November 12-14, 2017 Bellagio Resort & Casino, Las Vegas. Talent Development in Procurement: The Skills and Roles Needed for Future Success

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1 November 12-14, 2017 Bellagio Resort & Casino, Las Vegas Talent Development in Procurement: The Skills and Roles Needed for Future Success

2 Statement of Confidentiality and Usage Restrictions This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group. Copyright 2017 The Hackett Group, World-Class Defined. All rights reserved.

3 Kurt Albertson Principal, Procurement Advisory Practice Kurt Albertson is a Principal with The Hackett Group with program responsibility for North American Advisory programs focusing on client relationships, business development, research and program delivery. Mr. Albertson works with over one hundred Global 1000 companies leveraging research and thought leadership to provide strategic direction and best practice business advice within Procurement and Finance. Prior to joining the Hackett Group Mr. Albertson spent six years as a management consultant in Sourcing and Procurement during which he worked with executives from dozens of large corporations on sourcing, business and technical strategies, organizational and business process design, and cultural change. Mr. Albertson also has five years of automotive experience working in manufacturing, quality, and operations. In this role he designed and implemented global manufacturing processes and supervised production operations. Mr. Albertson has been quoted in the Wall Street Journal and other major publications, has been the key note speaker at many national events, and travels globally to support client objectives. Contact Information: kalbertson@thehackettgroup.com 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group Key Issues Study

