Centralized or decentralized organization structure?

 

treeThe question I am most often asked by CEOs

This is a question frequently asked by the C-suite, who is wrestling with autonomous business units seeking control over their P&L rather than optimizing leverage and synergy from the supply base. The answer that I give is always simple and easy to understand: Let the company’s’ expenditure be the guide to how you design the procurement organization. If the company has spend that crosses all business units and is strategic to the business, it needs technical expertise, global strategy and coordination. The other consideration is understanding regional markets and regional business requirements. This needs to be supported by regional teams, each with a perspective on the region they represent and serve. They can coordinate and drive regional strategies, while coordinating the implementation of global strategies. There will always be a need to have resources on the ground at the manufacturing location to buy and manage local requirements. A key role of the local procurement teams is input to supplier performance measurement.

While a three-tier organization is the most effective organization structure, it must tie in to the overall business objectives and deliver on the needs of the individual business units. The procurement team is the commercial arm of the business, responsible for cost and value improvement, supplier integration and alignment to the business and supplier risk management and performance delivery. This leaves conversion, productivity, sales and marketing to the business unit to optimize. This matrix organization works at its best when the organizational objectives for the business are clear, aligned and focused.

What sort of organization should a company have?
Let the spend be the guide.

 

photo credit: Adarsh Kummur

Three Hours of Power

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The Secret to Achieving Strategic Procurement and Supply Chain Goals

As I watched the Olympics last night, I saw the thrill of swimmers and gymnasts achieving their strategic goals and became even more excited about this blog. This week I’m honored to have guest blogger Chris Brogan. Those of you who know me understand that I’m all about implementable solutions and Chris’s tools and suggestions work. He’s had a huge positive impact on Linda, me and our business and he’ll help you win, too.

Three Hours of Power
By Chris Brogan

I’m writing to you within the three hours I’ve allotted each day to reaching my goals for myself and my business. It’s part of something I sell called the 20 Minute Plan JUMPSTART but it’s something that I work from daily. Remember the old ad? “I’m not just the president. I’m also a client.” True of me.

Three Hours of Power

The basic concept of the 20 Minute Plan is that you take 10 minutes in the morning and 10 minutes in the evening to set up your days for success. The mantra behind this is simple: your day is your week is your month is your year.

Your day is your week is your month is your year.

What you do today influences your weekly goals, and impacts your monthly progress and ultimately shows up in what you get for the year.

The three hours part is what I call the 9box. It’s for a simple reason. Take three hours and split them into 20 minute blocks. That’s 9 blocks of 20 minutes each. On my little sheet I work from, it looks like one side of a stretched out Rubik’s Cube.

In those three hours go ONLY that which moves me closer to my goals for me and my business. No client work. No honey do list stuff. Only priority work. Grade A top shelf stuff that will move the needle.

The To Do List is the Enemy

You’re so busy that you’re not doing anything. Let THAT sink in a moment. Are you one of those people who answers “How are you doing?” with a deep sigh and says, “Oh, busy!” And then you open your mouth to draw in air and your eyes are a bit wide, like, whew the exhilaration.

Guess what? 1.) No one cares that you’re busy. 2.) How successful is that busy making you?

People love their to-do lists. They feel excited when all the boxes are checked off. I call to-do lists noble masturbation. It feels good, but it’s not the real thing.

Sure, you have work to do. Whatever. We all do. But if you don’t dedicate some time to the actual priorities and efforts that will move your business forward, you’re just eating up hours on tasks.

The to do list is the enemy. Make it a third class citizen in your life.

Work Inside Three Hours

You’re awake roughly 16 hours each day, if you get 8 hours of sleep. I get 8 or more. You’re probably too busy to sleep as much as me.

Of those 16 hours, people speak for a lot of your hours: family, friends, work, clients, whatever. Find three. You can find 3 out of 16. And make those about your priorities. This isn’t piano lessons. This is “this will make me more successful because I’m investing time and focus in it” type stuff.

You can find it. And your success will start giving you proof that it’s working. And then you’ll defend it. I promise. It’s how I’ve written ten books and counting, while still traveling to consult, speak, and spend as much time as I can with my kids and my fiancé. Join me in taking some of this power for yourself.

