2017 Global SRM Research Report - Solving the value Puzzle

PEOPLE

Inmany cases the training budget is being spent without identifying the requisite skills or assessing the capabilities of employees 57% say communication is themost important SRMskill

COMMUNICATION SKILLS ARE KEYWHILE STRATEGIC THINKING IS MOST NEEDED Understanding the skills mix is important to SRM, not just for selecting the right people for the function, but for understanding where skills gaps lie. We asked what the top fivemost important skills were for delivering effective SRM. This question forms part of a trio of questions designed to highlight the training deficit that most organisations have between the skills that are important and need improving and the training they provide. Communication (57%), strategic thinking (49%) and influencing skills (48%) are the three most important skills according to our respondents. These priorities reflect the increased emphasis on collaborative and strategic work that SRM requires, a point underscored by the fact that working in cross-functional teams and trust building also score highly. We are also interested in which skills organisations most need to be improved. Training budgets are invariably limited and it is important that organisations spend the money wisely. We’ve already seen that in many cases the training budget is being spent without identifying the requisite skills or assessing the capabilities of employees. Just over half (53%) of respondents say strategic thinking requires themost

The overall lack of training suggests that a huge deficit, even among leaders, remains between what organisations need to improve on and the training they provide.

To benefit from SRM, organisations need to invest in distinct skills. Attention to this area is clearly lacking. Over 18% have carried out none of the steps necessary to improve people skills. SRMREMAINSWITHIN PROCUREMENT, AS SKILL PRIORITIES ARE UNCHANGED A significant majority of respondents indicated that they see SRM as a procurement discipline. However, it is clearly different from others such as sourcing and category management in both its focus and required skills. Organisations need to ask themselves if they should all be managed in the same department, or whether SRM should be managed by a separate team, even if that team is still part of the procurement function. There’s no right or wrong answer, but the conclusion should reflect ongoing strategic importance of SRM. Three quarters of survey respondents say their SRM activity sits within the procurement function. The proportion has remained consistent over the years and varies little between leaders, followers and others. Sixteen percent of respondents say they manage SRM fromwithin a decentralised procurement team, within the business units.

Approaching skills development with a structure like this means organisations are moving away from simply implementing SRM using existing roles and skills. Increasingly the role is seen as new and different and requiring a new skillset. The attitude to skills acts as a good barometer to measure the organisation’s commitment to SRM. In the first step to improving skills, we find that across all respondents 29% have defined an SRM role and described its aims and objectives. There is not a lot of difference between leaders, followers and others in this regard. Only just over a one in five of respondents has developed a skills and competency framework. While for leaders the figure is 27%, we still consider this a very poor performance. Worse is the number to have completed a skills and competency assessment: only 11% of all respondents have done so although the practice is more common amongst leaders with 22% having carried it out. Around 20% of organisations say they are doing some SRM training, suggesting that in some cases they invest in training without a clear definition of the role, and without the benefit of a skills and competency framework or a skills assessment. Clearly this is not the best use of training budget.

improvement, making it themost popular choice. Communications and influencing skills were the second and thirdmost popular, both selected by 41%of respondents. The top threemost important skills are also the skills that most need to be improved, which shows clearly where organisations should be focusing their efforts. One way organisations can acquire the level of skills they require for SRM is to invest in training. However, our research shows 38% of them have not rolled out any training at all in the last year. For those who have, the top five areas where some training has been provided in the past 12 months are: → Negotiation → Commercial and contract skills → Communication → Leadership → Influencing skills There is a mismatch between this result, the most important skills and the skills most needing improvement. Negotiation skills, for example, are 14 th in the rank of skills most needing improvement. Organisations are probably creating this mismatch because most SRM takes place in procurement departments: the training is aimed at enhancing traditional procurement skills rather than SRM.

Themost important skills required for SRM remain themost inneed of improvement and also thosewhere the least training is on offer

Considering how important people are to the business efficacy of SRM, it is a concern that skills and competencies are ill-defined and investment in training is so low. Even where there is investment it does not match the skills that businesses feel they most need to support SRM. If individuals in procurement and elsewhere do not understand the distinctive qualities necessary to drive SRM, they will be unlikely to see value from it, especially the higher-order strategic value such as innovation that businesses so desperately require.

IN THE NEXT SECTION... People are vital to SRM, but to make decisions about supplier relationships, they need data. To gather data they need information technology, a subject we explore in the next section.

Entrepreneurial SRM requires a different set of skills and mindset from the traditional and core skills in procurement. Skills such as strategic thinking, influencing and communication are fundamental. To create new sources of value for the business, the team should align with business stakeholders and suppliers to find opportunities and exploit them at speed. The entrepreneurial approach requires the business to identify those with an eye for an opportunity who have tenacity, and the confidence to knock on doors to facilitate

discussions. At the same time, they need to able to exercise the right level of control. CPOs should review the competencies of the team, developing an organisational structure that delivers a well-rounded mix of business and procurement professionals. Good governance provides the teamwith the structure and framework to manage the basics, freeing up headcount and resources from firefighting for more creative, entrepreneurial work.

PEOPLE STATEOFFLUX 2016GLOBAL SRMRESEARCHREPORT