Mergers and acquisitions (M&A) trends are growing on a global scale, and the benefits are many. M&A create cost efficiencies through economies of scale and also lead to tax gains. They often increase revenues and can reduce cost of capital. And while the benefits of M&A are significant to businesses, there is often an overlooked factor that can potentially collapse the upsides to these benefits. As M&A continue to trend upward, so does the contingent worker population. According to the Bureau of Labor Statistics (BLS) the total number of flexible workers exceeded 2.6 million in late 2013 with projected growth to continue full steam in the coming years. Contingent labor growth is a direct result of the changing overall workforce landscape, and companies are making considerable investments in their contingent workforces to reduce costs and remain nimble. To that extent it's important to recognize that during a merger between companies, independent contractor (IC) liability is often times overlooked. This "hidden exposure" can be devastating to any company as state and federal agencies are increasing their efforts to uncover unknown ICs and penalize the companies responsible for misclassifying these workers. Individual states are also establishing harsh consequences as IC misclassification continues to be a growing problem, and ICs themselves are becoming empowered with information on how to secure their rights as an independent business. Ultimately the acquiring company inherits the ICs as well as the risk associated with those IC engagements. Because the level of IC validation (if any) with the selling company is unknown, it's critical to include discovery of the IC population as a part of the overall M&A due diligence process.
Dan Evanoff, Director of Compliance, Synergy Services
Real estate and facilities may be the most misunderstood corporate function in the world of sourcing. Despite the fact that real estate is one of the largest corporate expenses, senior managers often are only vaguely aware of all the myriad strategies that exist to reduce cost, manage risk and drive productivity. Real estate is a strategic corporate function that affects every aspect of the business, from the C-suite to Finance to HR, and the ability of business units to operate effectively. But often, corporate real estate (CRE) leaders are perceived as the guys who work in the basement and clean the restrooms. This misperception is somewhat dangerous. In a recent survey, more than 70 percent of CRE directors said they face high internal expectations for increasing productivity in the workplace and improving efficiency within their department, but only 28 percent feel "well-equipped" to meet these rising demands from senior leadership. The challenge is intensified by the growing trend of procurement professionals affecting real estate sourcing decisions. More than two-thirds of CRE leaders see procurement taking an active or even leading role in real estate decisions, but only 42 percent believe the procurement function is sufficiently knowledgeable about the facilities function to make informed decisions. The problem lies in the notion that real estate is a commodity service, so the goal of a procurement team is to find the lowest-cost provider. That approach might make some executives look good as cost-cutters, but the damage to the business greatly overshadows any incremental cost savings. Companies that fail to recognize how real estate strategy affects corporate performance will inevitably fall behind their competitors, in terms of their ability to attract and retain talent, maximize profit and mitigate a range of risks.
I am a self-proclaimed Olympic junkie. It's true...summer or winter and ALMOST (but not quite) sport-agnostic. I LOVE the Olympics. For two weeks, I tape (an old-fashioned term similar to "DVR" for those who are too young to remember VHS) the Olympic coverage, and then watch it every night. I love the sappy side stories that tug at your heartstrings. I swell with pride when I hear the National Anthem being played, and I tear up when someone perseveres to win a medal or just has a personal best. And as much as I love the Opening Ceremony, it's really not that event which I'm most enamored by. It's all the little moments during the different sports that are so meaningful to me. I feel the same way about our Summits. Ok...maybe it's not QUITE the same. I don't have to wait two years between Summits (or four as the case may be). And it's not as if people are setting world records...but it's the anticipation of the event and the little moments that make it all worthwhile. When we start planning each event, it FEELS like we're planning the Olympics. We have a spreadsheet we start working through that has 231 line items on it. And EACH of those line items can represent 10-20+ individual projects, tasks, etc. (or even hundreds of phone calls as the case may be). For months we work to put together a world-class event—from finding the right speakers, to vetting presentations, to writing press releases, to picking meals—there are thousands upon thousands of "little" things that go into putting on a big event. In fairness, if one of our LCD projectors doesn't work quite right, we haven't disappointed millions of people...but regardless, much like the Olympics, we aim to execute a "flawless" event. We can't guarantee the performance of the athletes (read: speakers) or the spectators (read: delegates), but we can put together a compelling event with fantastic keynotes, thought-provoking content and incredible opportunities for networking.
