CWS 3.0: October 22, 2014

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Trying New Fare: Procurement looks past cost savings

To ask an indirect procurement category manager to look beyond cost savings is a little bit like taking a seat at your favorite restaurant, where you always order the same rib-eye dish, intending to try something new — but when it comes to it, when the waiter takes your order, there’s only a slight hesitation before you order your tried and true.

We all know your favorite restaurant serves other great dishes, but there’s something about that steak. Likewise, we all know procurement delivers more than just cost savings, but there’s something about the money. As Bryan Peña, VP of contingent workforce strategies and research for Staffing Industry Analysts, wrote for this publication previously, “It’s not real unless the finance team says it’s real.” And with many procurement managers reporting direct to the CFO, the addictive nature of cost savings, cost savings and more cost savings is practically impossible to resist, just like a great steak.

To many, it may come as a surprise to hear a growing number of procurement professionals are thinking beyond cost savings and looking at other dishes on the menu:

  • profiling their category spend and understanding internal business needs as well as linking those needs to the external market;
  • focusing more on strategic activities and the implementation of sourcing strategies that deliver long-term value and long-term sustainable supplier relationships;
  • branding and marketing their workforce programs; and
  • investing in technology solutions that capture workforce data.

Staffing Industry Analysts’ recent CWS Summit & Solutions Forum was testament to the growing appetite for variety, with high attendance at sessions not strictly pertaining to cost and compliance, such as “The Modern Family (MSP)”; “The VMS Shuffle: How to Match a VMS to Your CW Program”; “The Talent Acquisition Imperative, Big Data and Your Contingent Workforce”; and “Finding Your Purpose - Aligning Your CW Program to Your Company Goals.”

Of course, cost and compliance are still critical issues, but procurement has begun to focus on an additional key performance concept: quality. Quality of candidate; quality of service; quality of data; quality of systems; quality of suppliers. But the definition of quality varies. It speaks of high position, excellence, superiority, and these connotations can have negative cost implications, and in many cases even the term “quality” is misunderstood in a contingent workforce environment. Speak of talent quality to CWP managers and they hear: “I know this contractor is well above our normal bill rate for the role, but he/she is really good, and I really want him/her!”

If we are reluctant to use “quality” as a term to describe characteristics, grade or excellence, then what should we use? I suggest condition: (noun) the state of something with regard to its appearance, quality, or working order; (verb) bring (something) into the desired state for use.

For me this was an “Ah ha!” moment that explains nicely why procurement are more and more interested in quality and in the sourcing of talent: the “condition” of the talent is becoming a critical factor in the success or otherwise of contingent workforce programs: is the talent suitably qualified? Can the talent perform the work? Is the talent available at the right time? Is the talent available at the right price? Where does my talent come from? Where do they go when they leave my program? Would I re-hire the talent at a later date? Can my program predict talent needs in a timely manner? Can my program guide the business to make good talent choices? Can my program attract talent with high demand from other competing programs?

Analyzing these questions, gathering data and making decisions for talent sourcing helps procurement ensure their talent is in good condition and, in total cost of ownership terms for the full program life-cycle, ensure cost management remain core to their program goals alongside compliance.

Cost, Compliance and Condition. With procurement professionals nailing the quality conundrum, using quality as a tactic to force more cost efficiencies — and become more involved and knowledgeable in sourcing talent and tracking talent performance — the role of procurement in creating and managing talent management solutions can only become of more value to organizations.