriously wrong here.  I am not trying to glorify what we do here, but when there is this low level of general awareness around us, we need to take responsibility.  Perhaps we have been doing a sucky job in the past that makes us so redundant.  Maybe the results and deliverables we generated can’t really be traced back to our efforts.  Maybe we were never good at advocating our value in front of clients, and perhaps even chose to stay in the comfort zone of assuming tactical purchasing roles that is increasingly commoditized. 

I can’t depend on the others, and so I will try my best to continue doing my part to help elevate such awareness, especially when I know there is immense value we provide to our employers.  I won’t be an obnoxious geek when I hang out with my friends and peers, but I surely won’t be shy in front of business clients and partners. 

There I said it.  Let’s see if I will get killed one way or another.  If you don’t know what I mean, read this!

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You see them staring at you on 5-storey high billboards.  You see their dashing smiles and authoritative poses on the city’s buses.  You see them on full-page newspaper ads where they are pictured with hundreds of students holding up their straight-A report cards.  Yes, they are the city’s star tutors, though they dress and behave like your TV and movie idols.  This, is a multi-billion dollar industry.

When I grew up there were a few tutor schools where we got ourselves enrolled to brush up for upcoming public exams.  Those were usually a few sessions only for each subject and the fees as I recall were nothing like what students today are paying.  The star tutors today have evolved to almost replace the normal daytime schools that students go to.  Their curriculum is tailor-made to survive public examinations, and hence the star tutors spend a considerable amount of time researching the latest examination trends and marking schemes.  Many of them possess enough star qualities to lure aspiring students.  They are well-groomed, articulate, and hardly much older than the kids themselves, making them extremely relatable and approachable – comparing to the day school teachers.  They hire assistants to help them prepare fancy notes and even run errands because their tutoring schedules are so hectic from running around several tutor centers in the city, usually on a daily basis.  They hire image consultants together with professional make-up artists, photographers and designers to make sure they are marketable in this lucrative business. 

I am not here to criticize whether these star tutors have twisted the idea of education, or whether it is unethical to make money out of young kids.  In fact, this is a common trend of fast food mentality of Hong Kong where everyone focus on only the results rather than the means.  The blame is with everyone.  I just see this as a classic example why training and teaching techniques need to be evolved according to times.  Everyone can find subject literature in books and over the internet, and they need no one to simply read to them and repeat case studies from textbooks. 

Students want to hear relatable material so that it helps with digesting and understanding the subject at hand.  In my field of strategic procurement training, we always make use of real life case studies to illustrate the theories we advocate.    Public sector case studies are often popular due to their wide coverage over TV and newspapers.   On the other hand, the trainees also don’t want to be preached  like young school kids.  They want to feel that they are also contributing to the class and hence we are often moderators instead of trainers.   I like the idea that the star tutors are organizing social activities to help bond with the students.  I know, you may argue that they are in fact sucking up to their paying customers, but if the students do not feel that the classes are enjoyable and effective, there are tons of other tutors out there.

I dream of the day that there will be similarly inspired tutor centers some day where we can offer consulting advice to working procurement professionals, whether it is in terms of career progression advice or anonymous yet real life work issues.  As the next generation of public-exam-tutors, will there also be star tutors for new career professionals?  Come to think of it, the “rules at work” are even less scripted and way more challenging.

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I was looking for salary survey information for some research and just realize that the latest figures won’t be available until first quarter next year.  While surfing the two main industry certification bodies, namely The UK-based Chartered Institute of Purchasing & Supply (CIPS), and US-based Institute for Supply Management (ISM), I come across some interesting facts of the year 2009.

I know and I have been advocating all along that the procurement profession has undergone a major transformation over the last few years.  However I am still quite shocked to read from the CIPS – Croner Reward salary survey (conducted between October and December 2009) that procurement and supply professionals get paid more than peers in marketing, finance, IT and human resources in graduate careers.  Salaries obviously reflect experience, qualifications and ability, so graduates entering the profession need to prove themselves by showing a willingness to learn, independent thinking and determination. 

This is definitely great news for us to recruit graduates into the profession. 

In terms of experienced procurement professionals, the ISM 2010 Salary Survey (covering 2009 data) shows average salaries by titles range from US$50,506 for entry level positions to US$240,408 for chief procurement officers.  Total average annual compensation is US$98,200, and 34% of respondents reported earning a salary of US$100,000 or more.  The reported high salary was US$620,000 for the men and US$690,000 for the women.  Bonuses are already included in these figures.

I know, salaries shouldn’t be the only luring factor for graduates, but I truly believe that it has to be appropriately measured up against the value and results we deliver.  There is never any excuse for corruption or bribery activities, but face it, the likelihood of that happening is higher with underpaid procurement professionals.  As covered in my pervious posts, we should always uphold the highest level of integrity at all times.

On the same CIPS site I discover a fabulous Graduate Guide to Procurement, aimed at introducing what procurement is to graduates.  It provides a wealth of information including industry 101, salaries, environment, industry outlook, job hunting, CV writing, personality tests, and a number of corporate case studies including British Airways, Rolls-Royce, Starbucks and Apple.  Highly recommended even for those who are just interested in knowing what we do for a living!

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