A strategic sourcing approach can accelerate enterprise growth. Deeply knowledgeable on IT issues, procurement leaders offer a sophisticated understanding of how to make IT purchases impactful to the corporate bottom and top lines. The next hill to climb in delivering increasing value to the C-suite may lie in another significant expense category: corporate real estate. Companies outsource facilities management and related services to reduce expenses, and those expectations are met, but they soon learn that real estate strategies can provide even greater value in areas such as employee engagement, worker productivity and risk management. The right real estate partner with the right strategy in place can also help companies optimize balance-sheet and P&L impact, enhance employee attraction and retention, and meet strategic goals in areas ranging from M&A to sustainability. These goals are often the responsibility of internal departments other than real estate, so gaining the benefit requires strong collaboration among internal teams. If this collaborative spirit doesn't already exist at your company, bringing in a third-party real estate partner can help bridge communication gaps and align the goals of different departments to gain mutually beneficial results. Some areas where collaborative initiatives pay the biggest dividends include:
There. I said it...I am officially addicted to Twitter. How can that be, when just a year ago I didn't even know how to log in? At that time I thought it was only for celebrities who used it to "tweet" about their exciting lives. How could anything meaningful come out of 140 characters? I thought it really wasn't going to catch on in business. Well, I decided I was acting like a fuddy duddy (yes, that tells my age) and would give it a month. Much to my surprise, after the month flew by, I knew I was addicted. Now I am going to tell you why you should consider having a twitter account. I don't care if you tweet (send out messages), but if you want to learn, you do need to follow (receive tweets) others. I started following some really interesting, talented, well read, educated people and by reading their tweets and their bit.ly (shortened) links to articles and other things they post, I am blown away by how much I have learned! How? Well, I follow people in sourcing, outsourcing, logistics, supply chain, economics, news feeds, research, member companies, technology etc. From each of the 500+ people I follow, I glance at their tweets on a daily basis and when it catches my eye I click on the article/whitepaper/video that they linked to and start reading and learning. I can only skim a handful of sites and periodicals myself...what my twitter network has done is opened the world of knowledge to me by having 500+ sets of eyes covering the news we should be hearing and bringing it directly to me. If each of my 500+ follow another 500+ interesting twitter links I have exponentially exposed myself to people all around the world interested in the same topics I am. I am seriously astounded by all that I am able to read/learn/consume about topics that may have taken months or years to bubble to the top of my knowledge base. I am now able to see cutting edge ideas as they emerge and can plan on how they apply to SIG, sourcing and outsourcing.
Spend Visibility at the most granular level identifies what is being purchased and from whom it is being purchased. Taking spend analytics a step further - to see who is buying, how they are buying and why, and also comparing what an organization is spending as compared to the industry overall, will help leading organizations uncover previously untapped savings opportunities by looking at spending behaviors and identifying new and better ways to proactively influence demand. Today procurement organizations are swimming in data, in fact Capgemini Consulting forecasts that over the next 5 years, the growth of data – both structured and unstructured – is expected to grow at over 650%. So the procurement data is plenty "Big" – the problem is having real analytical visibility to do something with it. As Capgemini points out, most analytics provide aggregate visibility which is not actionable: "Aggregates in isolation provide very little actionable information. Analytics, on the other hand, can tell you what's happening in the business and how well you are servicing it." So to make sense of "Big" Data, first think "Small" by being able to interpret purchasing patterns through transactional level insights, something world-class procurement organizations are much more likely to be able to do than their counterparts. According to Hackett Group benchmarks, 23% more world class procurement organizations had a "significant amount" of spend visibility company-wide than the peer group in 2012, and the gap is getting bigger, more than doubling in 2013 to 47%, when 89% of world-class organizations achieved this mark overall. Procurement organizations will be putting their money where the mouth is by upgrading their investment in analytics during 2014.
Richard Waugh, Vice President, Corporate Development, Zycus Inc.
Over the past two years I have had the opportunity to spend time within several Fortune 500 procurement departments undergoing large-scale organizational transformations. While the goals and approach varied by firm and industry, there was one definitive similarity...each company sought to realign the focus of their full time employees on the most strategic activities. This shared objective manifested itself in various ways, including:
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.