Rough estimates predict that 200,000 senior procurement positions will open over the next few years. The inevitable talent vacuum is coming. Is your company prepared for the inevitable exodus of procurement talent?
Employees' diminishing retirement funds bought procurement teams much-needed breathing room from the departing Baby Boomer generation. However, the market will eventually recover and executives will be anxious to get on to the retirements they've worked so hard to earn. According to the U.S. Census Bureau, more than 60 million Baby Boomers will leave the workforce by 2025, and only 40 million new employees will enter. Are the ranks ready to close this gap and fill the leadership positions?
Strategic Sourcing's Special Role
Retiring Baby Boomers will affect almost every profession across all industries; very few occupations will be left untouched. Why the special emphasis placed on sourcing?
For organizations large and small, strategic sourcing has transformed into a key competitive weapon. The role of the chief procurement officer (CPO) is on the rise as sourcing organizations mature in their ability to achieve hard savings, cost avoidance and supplier value contributions. The recession emphasized this as sales have slowed and companies have faced the pressure to cut costs and increase savings. So what we see is a discipline that is evolving in its maturity, while, at the same time, demand for sourcing professionals is rising. The pending retirement waves are icing on the cake.
The challenge from a skill perspective is the discipline's highly specialized nature. Effective sourcing professionals have to learn the breadth of skills required by the source-to-contract process in addition to commodity specific expertise. Given that many commodities are sourced on a two- or three-year contract cycle, it can often take many years for new employees to mature into rounded sourcing professionals capable of strategic planning across multiple commodities. Like many professions, this development is accelerated by a solid university education, but it does not serve as a replacement for the relationship and experiential skills earned by managing commodities.
Generally speaking, two to three years are needed for new employees to master their first commodity, although this varies greatly based upon the complexity of the commodities and the depth of subject matter expertise required to understand it. For example, expertly managing a billion dollars in real-estate acquisitions for a major financial institution could require a decade or more of experience by an executive-level resource, while sourcing office supplies for a midsize corporation could be handled by a new employee with some coaching. The important lesson here is that a large part of success is defined by the sourcing knowledge resident in the individual, and the more critical and complex the commodity, the higher the skill requirements. So once the senior team leaves, years of knowledge and experience depart right along with them. This may be easily manageable in the case of office supplies, but it could be catastrophic if multiple commodity managers at the level of our real-estate example leave simultaneously.
Not buying into the challenges caused by the departing Baby Boomer generation? Putting the issue aside, the need for knowledge transfer and skill development for sourcing executives can be seen just as clearly through the recession. Departments are slashing budgets and reducing staff sizes, and resources are becoming continually scarce. More than ever before, organizations are leaning on the sourcing team to perform at greater levels with fewer resources. And, as we all know, year-over-year savings and value contributions become incrementally harder to achieve as more spend is placed under management and the low-hanging fruit is picked. Continuing to drive value requires an ever-increasing skilled set of sourcing professionals.
Between the impending demand shortage and current market pressures, the clock is ticking for sourcing departments to define a skill strategy. The time has come for companies to leverage the skills and talents that only exist in their senior procurement team's heads — and, more importantly, to develop strategies to pass along the generational expertise to the next wave of staffers before the existing talent is lost. It's the skill equivalent of cost-avoidance.
Opportunity Assessments — Identify the Talent Gaps
While procurement talent shortages are certainly coming, organizations still have time to prepare for the exodus of retirements. Smart companies are taking action and building infrastructures that continuously capture their current talent base's knowledge. The end goal: Creating a knowledge bank that can be utilized to build talent when skilled sourcing professionals become scarce.
The first step in building a talent infrastructure is identifying the processes that your organization needs to achieve desired savings levels each year. This sounds simple enough, but planning stages are absolutely critical to the program's success; without them your skill strategy won't be aligned with your sourcing objectives. Once management understands the end game — where the company wants to be financially — mapping a plan to a particular set of skills becomes simpler. Evaluate the team honestly by asking these questions:
- What are my organization's top business priorities for sourcing?
- What projects are critical to the success of the sourcing plan?
- Do we have the skills to succeed on these projects?
Skill Assessment and Knowledge Transfer in Action
The Clock's Ticking
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