4 Enabling World-Class: Hackett s Solution Portfolio Benchmarking, Advisory, Business Transformation Peer Group Practice or Outcome Practice Practice Practice Practice Practice Practice Practice Practice World Class (% of revenue) Process Taxonomy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Sourcing and Supply Base Strategy Vision Dimension Supply Assurance Supply Assurance Supply Assurance Supply Assurance Supply Assurance Supply Assurance Purchased Cost Reduction Purchased Cost Reduction SDM Component Process Design Process Design Process Design Process Design Process Design Process Design Process Design Process Design Peer Group World Class (per end user Equivalent) Capability / Enabler Degree to which a sourcing strategy exists Breadth of supplier universe Degree to which supplier risk is measured and managed within the sourcing process Degree of contingency planning performed to assure supply Degree of supplier qualification in place Degree of effectiveness and efficiency of price refresh process Level of rationalization of supply base size Maturity of use of supply market intelligence Peer Group World Class (per employee) Peer Group World Class (% of spend) Perspective on World-Class Finance Accelerating GBS Lagging 2 - Achieving 3 - Exceeding 4 - Leading Sourcing strategy is ad hoc or nonexistent. Supplier selection is based on historical or personal relationships; suppliers often selected prior to Procurement s involvement in a project. Risk not considered as part of sourcing decisions or supplier management. No supply contingency planning exists. No formal supplier qualification process. Quoting and price refresh process is undefined and performed manually and on an ad hoc basis. Large number of suppliers due to short-term, one-off relationships. Supply market knowledge is ad hoc and incomplete. Sourcing strategies reflect and are aligned with overall business strategy and objectives, including high level risk requirements. Historical spend analyses are regularly and routinely conducted by market and across markets - i.e. by specific commodity, service, location and business. Projects are initiated to limit the total number of suppliers and bundle the spend volume. Procurement is involved in the supplier selection process. Suppliers are often considered on a regional or compartmentalized basis. Supply risk is considered as part of category-specific sourcing efforts and supplier performance management processes. Contingency plan exists in case of supply shortage; alternate suppliers and alternate locations identified. Simple processes in place to register suppliers and inspect supplier qualifications at time of registration or category review. Quoting and price refresh process is defined and audited manually. Organization has identified the need to rationalize the number of suppliers in order to create leverage. Process, tools, and sources established to gather and organize data on most categories. In-house Colocation Commodity management and sourcing strategies define appropriate purchasing and payment processes and tools. Contract terms, lengths, and conditions are defined to drive optimal benefits to the enterprise; in terms of total life-cycle cost, service, and quality. Supplier universe is considered by major commodity or service area rather than in aggregate. Suppliers are considered for bundled and/or extended services that may extend to multiple areas of competency. Supply base risk is explicitly factored into broader business continuity objectives. Supplier risk is considered beyond the specific good or service being sourced. Alternative supply sources are developed in conjunction with current suppliers for key purchases. Established supplier training program on enablement strategies and buyer s technologies. Formal program exists to identify key qualification metrics with stratification based on category criticality and supply alternatives. Quoting and price refresh processes are structured to minimize enterprise financial impact to all parties. Supply base rationalization is complete. Few new suppliers are needed and an added supplier typically results in a removed supplier (equilibrium). Strong relationships developed with current suppliers focusing on JPI in critical or large dollar spend areas. Supply market intelligence / knowledge captured to identify when a supply strategy needs to be re-visited. Customer Responsibility Provider Responsibility SaaS Applications Sourcing strategy is reviewed and updated annually (or more frequently) to reflect direct linkage to the company's strategic growth plans, market changes and product innovations, production plans and business M&A/ventures. Supply universe is global and not limited to traditional commodity suppliers. Procurement works with other risk management staff, ensuring alignment between internal risk/return preferences, business objectives, and both general and specific supply market risks. Back-up suppliers are required for critical or strategic categories and items, including formalized contingency plans to ensure seamless supplier transition and application of penalties and liabilities with supplier(s) at fault. Annual review of at risk suppliers and suppliers of key categories. Quoting and price refresh processes are automated, nearly error-proof,, with appropriate controls in place.. Structured process is in place that benchmarks the marketplace and ensures continual supply base assessment. Supply market intelligence / knowledge captured, modeled, and utilized for pro-forma simulations done during strategic planning, design, sales, etc. Complete Outsourcing Current State Assessment Priority Future State Target Average Gap 2 - Achieving 2 - Medium 3 - Exceeding Lagging 2 - Medium 2 - Achieving Exceeding 3 - High 4 - Leading Exceeding 2 - Medium 3 - Exceeding Achieving 2 - Medium 2 - Achieving Achieving 2 - Medium 2 - Achieving Achieving 2 - Medium 2 - Achieving Achieving 2 - Medium 2 - Achieving 0.66 Membership Advisory & Research (Provides insights into World Class Performance) Unlimited inquiry access for members to Hackett experts for transformation steering Library of 2,500+ Best Practice Research Perspectives, Books of Numbers, and Hackett Certified Best Practices through the Best Practice Intelligence Center Peer-to-Leader Best Practices sharing, and Best Practices networking events Enterprise, functional and process-based performance studies & value accelerators Benchmarking (Defines World Class Performance) Hackett The World-Class Advantage Finance World-Class organizations always find a way to get there 1.12% 46% 22% 23% 19% $7.7K $2.2K 0.73% 0.60% $6.0K 0.59% $1.7K Finance Cost IT Cost HR Cost Procurement Cost 2014 Cost of Finance by Process Category (as a % of revenue) 0.39% 0.21% 0.23% -59% 0.16% 0.17% -23% -46% 0.11% Transacting Control & Risk Planning & Strategy Gold Standard Benchmark over 8,500 conducted, the empirical backbone for your transformation at the SG&A Enterprise, Functional, and Process level. World-Class, Peer, and Custom Peer comparative metrics and best practices Ability to provide multiyear World-Class Program view of performance over time Hackett Performance Exchange (automatic accumulation of performance data from Oracle or SAP Business Transformation (Transforms Performance into World Class) Governance & Organization Skills & Talent Enabling Technology Information Service Delivery Components Process Design Service Placement / Scope Process Sourcing / Location Strategy Finance Human Resources Information Technology Procurement Supply Chain and Operations Enterprise Performance Management Shared Services, Global Business Services & Outsourcing Merger Integration Working Capital Management Best Practice Technology Enablement (Implements Technology to enable World Class) Oracle EPM (Platinum Partner) SAP ERP (Gold Partner) Hyperion Kronos Workforce Management Application Managed Services Source to Pay Solutions Assessment Selection Implementation Change Management 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group Key Issues Study

5 Let s look at how executives feel about the importance of current procurement capability gaps in driving their objectives Measure and manage procurement performance and business value Align procurement skills and talent with changing business needs Improve procurement analytical, modeling and reporting capabilities Modernize procurement application platform(s) Improve procurement responsiveness to changes in business demands Increase spend influence though strategic sourcing Obtain more value from existing categories through category management Obtain more value from existing suppliers through SRM 78% 73% 72% 70% 70% 64% 62% 56% Expand procurement work executed in GBS / SSO Invest in procurement CoE to enhance ability to provide value added services Invest in supply market intelligence capabilities 45% 43% 42% Reduce procurement operating cost Refine continuous improvement programs and techniques Increase budget for procurement software tools Invest in procurement technology other than software 33% 33% 33% 22% High/Very High 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group Key Issues Study