Chris Brogan is a business advisor and New York Times Bestselling author. Learn more about him at http://chrisbrogan.com

5 characteristics that drive high-performing teams

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Over the years I’ve had the opportunity to work with hundreds of teams. It’s always interesting to observe the teams and question why some teams succeed, while others flounder and eventually fail. Here are five characteristics the best performing teams have in common.

  1. Clear responsibility, authority and accountability must be assigned to the team. The team with responsibility and accountability is likely to fail if they lack the authority to act.
  2. Vision, mission and alignment to the business plan is a core criterion for success. If a team doesn’t have a charter with an agreed mission, the team will operate like a rudderless ship. It’s essential that the team works hard at the front of a project to understand the vision for the project, mission and joint goals. As part of the alignment of the business plan, the team must also understand how to measure its own performance and the success of the program.
  3. Management awareness and commitment to the team. One of the key elements for high-performing teams is the selection of team members. In today’s business environment when everybody is extremely busy, it’s essential for management to make a commitment of resources to the project. One other essential element is that the team success or failure reflects on the individual’s performance.
  4. Funding is always an issue when it comes to cross functional teams. I ‘ve seen teams struggle and fail when “who is paying for the project?” is unclear. Travel always seems to be a contentious issue when it comes to teams, especially if it’s global travel. One way to be successful is to create a budget upfront or agree with key line managers how much travel is involved and what time constraints will be placed on their department resources for this project. By addressing this issue at the start, team and project leaders can be assured that it won’t be an issue later in the project at a critical point.
  5. Reward and recognition is an essential part to assuring team success. Many team members are working on projects in addition to their regular workload. When a team is successful, it’s the responsibility of management to recognize their contribution to the business and develop some simple reward as a token of appreciation.

Many companies work to drive cross-business teams to meet business goals. Using these key elements as a project leader will improve the chances of having a high performing, successful team.

Will your team succeed?

Managing when revenue is down

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This week’s Wall Street Journal really made me think about how procurement and Supply Chain Professionals must modify strategic direction to help their firms survive; Apple’s overall revenue declined 14.6 %. Caterpillar reported another sharp decline and cut back its outlook indicating the 4-year slide will continue and 3M also trimmed its sales outlook.

While these news stories show slow economic growth, they should serve as an alarm to professionals in procurement and supply chain–it is essential that the total focus includes process redesign, aligning the supply chain and implementing lean techniques. From my experience, I understand that cost improvement is the key to survival to organizations experiencing sales decline.

  1. Supply chain leaders must understand lean and apply waste reduction and productivity improvement across all tiers of the supply chain. When profits are falling, it is essential that all organizations capture all leakage of profits through waste and lost productivity.
  2. Procurement and supply chain processes be reviewed and redesigned to assure that the total focus and mission relates to cost improvement, which assure that all effort is dedicated to the task at hand maintaining profitability in the wake of falling sales. This doesn’t mean just price reduction, but true total cost improvement.
  3. Procurement must align its suppliers with the mission of cost improvement. Suppliers must understand that the current economic conditions require supply chain alignment and lower cost to survive declining sales.

While these things are common sense, it is essential that as supply chain and procurement leaders, we have a direct impact on profitability, shareholder value and, ultimately, we have a fiduciary duty to help the organization weather the economic storm and survive.

We asked for a seat at the table; the time for action is now.

5 Ways to Deal with Emotion in Negotiation

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Many times we enter negotiation with detailed plans, strategies, positions and a BATNA, but, sometimes, we forget that people on the other side have goals, objectives, needs, wants and strategies, too. When both sides are passionate about meeting their objectives, emotions, planned and unplanned, become part of the interaction. When dealing with emotion in negotiation, the one thing that that works for me is to be tough on the problem and soft on the people.

I have participated and observed several thousand negotiators across the globe and have found there are four skills separating the effective negotiators from poor negotiators:

  • Listening. Effective negotiators do more listening than talking.
  • Questioning. Question effectively and use questions to your advantage.
  • Communicating. Be clear, unambiguous and to the point.
  • Relationship. Separate the problem from the people

Effective negotiators learn how to recognize and deal with emotional people, challenging tactics and maintaining focus on the key issues.

Dealing with emotional opponents can be challenging, but here are 5 tips for managing emotional players in negotiations.