Many companies understand procurement's value can extend beyond tactical buying and into strategic cost and risk management; however approaches for managing talent capable of delivering on that strategic potential has not kept pace. When talent is addressed, the focus is on changing the individual (e.g., behavior/professional skills). There is a better way to transform procurement into a talent incubator: shift procurement from the place you're from to the place to get ahead. This strategy inevitably requires investing in advanced supply management tools to enable procurement professionals to be effective and efficient. Strategic procurement organizations have unique opportunities to offer employees who demonstrate business leadership potential. Below are two key examples:
Eric Walsworth, Director of Supply Management, LexisNexis, a Reed Elsevier company
How do you attract Gen Y workers? By 2025, it is said that Gen Y (also known as "Millenials") will make up 75% of the workforce. Born between 1980 and 2000, Gen Ys are now of the age to be joining the workforce, post college, and as the baby boomers continue to exit the system, the Gen Ys will soon become the majority of the workforce. With that in mind, while the way you attract talent has worked well in the past, it needs to change since Gen Yers think differently, act differently and perform differently. To attract the best Millennials you need to appeal their uniqueness.
I'll admit it. I was pulling for the Broncos. I know there are two sides to every story, and something preceded Richard Sherman's less-than-gracious on-screen comments in his interview with Erin Andrews after the 49ers playoff game...but all I heard were HIS comments, and they were enough to turn me into a Broncos fan for the Super Bowl. Of course, the fact that Seattle beat my home team to GET to the Super Bowl was also a contributing factor...but I digress. The real reason I bring up yesterday's lopsided game, was that in a very strange way, it made me think about governance and supplier relationships. Why, you ask? Well, it's simple. If you don't set out the terms of a relationship and have a proper governance plan in place, you can end up with a very imbalanced set of understandings, which can have a disastrous result. In a blog posting on governance several months ago, I spelled out my thoughts in a detailed manner, including organizational structure, stakeholder involvement, cultural alignment, milestones, deliverables and goal linkage. Without a doubt, those are all critical, but for the purpose of this "post game report" I'd like to focus on what I consider to be two of the most important components in just about anything.
Procurement's historic focus on managing categories of supply too often assumed that the category was comprised of interchangeable sources of supply to be manipulated to produce perpetual annual cost reductions at the category level. The new realization is that material cost savings are not an annuity and commodity suppliers are not a "commodity." The best suppliers, and the supplier's supplier, are the source of innovation and competitive differentiation, and a supply management, not category management focus, is needed to nurture them. While the orientation towards Category Management remains ingrained - the latest CAPS (Center for Advanced Purchasing Studies) Manufacturing Industry Benchmarks still show nearly double the amount of procurement resources allocated to Category Management as compared to Supplier Management (31% to 16%) - the shift towards Supplier Management has already begun. In a Zycus sponsored, December 2013 webinar in collaboration with The Hackett Group, titled, "Real-time Procurement Benchmarking," almost half of webinar attendees polled expect to get more than 10% of "total procurement value" from Non-Sourcing or Category Management activities - in other words, Supplier Relationship Management. More organizations are turning their attention to Supplier Management as a new source of savings - and value - as a matter of necessity. Hackett Group Benchmarks point towards a leveling off of savings achieved by World-Class performers, whose Total Spend Cost Savings as a percentage of Annual Spend (Cost Reduction and Avoidance), are forecast to decline by more than a full percentage point (7.56% to 6.46%) from 2012 to 2013. And according to Hackett benchmarks, Top Performing organizations are already realizing 3.4% savings annually as a percentage of Total Spend above and beyond savings from sourcing or category management, twice as much as their peer group.
Richard Waugh, Vice President, Corporate Development, Zycus Inc.