6 Current and projected business risk Cyber security risk tops the list overall while competition and talent are forecasting the biggest projected increase Percentage of companies ranking as high risk 2016 (current) (projected increase) Cyber / information security 47% 20% Intensified competition 41% 17% Disruptive innovation 32% 24% Access to critical talent 31% 20% Source: 2017 Key Issues Study, The Hackett Group 6

7 Summarizing the most widely needed skills in procurement: Dominated by business skills Critical procurement skills GENERAL BUSINESS SKILL PROCUREMENT-SPECIFIC SKILL Relationship management and interpersonal Business Skills are generally more transferable across functions and roles while Procurement skills tend to be more relevant to Procurement and related roles Strategic sourcing process expertise Problem-solving Strategic thinking and analysis Specific supply market/commodity expertise Business acumen SRM expertise Group collaboration/facilitation Scale: Low = A critical skill for <25% of positions Medium = A critical skill for 25-50% of positions High = A critical skill for % of positions Source: Skills and Talent Outlook, The Hackett Group, 2014 Organizational know-how Data analysis and modeling Low Medium High 7

8 Business skills are generally felt to be more impactful when it comes to driving the performance objectives of procurement Procurement Specialist Skills (Substantial or Very Large Performance Impact) General Business Skills (Substantial or Very Large Performance Impact) 83% Percent of skills across all companies rated as having a substantial or very large performance impact on Procurement objectives 71% 18% 32% Non-Top Performers Top Performers Non-Top Performers Top Performers Hackett Talent Management Study

9 SRM, Risk Mgmt, Strategic Thinking and Change Mgmt are biggest movers with respect to future demand Percent of companies ranking demand for skill as high or extremely high Percentage increase CURRENT DEMAND NET DEMAND INCREASE IN NEXT 2-3 YEARS S R M E X P E R T I S E S T R A T E G I C T H I N K I N G A N D A N A L Y S I S R E L A T I O N S H I P M A N A G E M E N T A N D I N T E R P E R S O N A L S K I L L S S T R A T E G I C S O U R C I N G P R O C E S S E X P E R T I S E B U S I N E S S A C U M E N D A T A A N A L Y S I S A N D M O D E L I N G C H A N G E M A N A G E M E N T A N D P R O C E S S I M P R O V E M E N T S U P P L Y R I S K M A N A G E M E N T E X P E R T I S E 43% 30% 13% 0% 10% 16% 45% 30% Source: Skills and Talent Outlook, The Hackett Group,

10 Culture: Pfizer s highlights the importance of driving positive change through its culture champion network 10

11 Leadership: Guardian recruits and develops future leaders by fostering an entrepreneurial spirit, focusing on relationship skills Recruit, train and develop careers Build One Team Foster ownership and initiatives Reward and recognize performance "Outside the box" recruiting (offshore and onshore) Cross-training and lunchbox training Career track program Single mission Shared cascading objectives Team events (incl. Community volunteering) Physical seating Department meetings Intellectual capital building Process improvement Corporate projects volunteering Newsletters Recognition and rewards program Department trophy ceremony Source: Guardian What makes culture agile? Our most important asset is our people. We re trying to approach recruitment differently than in the past. I m not convinced we necessarily need to hire only people who have done sourcing before. Rather than hiring for experience, we look for candidates with the right skills to succeed. Sometimes you need a combination of skills and experience, but ultimately, I want people with an entrepreneurial spirit, who want to build something new, are quick learners and logical thinkers, but who can also build relationships. We can train them in our sourcing process, but softer skills are more difficult to teach. Frederic Khalil VP, Head of Source-to-Pay and Corporate Services Guardian Life Insurance Company of America 11

12 Ultimately, becoming more agile requires innovators, not optimizers A lot of procurement executives have been molded and developed in their careers to become optimizers, but we need innovators. In the past, managers often took comfort in hiring like-minded people, which yielded a kind of group-think that is not sustainable. You may get a temporary lift for a few years when someone comes in and optimizes something, but when you are challenged to change the model altogether, it is very difficult. Transformation requires people who bring individual creativity and thinking to the table and are willing to raise controversial issues and consider alternative ideas. Ramsay Chu Global Head of Procurement Rio Tinto Group 12

