In this article, Denali Group Managing Partner John Evans discusses how progressive Procurement organizations are capturing knowledge and preventing the loss of intellectual capital given fluctuations in the workforce. A long-form whitepaper on this topic may be accessed here.
Most Procurement executives are trying to accomplish more than ever before with fewer resources in an increasingly complex global marketplace. For Procurement to progress, solid and effective Knowledge Management Programs are needed to capture and share intellectual capital.
II. Emerging Trends in Procurement Organizations
Why Knowledge is Essential
You’ve most likely heard the adage "knowledge is power". The corollary to this is that knowledge also translates directly into dollars. Knowledge is intellectual capital that is pivotal to the success of your Procurement organization. So how do you, as an organization, capture knowledge? And, how do you prevent knowledge from walking out the door, thus having to recreate it time after time? The answer is to create robust Knowledge Management Programs.
Key Approaches to Talent Management
Talent management is becoming a significant differentiator for both Procurement and organizations as a whole. Leading organizations are actively shifting towards attracting and motivating the next generation workforce of Generation Y (Gen Y) workers, and developing programs, tools and technologies to help capture the knowledge and prevent intellectual capital from leaving because of expected higher turnover rates.
Emerging trends include:
Gen Y Appeal – Procurement organizations are seeking creative ways to attract, motivate and retain a new, younger workforce. This includes branding the company to appeal to a newer generation and implementing incentives such as pay-per-performance compensation models and flexible schedules.
Centers of Excellence – Progressive Procurement organizations are using Centers of Excellence, which are internal efforts dedicated to capturing and organizing everything from Process Knowledge, Technology Know-How, Internal and External Market Intelligence, and Category-Specific Knowledge.
Training & Technology – There is a trend towards more creative, experiential training approaches to help accelerate resource growth. There is a profound shift in the skillsets needed in Procurement, mostly resulting from the deployment of new technologies.
Separating Strategic vs. Tactical Functions – More and more progressive Procurement organizations are separating strategic from tactical functions. As a result, this requires more relationship-management skills to guide the strategic work.
Examining the Shifting Workforce
Baby Boomers are retiring and taking decades of knowledge with them. Replacing them are Gen Y workers, who are apt to work for a company for only a few years and with motivators that are completely different. Given the evolving workforce, the question is, "How do you keep your intellectual capital from walking out the door?" The simple answer is, you can’t. But you can capture it before it leaves. Building a talent-retention program is important. However, a more realistic approach is to build solid Knowledge Management Programs that ensure a seamless continuity of organizational processes and practices to ensure stability within a dynamic workforce.
III. Key Components of a Robust Knowledge Management Program
Many people think of knowledge management as just training and development, which isn’t the case. There are four key elements to having a comprehensive, effective Knowledge Management Program:
Process Knowledge – Documentation of key processes, such as strategic sourcing, category management, category strategies, relationship management, and contract management. Whatever processes are important to a particular organization, it is essential to document them and have appropriate templates, examples, and tools in place to help standardize.
Technology Knowledge – Technology has become increasingly more sophisticated and prevalent, which is why it’s important to have a formal technology training program to train new workers efficiently and effectively.
Training & Skills Development – Progressive Procurement organizations are adopting a more holistic approach to training and skills development by performing skills assessments to identify gaps. The result is a specific training and development plan that includes both group and individual training.
Category Knowledge –With the potential for higher turnover, it becomes critical to formally document category knowledge so the organization is not reliant on the personal knowledge of individual employees. Progressive Procurement organizations are utilizing "category playbooks" to capture critical information about each of their spend categories in an effort to ensure that the expected higher turnover doesn’t affect category performance.
Embracing Procurement Technology
A broad spectrum of technologies is available today, such as eSourcing tools, data-cleansing tools, spend analysis tools, and supplier-management tools. So new hires - in addition to learning about their new organization - are also charged with learning the organization’s various technologies. This necessitates a need to have a Knowledge Management Program element focused on technology. Many technology providers offer some form of training tools, however, if a company uses multiple technologies it is essential to have a comprehensive program that is easy to use. The chart below illustrates the type of Procurement Technology Footprint that exists in many Procurement organizations today.
Assessing and Training the New Workforce
Leading Procurement organizations are taking a holistic approach to working with the next generation of employees. Criteria for selecting Procurement talent has changed. Many are now looking for skillsets that include creativity and relationship building. An annual skills assessment provides a snapshot of where the gaps are - both individually and for the organization itself. Development plans at individual and group levels can then be created to build a more robust organization.
Identifying Skill Requirements – Determine the skillsets required by both individuals and groups in a particular role.
Skills Assessment – Perform regular skills assessments to pinpoint gaps, both individual and as a group, relative to the requirements.
Fit-for-Purpose Training and Development – Based on skills assessments, develop a tailored program to fill gaps in the desired skillset.
Web-Based Training – Integrate web-based applications with traditional training programs to allow for additional flexibility.
Multi-Faceted Approach – Use a combination of experiential classroom, interactive/virtual, computer-based, and on-the-job training to ensure that the organization has a clear understanding of:
Category and market intelligence data capture and format
Available tools, templates, and processes for submitting improvements
Building Effective Category Knowledge
Organizations are beginning to formalize category knowledge and document it explicitly by using category playbooks. Category playbooks are used to document relevant information and strategies for specific spend categories. They are typically created electronically, web-based or on the company file server, so that new hires have information concerning the category.
Here’s an example of what a category playbook might look like for a specific category:
Creating a Center of Excellence (COE)
Centers of Excellence are similar to internal consulting/training groups that actively manage content within Knowledge Management Programs. The COE is responsible for documentation, creating toolkits, benchmarking, examining best practices, and updating processes and templates on a regular basis.
Progressive companies will evolve their organization into an environment that attracts new talent and becomes a place in which people want to work. They will also be realistic and well-prepared for the changes that lie ahead. Having a solid Knowledge Management Program in place can help the organization to seamlessly manage transitions in the workforce for whatever the future of Procurement holds in store.
Learn more about creating a formal Knowledge Management Program in just four weeks.