By Anne M. Kohler
Gone are the days when it was enough to deliver incremental savings by forcing suppliers to shave a couple of percentage points off their prices. Now CEOs are demanding that their supply chain/strategic sourcing organizations become competitive competencies for their companies. Creating complex global supply chains to take advantage of constantly moving cost arbitrage opportunities and managing the inherent risk involved; constantly increasing the value from supplier relationships by relying on them for things like joint product innovation; and having supply chain strategies drive business strategies — these are examples of the new realities facing our profession. In fact, in certain industries the supply market is so constrained that the sourcing professional's challenge is to create competitive advantage for the company by securing capacity at favorable terms over the competition.
The role that supply chain/strategic sourcing professionals are expected to play in today's environment has shifted dramatically, demanding competencies that reach far beyond traditional process skills. Savvy supply chain/strategic sourcing leaders have recognized that "process" skills are not strategic. Some of the skills and competencies necessary to play a more strategic role are: consulting and facilitation, change management, project management, industry expertise and information technology savvy. In addition, the complex issues that face world-class supply chain/strategic sourcing organizations require a brand new way of thinking about skill and competency development.
This article will focus on the complex issue of talent management within a supply chain/strategic sourcing environment and how effective people development can be your secret weapon.
What is "Strategic"?
The definition of "strategic," according to Webster's Dictionary, is: "Of or relating to strategy. Of great importance within an integrated whole or to a planned effect." The Mpower Group's (TMG) sourcing/supply chain Maturity Model highlights the meaning of "strategic" within sourcing/supply chain and how it has shifted over the last five years. This model allows us to look at the characteristics of a sourcing/supply chain organization at various levels of maturity:View Maturity Model
The Value Creating maturity level is where truly "strategic" organizations operate. Elements of this maturity level are:
- Corporate, business unit and sourcing/supply chain goals and objectives are tightly aligned and managed.
- Sourcing/supply chain leads value engineering efforts to drive out inefficiencies.
- Technology is appropriately deployed and seamlessly integrated into process.
- The strategic sourcing process is well-defined, articulated and utilized throughout the organization.
- A robust infrastructure is in place to support the strategic sourcing process (tools, templates, etc.)
- Global supply markets are researched for cost arbitrage opportunities.
- Performance metrics are closely tied to strategic goals and objectives.
People are clearly your strongest asset and your source of competitive advantage. When we look at the role the sourcing/supply chain professional plays, it is very different from the old approach of "three bids and a buy." Today, sourcing/supply chain is strongly supported by senior management and led by a C-level executive. The sourcing/supply chain professional is considered to be among the best and brightest in the company and helps to define enterprise strategies. In addition, sourcing/supply chain is involved in or leading product strategy and development. The role, which is really a combination of several roles, is more than that of an expeditor:View Sourcing/Supply Chain Professional Role
In order for a strategic sourcing/supply chain professional to be able to play this emerging role, he or she must have a unique set of skills and competencies, which are concentrated in three key areas:
- Consulting skills
- Change-management skills
- Sourcing/supply chain process skills
In a recent meeting of the Best Practices Xchange, hosted by TMG, top sourcing/supply chain executives gathered to discuss best practices as they relate to talent development in strategic sourcing/supply chain. When the group was asked about the type of competencies required to be "strategic" today, there was overwhelming agreement on the three areas noted above. When asked the question "Are you there yet?", most admitted that they clearly are not, and the challenge of people development is a key issue in this regard.
How to Become "Strategic"
There are four key elements within an effective talent management program that need to be aligned and integrated for success: recruiting, people development, career development and compensation. The one common thread that runs through all these elements is "clearly defined competencies." In recruiting, define the role your recruits will play within your organization and the competencies required to execute that role before you begin hiring people.
In people development, understand the competencies required to be successful within your organization, where your organization is today against those competencies and what the gap is. That competency gap analysis should then drive your training and development programs.
In career development, it is necessary for you and your employees to clearly understand the competencies required to move to the next level, so you can help them get there.
In compensation, most Human Resource departments will need to know the competencies required for a sourcing/supply chain professional, along with the role the new hire will play in order to fairly assess the salary market. In other words, the development of a comprehensive competency model is an absolute necessity in winning the talent management game.