  1. Anger – find out why they are angry
  2. Insulted – address the feeling and move on to key issues
  3. Guilt – move away from the guilt and focus on the key issues
  4. Exasperation – empathize and understand
  5. False flattery – refocus the discussion

It’s important that you do not make substantive concessions in hope of deescalating the tension or sustaining the relationship. Always focus your points on the fact that you want an agreement that is fair to all parties. Avoid assigning blame or pointing out deficiencies and help them save face, it’s essential that you build and sustain trust by always separating people from the problem.

How do you diffuse emotion in negotiation?

Rethinking Supplier Performance Metrics: value-based intangibles matter

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Working with procurement teams over the years, I am still amazed at the lack of focus in the area of supplier performance metrics. Many of the mid-cap and small businesses fail to manage suppliers at all and have limited key performance indicators (KPIs). When pushed to discuss supplier metrics, the response is normally “we measure cost, delivery and quality.” Further investigation almost always reveals vague, inconsistent and inaccurate measurement processes.

When developing KPIs, you must assure the metrics are consistent, meaningful and focused on performance improvement. Cost, quality and on-time in-full delivery performance are critical and must be specific and accurately measured, but these metrics are equally important and often over looked:

  1. Speed of response
  2. Disaster recovery plans and risk management processes
  3. Innovation delivery and capture
  4. Supply chain mapping and integration
  5. Business plan alignment
  6. Continuous process, cost and business improvement

Key Performance Indicators are:

  • Quantifiable/measureable and actionable
  • Measurements critical to the success of the organization
  • Tied to business goals and targets
  • Applied consistently throughout the company

Key Performance Indicators are not:

  • Metrics that are vague or unclear
  • “Nice-to-knows” or metrics that are not actionable
  • Reports (e.g., top search engines, top keywords)
  • Exhaustive set of metrics
  • Refutable

Driving metrics that enhance performance is the responsibility and accountability of the sourcing and procurement professional. As we have evolved our profession, it’s now necessary to evolve our metrics to enhance relationships, improve supplier and add value metrics to our businesses.

Are you measuring value delivery?

Five Key Personality Traits of Successful Procurement Leaders

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It goes without saying that technical procurement skills and business acumen (listen to Jim Barnes on the Art of Procurement podcast) are the prerequisites to be successful in procurement. While these skills will take you far, they may not be enough. From studying procurement and supply chain professionals across the globe, I have noticed five personality traits that separate mediocre from highly successful leaders. I love it when data backs up observation, especially since these observations aligned with a SpendMatters and ISM procurement personality survey in 2015, which found that Myers-Briggs personality types ENTJ and ESTP were the top personality types for CPOs.

  1. Flexibility and Agility – procurement leaders operate in a highly dynamic environment where acquisitions, mergers, bankruptcies, economic changes, risk and regulation can change both the daily routine and strategy for procurement. The ability to move with the dynamic world is one of the differentiators between successful and run-of-the-mill procurement practitioners.
  2. Communication and Relationship – building stakeholder and supplier relationships based on trust, mutual benefits, innovation and that delivers value is a core requirement for procurement leaders today. To develop these skills, a leader must be an expert listener and an even better communicator. The ability to communicate, listen and build strong relationships can make a difference in a corporation’s success or failure in the marketplace.
  3. Objectivity – many procurement professionals are solely focused on cost. Their relentless drive for cost without understanding the suppliers’ financial makeup can be a disaster. All suppliers have to make a sufficient margin to reinvest, satisfy shareholders, and innovate. Successful leaders maintain objectivity and understand the drivers behind the suppliers cost and typically receive more value than their competition. Maintaining this objectivity enables them to keep things in perspective, balancing cost and value opportunities.
  4. Learning by Experience – in organizations where procurement professionals have developed and changed strategies frequently not allowing the strategy time to embed always fail. Consequently, it is not uncommon for these organizations to make mistakes and continue to make mistakes without learning from the previous strategy. The most successful procurement leaders learn from experience and drive continuous improvement.
  5. Confidence to Acquire Top Talent – professionals who are reluctant to bring in high-level talent for fear that they will be overshadowed and potentially displaced achieve suboptimal results. The best leaders bring in the best talent and lead that talent to deliver high levels of performance. The confidence to on-board, coach, mentor and execute strategies is a valuable asset to any organization.

Perhaps the most important skill of a leader is giving back to the profession and having time for everyone.

How does your personality match up?