Tactical Operations Benefit from Separation, Too
While freeing up resources to be dedicated to strategic tasks assures that those strategic tasks get the necessary attention and get completed quickly and with quality results, tactical procurement also stands to benefit.
Though I used examples of several different crises that happen in tactical procurement, much of the tactical procurement landscape is characterized by routine transactions. Many organizations measure both strategic and tactical procurement performance, with tactical procurement metrics including things like requisition cycle time, purchase order errors, etc.
When a segment of a procurement team can focus strictly on tactical work, improvement in these tactical metrics can be dramatic.
The Challenges of Separation
Despite the benefits of separating procurement work into dedicated tactical and strategic assignments, there are a few downsides.
The first downside is that tactical work may not appeal to more ambitious team members. They may not find it challenging, and the path to career advancement may appear murky to them. Relegating someone with aggressive career aspirations to a permanent tactical role is a recipe for attrition.
The second major downside is the inherent potential for communication disconnects. For example, if one person negotiates a contract and a separate person is responsible for managing the day-to-day activities of that contract, there is a possibility that what is negotiated may not be enforced and the Procurement organization would be none the wiser. As another example, the person responsible for writing and negotiating the terms and conditions may have little understanding of the day-to-day realities of the supplier relationship and, therefore, may fail to address important operational issues when putting together the contractual agreement.
Overcoming the Challenges of Separation
While there are indeed challenges to separating tactical and strategic procurement responsibilities, those challenges should not dissuade one from doing so for his or her department. Most good ideas will have obstacles, it’s just a matter of identifying those obstacles and getting around them.
If you’re worried about putting one of your star performers on a tactical team and that star performer becoming dissatisfied and ultimately leaving the company, require a rotation where your top performers cycle onto the tactical team for six months before going (back) onto the strategic team.
This way, your top talent is kept interested, you have resources capable of handling the big tactical challenges that invariably arise, and you can actually bring some of those strategic projects to a successful completion!
Rotation between separate tactical and strategic teams is obviously one viable approach that has worked for many companies. UPMC, an $8 billion global health enterprise, took an alternative approach.
UPMC is an organization that prides itself in bringing in only “A” players to its Procurement department. And it once had separate tactical and strategic procurement teams. However, it learned that long-term, purely tactical assignments for “A” players were not perceived as fulfilling to those employees. Between 2007 and 2009, it experienced turnover of up to 60 percent per year on its tactical team.
This unacceptable turnover rate obviously warranted action. Rather than going the rotation route, UPMC united the tactical and strategic teams yet kept the tactical work distinctly separate from the strategic work.
Now, subteams within the UPMC Procurement department have a tactical procurement specialist and a strategic procurement specialist, each with discrete roles. Today, the employees in tactical roles are better able to visualize a future of performing strategic work. It’s not coincidental that the turnover rate associated with job dissatisfaction fell by more than 50 percent – a welcome trade-off. In addition, the aforementioned communication gap was closed because of the now close linkage between those negotiating the contracts and those administering the performance of the contract.