13 Let s talk about what digital transformation means to procurement by reviewing Hackett s Procurement Digital Transformation framework The Digital Business Strategy Four pillars support procurement s digital business strategy 2 Omnichannel, personalized stakeholder experience 3 Digitally enabled procurement workforce 4 Smart orchestration of source-to-pay services 5 Ecosystem of networked solutions Data and analytics form the foundation 1 Analytics-driven insights 13

14 Thriving in the digitally enabled workforce will require these 6 skills Data Analysis and Modeling Process data and extract relevant information Knowledge of analytical tools and methodologies Translates analyses into actionable plans Business Acumen Understand key business drivers Knowledge of factors, priorities and business demands Identify problems and prioritize alternatives Strategic Mindset Develop strategic frameworks and visions Anticipates market changes Address challenges and outline future direction Relationship Management Advanced interpersonal skills Positively influence decisions Open and approachable Savings and Financial Analysis Translate savings and value improvements to P&L impact Develop tools to track, measure and forecast savings Analyze supplier financial statements for detailed insights Supply Risk Management Expertise Assess and prioritize business and category-specific risks Measure, prioritize, and address risk Develop risk mitigation plans for high-priority drivers 14

15 Key Skill: Business Acumen Individuals with strong business acumen: Understand how key business drivers relate to one other and are impacted by competing courses of actions Have deep knowledge of factors, priorities, and demands that influence business decisions Are experts in how to identify problems, prioritize alternatives, and implement solutions Understand interdependencies across business functions Are capability of managing uncertain situations and remain flexible in the face of shifting circumstances Navigates the short- and long-term trade-offs of business decisions Why it Matters As economic volatility increases, category managers will need to sit side by side with their stakeholders, navigating business decisions that impact the supply base. Business acumen is fundamental to elevating procurement s role as a trusted advisor. How to Build it Learn finance and operations basics Take job rotations Monitor industry research Spend time in one company/industry 15

16 Key Skill: Relationship Management Individuals with strong relationship management skills: Use advanced interpersonal skills to build relationships that drive business outcomes Treat individuals from all levels of the organization with courtesy Meet with others and listen to their perspective on business issues. Interact with internal and external peers to positively influence decisions Are consistently open and approachable when resolving highly sensitive and complex issues Build strong relationships with senior leadership Why it Matters Evolving the value of procurement requires working hand in hand cross functionally with a variety of stakeholders from senior budget owners to line managers as well as being a customer of choice and partnering with valuable suppliers. How to Build it Build your soft skills: Listening, learning and caring Embrace diversity Check your subtle cues Be approachable and approach others 16

17 Key Skill: Risk Management Individuals with strong risk management skills: Are considered an expert in assessing and prioritizing business and category-specific risks Develop templates and frameworks to measure, prioritize, and address risk Lead others in the development of risk mitigation plans for high-priority drivers Adopt emerging technologies like advanced analytics and cognitive tools to better assess, monitor and mitigate risk factors to the business Why it Matters In a market of increased risk and volatility, risk management capabilities are more prominent to the enterprise. Responsiveness to market and outside threats will determine which companies survive. The next economic downturn or crisis may be revealing. How to Build it Know your industry risk factors Include risk in your category plans Read up on risk Pay attention to technology developments 17

18 Key Skill: Strategic Mindset Individuals with a strategic mindset: Are experts at developing strategic frameworks and setting a vision for the organization Serve as a key resource to advise others Anticipate market changes and establish a vision to affect change through formulation and implementation of objectives and priorities Are able to lead a strategic planning team to address major challenges and outline future direction for the organization Why it Matters Even the most digital organization needs strong leaders to navigate the ship. Understanding the broader market and aligning procurement s vision with that of the business will be fundamental to navigating change and extracting value from the supply base. How to Build it Learn about corporate strategy visit a MOOC Understand your broader business objectives and challenges Be a leader 18