How do you get started in developing a comprehensive competency model? The first step is to identify those technical and functional skills and competencies necessary to function at a world–class level within a strategic sourcing/supply chain environment within your organization. Step two is to evaluate your current organization against that world-class model to identify skill gaps and develop gap closure strategies. The ultimate goal is to enable your sourcing/supply chain organization to realize the full benefits of world-class strategic sourcing by determining the current organizational gaps and developing strategies to close those gaps.
In 2003, FMC Technologies (FMC), working closely with The Mpower Group, started on a multi-year journey to transform its global procurement organization. Randy Ellis, chief information officer and chief procurement officer of FMC, had this to say about developing a world-class organizational competency model for his staff of over 180 procurement professionals: "It raises the bar. It's a big change for us as we continue to transform procurement from tactical to strategic. I'm looking to set a standard for a higher level of performance."
Here is the process TMG utilized when working with FMC:View Process
A competency model is developed from a number of inputs, including the executive's vision, employee job analysis interviews, interviews of key strategic sourcing customers, current job profiles and extensive research of world-class sourcing competency models. The model is very detailed, generally covering seven to 10 competencies, like change management, supply chain management and IT, across four different proficiency levels (foundation, intermediate, advanced and mastery). The model should be defined by behaviors to make it practical and usable.
The single biggest challenge is ensuring that your competency model reflects the evolving and more strategic role of your organization. Process skills are no longer enough for sourcing/supply chain professionals to be successful.
Once your competency model is complete, it is critical to assess where your current organization is against the model. If your competency model is effective, there will certainly be a gap, which is okay because building a sustainable, strategic, world-class organization cannot and will not happen overnight. The point is to have stretch goals for each individual and the organization to work toward and to have a well-defined model to drive every aspect of your talent management program.
Next, a customized assessment instrument should be used in performing the gap analysis. Each employee (or a representative sample for very large groups) completes the assessment instrument and validates it with his or her supervisor through an open and positive face-to-face meeting to develop consensus on the individual's current competency levels, identify true needs and build ownership of those needs in the individual. The assessment instrument can also be used for ongoing review and alignment activities.
Gaps for each competency area are compared across individuals to identify overall department trends and closure strategies. Training may not be the appropriate closure technique for all gaps; in those cases, alternative strategies may be chosen. These may include coaching/mentoring, on-the-job learning or self study. For those gaps where training is the appropriate intervention, a customized training curriculum should be developed by job family.
FMC used its competency model to develop a global training program for its sourcing/supply chain leadership team and professionals, buyers and other FMC employees involved in the supply chain, such as project and product managers. The training program was developed and customized by The Mpower Group through its' Strategic Sourcing University. (For a full case study of FMC's project with The Mpower Group, see the online exclusive sidebar to this article.)
Building Individual and Organizational Competency
For a sourcing/supply chain organization, paying attention to individual competency is simply not enough. You also need to be concerned about organizational competency, which requires that each individual is given the training, infrastructure, organizational support and on-the-job learning experience to be able to raise the level of competency for the organization as a whole. If you think of the sourcing/supply chain organization as a consulting firm, there are a number of things that such companies do to ensure "organizational" competency, such as:
- Developing a deep understanding of the "consulting process," which can be applied to any business process (i.e. strategic sourcing)
- Developing standard processes, tools and templates
- Developing a common language/lexicon
- Providing an environment to share experience among consultants LI>
- Developing deep project management skills
- Providing a robust knowledge management system
While working on developing individual competency through the deployment of TMG's Strategic Sourcing University, FMC is also working on developing organizational competency. TMG is currently working with them on developing a standard sourcing process manual along with a standard toolkit. In addition, FMC is in the early stages of developing an online knowledge management system.
Milton Young, FMC Global Subsea Supply Chain director, remarked: "In supply chain, we see our people as our greatest competitive advantage. We are investing heavily in developing a world-class sourcing/supply chain organization, and we are beginning to realize huge benefits."
Truly "strategic" sourcing/supply chain organizations have concluded that their people are their most valuable asset. Effective talent management, particularly in the area of people development can be your secret weapon in reaching the strategic maturity level. But beware: Once your sourcing/supply chain professionals become strong internal consultants, it will be difficult to hold on to them.