I just had the distinct pleasure of spending a couple days in Guadalajara experiencing first hand the talent, passion and capabilities of the region. Nearshore Executive Alliance held the Immercio conference there for about 80 people with a mix of buy-side, sell-side, regional experts and advisors in attendance. The sessions I attended and stories I heard convinced me that if I had any doubts about outsourcing to Mexico, it was time to see the light. I was able to hear first hand from companies like HP and United Healthcare who have opened captives with amazing success and while it is more expensive than their Indian locations, they would never consider moving out due to the unique talent, as well as time zone and cultural affinity. I met people representing companies like Softtek with 10,000 employees as well as companies like Unosquare who have 102 and growing rapidly. I met a company called Vesta that outsources all of their high-end work to Unosquare with incredible results. I toured the Institute of Technology of Jalisco and saw hundreds of "20-somethings" doing work for a dozen or so outsourcing companies located there. I met with iTexico, a start up that had eight people working for them two years ago and have 80 now, with plans for 150 by next year. I found that these companies are taking on higher end-work, not commodity type coding. They are creating apps, websites, software and interfaces for companies in North America. They are working for Open Table, Uber, and similar companies. In addition they are serving Fortune 500 companies with their corporate identities and marketing platforms and social media. Why? Well, for one, they will soon be graduating more engineers than the United States on an annual basis. Their English skills are amazing and they are recruiting from all over the world. One center I visited was like the United Nations. I met people who came from India, the UK, Australia and Michigan.
I recently heard someone say that sourcing was boring. "Really?" I said with a hint of incredulity in my voice. In response the person said, "all you do is deal with incumbents and execute contracts." Well, that my friend is a person who doesn't really understand sourcing. Sourcing can be one of the most interesting jobs around. You must find a creative outlet for the category you are sourcing and discover new sources of supply as well as uncover new sources of information that will make your sourcing execution successful. When someone says sourcing is boring I often think that they are very simple-minded. Every single morning when I read the paper or watch the news, I think about the opportunities/issues facing companies when they have a supplier at the precipice of a disaster. Think about the last time we had a hurricane, a tsunami, a terrorist event or something of that magnitude. Those natural disasters have far-reaching impact, including call centers that were shut down, data centers that were closed, and goods and services that were trapped at our borders unable to enter a country due to issues happening around the world. Every time we have the political unrest, we face the reality that sourcing may change our near-term future. What I think is the most exciting news about our industry is the fact that everything that happens in the news every single day, can affect sourcing decisions. Global news impacts our everyday work lives. The other exciting aspect of sourcing to me, is the fact that we are the only function that looks across the company and sees stupidity, redundancy, duplicity, and multiple contracts, for the company that employs us. One might say that Finance has a better vision of what happens every day in our company. But, coming from a CPA background, I would beg to differ with you. When I report financial earnings profit or loss, I am reporting what has happened in the past.
I don't know about you, but at the beginning of each New Year, I feel pressure to come up with something I resolve to do differently. Truth be told, I don't come up with New Years Resolutions every year, but when I do put thought into them, I do my best to see them through--mainly because I select things that are achievable and "task-oriented," like (don’t laugh) "wash my face every night before bed." Needless to say, my personal and professional resolutions have always been somewhat different. This year my resolution is slightly more esoteric. In fact, it's more of a "theme" than a "thing." I got the idea from a friend and I think it's a perfect way to merge personal and professional resolutions. The idea is to pick a word you want to live by...and every day find ways to implement it. My word this year is "do." I know, it's kind of lame considering Nike's successful "Just Do It" campaign. But I couldn't think of a better verb to capture my goal, which is to act on things, not to catalogue them for later. To remember it, I've been using the mantra "see it, do it." This comes in handy with four kids in the house. There is a lot to "do" when I "see it." But I also find it great in my professional life. It is so easy to put things on the back burner until later. But with a "see it, do it" mentality, I'm trying harder to do things as I get them. Obviously this doesn't work all the time--some things have a higher priority than others--but by focusing on "do-ing," I find that I'm more engaged. I'm reading relevant articles when I get them, adding things to my list of priorities, reading through the priorities and doing them when promised. Perhaps the better work phrase is "see it, schedule it, do it." That way it gets the appropriate weighting before "doing." If you aren't a regular resolution-maker like me, maybe this can help motivate you to pick a word, theme or phrase to live by for the year. Me? I'm seeing it and following through on it!