About the Author: Anne M. Kohler is executive vice president, chief operating officer and a founding partner of The Mpower Group (TMG), a certified minority supplier that services Fortune 500 organizations globally, solving complex issues related to their supply chain and strategic sourcing operations including outsourcing and off shoring. TMG emphasizes world-class business practices related to strategy, process and technology that truly drive superior financial results for their clients. Anne has been leading consulting and financial management organizations for over 20 years and has extensive expertise in strategic sourcing, change management, organizational design, and supply chain management. More information available at www.thempowergroup.com.
FMC Technologies Adopts a Strategic Sourcing Competency Model
For some years, FMC Technologies ("FMC") had been introducing strategic sourcing across the organization and, as a result, realizing measurable benefits, both in the way the company conducted business and its bottom-line performance. As a means to accelerate its progress, the company partnered with The Mpower Group ("TMG") to help them transform the current strategic sourcing/supply chain organization. Randy Ellis, chief information officer and chief procurement officer, provided the leadership and sponsorship of the effort for FMC.
FMC recognized that its current strategic sourcing/supply chain organization had significant gaps when compared to a world-class model. These gaps existed for a number of reasons:
- The changing role of the strategic sourcing/supply chain professional;
- Divisions working autonomously, resulting in very different job profiles and roles across divisions;
- Lack of a common sourcing process/toolkit;
- Skill gaps that reached beyond traditional strategic sourcing/supply chain skills (i.e. change management skills, consulting skills, etc.); and,
- Lack of recognition from internal customers that strategic sourcing/supply chain could be a valued business partner.
These challenges were considered in developing the world class competency model, identifying the existing gaps and, most importantly, identifying practical, actionable solutions to bring FMC closer to world class.
The Mpower Group was selected to assist FMC because of its thought-leadership in the area of strategic sourcing/supply chain and experience in building world-class sourcing organizations from scratch. TMG recognizes strategic sourcing as a major process change for most large companies. Strategic sourcing/supply chain professionals are required to not only play the role of "change agent" but also to function as internal consultants. As such, strategic sourcing/supply chain organizations need to be equipped with three types of skills: strategic sourcing/supply chain process skills, consulting skills and change management skills. In addition, TMG feels so strongly that organizations should develop their own internal talent that one of its key offerings is a "strategic sourcing/supply chain university" that offers a set of modules customized for each client into a meaningful curriculum.
FMC leadership also recognized the importance of managing change and adopting a consulting mindset in executing the strategic sourcing process. They felt confident that TMG was the right partner to help them move toward a world-class strategic sourcing/supply chain organization.
For this project, TMG worked closely with FMC senior strategic sourcing/supply chain leaders to develop a world-class technical/functional competency model as a guide to drive the strategic sourcing/supply chain organization in that direction. The two companies worked together to identify those technical and functional skills and competencies necessary to function at a world–class level within a strategic sourcing/supply chain environment.
Step two was to evaluate the current organization against that world–class model in order to identify skill gaps and develop gap closure strategies. To that end, TMG assessed the current organization against the world- class model and determined the gaps, and then helped develop gap closure strategies.
At the start of the project, TMG launched the effort by spending time with Eliis and the supply chain director for each of the four business divisions within FMC. These key executives were able to provide insight into the current state of the Sourcing organization and their future vision for sourcing. It was clear that they were looking to transform the current tactical group into a more strategic business partner within the divisions. This resulted in a shared understanding of the competencies and skills required to build and operate a new, more strategic sourcing organization.
This process also provided a starting point for assessing the skills within the current organization and their potential needs for training and other development strategies.
The second part of the assessment explored the attitudes, perceptions and concerns of the existing strategic sourcing team, further defining skill gaps and investigating their view of the new organization. This was accomplished through very detailed job analysis interviews for a sample of employees across different job families. This helped TMG to understand the "unique" nature of working in the FMC environment. In addition, this interview process placed the TMG consultant shoulder-to-shoulder with the employee as they walked through job-related successes and failures in their job at FMC. This provided TMG with insight into the competencies that would be necessary for an employee to be successful in the FMC environment.
FMC benefited not only from the development of the competency model, but from the early involvement of the Strategic Sourcing team. Engaging the team early began fostering the buy-in, sense of ownership and commitment necessary for any successful change initiative.
Developing the Model
The competency model was developed from a number of inputs: the executive's vision, the employee job analysis interviews, interviews of key customers of strategic sourcing, current job profiles and, most importantly, the research that has been conducted by TMG of samples of world-class sourcing competency models. TMG developed a "straw man" model and reviewed it in detail with the executive team. The model was very detailed, generally covering seven to 10 competencies across four different proficiency levels (foundation, intermediate, advanced and mastery). The model was defined by behaviors to make it practical and usable. An excerpt from a TMG competency model follows, illustrating the change management competency as exhibited at the mastery level of a given job family:
1.4A.1 — Works with executives to provide change leadership beyond Sourcing and Procurement.
1.4B.2 — Innovative industry leader who develops high-level organizational change management models and practices that elevate performance and operational excellence for FMC Technologies and its partners.
1.4C.3 — Interfaces often with executives to establish alignment and advise on change sponsorship, articulating vision and strategy for strategic sourcing and procurement.
1.4D.4 Incorporates change methods and new [key performance indicators (KPIs)] into how business is done and performance is measured (reshaping the business scorecard) at FMC Technologies.
Once developed, the competency model was mapped to each job family. FMC was able to group all their strategic sourcing/supply chain jobs into five job families as follows:
- Sourcing Professional
- Process Support/Expeditor
These job families are important because they allow the competency model to be relevant across numerous levels of the organization. For example, everyone needs some level of competence in change management but at significantly different levels of depth and proficiency. Those individuals in the Leader job family need to display behaviors at the mastery level (see model above) while those individuals in the Buyer job family only need a foundational level. This approach accomplished many objectives:
- It helped FMC and the employees clearly understand the skills and competencies necessary to be successful at their current job level.
- It helped employees to see which competencies were necessary to move to the next level.
- It gave management a foundation for future objective setting and performance evaluation.
- It gave TMG a very clear model from which to evaluate current gaps.
- It laid the foundation for identifying professional development opportunities for the group as a whole.
Conducting Competency/Skill Gap Analysis
This step produced the competency assessment instruments and the individual competency assessments.
Based on the required competencies for each job family, TMG customized an assessment instrument for use in performing the gap analysis. The staff completed the assessment instrument and validated it with their immediate supervisor through a face-to-face meeting to develop consensus on the individual's current competency levels. The assessment instrument can also be used for ongoing review and alignment activities.
The face-to-face meeting occurs in an open and positive atmosphere focused on identifying true needs and building ownership of those needs in the individual. The primary focus is discussion and comparison of ratings, exploration of additional skill needs and reaching consensus on the individuals agreed proficiency levels.
Alternative methods that could be used include top down assessments (completed by managers only) or pure self-assessments (completed by individuals only). Both techniques can also be effective and are less time-consuming but may not build full alignment and ownership of development needs.
Determining Priorities and Techniques to Close Gaps
This step produces the department training curriculum and the individual training curriculums (for each in-scope individual).
Gaps for each competency area are compared across individuals to identify overall department trends and closure strategies. Training may not be the appropriate closure technique for all gaps; in these cases, TMG makes recommendations on alternative strategies. These may include coaching / mentoring, on-the-job learning, self study or other strategies. For those gaps where training was the appropriate intervention, a customized training curriculum was developed by job family.
Ellis and the supply chain directors have now taken the results of the competency assessment and launched a comprehensive program to start closing the gaps. This includes the delivery of various customized events: TMG's Strategic strategic sourcing/supply chain university targeted at the various roles; the launch of a worldwide strategic sourcing portal that provides a common process, templates and toolkit (with assistance from TMG); and common competency-based job descriptions, among other steps.
FMC has already started realizing a number of tangible benefits as a result of the project, including:
- Higher level of savings on categories by as much as 10-15 percent;
- Accelerated benefits from sourcing by reducing the process by three to four weeks;
- Higher sourcing employee morale;
- A more strategic and visible role for the Sourcing organization;
- Stronger alignment between sourcing and the rest of FMC.
FMC is well on its way to their goal of establishing a world-class strategic sourcing/supply chain organization. The best proof of that is the increase in demand for their services, which are now much more strategic in nature.