19 Key Skill: Data Analysis and Reporting Individuals with analysis and reporting skills: Possess expert ability to process data and synthesize disparate sources to extract relevant information Hold deep knowledge of analytical tools and methodologies Design training programs for data development and analytics to support organizational needs and guide analysis teams to address data needs and objectives Are able to query complex data sets and derive conclusions, as well as translate disparate analyses into actionable business plans Have insight to think mathematically and model complex problems with robust statistical tools Support all hypothesis and recommendations with relevant quantitative information Why it Matters Big data will change the way we use information in procurement. Those able to sort through the data and make actionable plans have the potential to add high value to the organization. The tools are available today, but adoption is just beginning How to Build it Train yourself on the latest analytical tools Start with your own spend cube Learn from others 19

20 Key Skill: Savings and Financial Analysis Individuals with strong savings and financial analysis skills: Are experts in translating spend, savings, and value improvements to impact on P&L Demonstrate ability to develop new and creative tools to track, measure, and forecast impacts of savings and broader value Share expertise with sourcing team and finance department to guide projects Have the ability to analyze supplier financial statements for detailed insights Why it Matters Tying savings and value benefits to financial statements demonstrates the value of procurement, but more importantly drives business profitability. Tying budget favorability to procurement actions can be elusive but critical. How to Build it Make a visit to finance Take a class Lead a project 20

21 There are a broad array of procurement s skills and talent concerns keeping CPOs up at night where to focus? Most pressing. Leadership Impact of growing use of outsourcing on staff development and career paths Developing leadership capability within procurement Productively integrating new generation of workers into the company Ability to offer learning & career progression opps. Training and developing the skills of procurement staff Ability to attract and retain Procurement managers people mgmt. & development capabilities Maintain adequate skill levels as older workers retire Impact of increasing use of and dependence on technology by procurement Alignment of procurement staff skills with changing requirements Dealing with varying talent mgmt. requirements of staff in different regions Communication vehicles and styles appropriate for/preferred by younger workers Attract and retain talent Learning and career progression opportunities Impact of increasing globalization/ offshoring of procurement resources Staff skills development Most serious concerns Serious concerns Moderate concerns Least serious concerns People mgmt skills Source: Skills and Talent Outlook, The Hackett Group,

22 Procurement organizations leading the talent race are putting in the effort to attract and build their digital workforce Function, not HR, takes ownership for Talent Management processes More fully developed career paths, particularly early and mid-career Implement a vision within the function for talent Greater use of intern and employee referral programs Engage in workforce planning activities, and do more to define talent needs and skills Perceived to be more open to innovation and offering more learning and career growth 22

23 New ways of hiring: Predictive analytics for hiring starts with understanding what drives success in the current role Large Financial Services firm builds a predictive model for hiring & retaining high performing sales team. Undertook an analysis of Average vs Top Performers: - Demographics - Recruiting data - Job Experience - Environmental data By shifting to a new way of assessing sales candidates, the company generated more than $4 million of new revenue in the first six months. Will this work for Procurement? Why not the qualifications are quite similar Source: 23

24 New procurement roles: Head of Cognitive Procurement and Digital Sourcing What makes a head of cognitive procurement? Business acumen Data analysis and Modeling Strategic Mindset 24

25 New ways of learning: Its time to modernize the learning approach To improve learning/development across generations: Explosion of social media provides new ways of learning and knowledge sharing Use a blended learning approach Make learning real time and relevant through bite-sized learning Take advantage of reverse mentoring opportunities Make learning fun and engaging through gamification (ex. MIT Supply Chain Beer Game) Train on how to access the right information/knowledge Develop a more collaborative environment leveraging today s technologies Source: ASTD 25

26 New Cultures: Characteristics of an agile procurement culture Agile procurement organization Low agility Agility enabler High agility Change averse culture, preserve status quo, focus on resource utilization Culture Embrace change, view change as an opportunity, focus on business outcomes Bureaucratic decision-making, lacks empowerment, fosters inappropriate risk taking Talent tied to specific roles, common talent management strategies for all roles, limited learning and development, life-long procurement Leadership Talent Delegated decision-making authority, change-oriented leadership, calculated risk taking Flexible talent placement, talent management tailored to needs of roles, continuous learning and development, rotation Low Agility enablement index High 26

27 How to get started on creating an agile Procurement culture? 1. Training is conducted in the field, not in a classroom. It is creative, engaging, challenging and specific/based on real-life scenarios. 2. Staff is rotated within and between business units and geographies, developing potential future leaders who have a broad understanding of the entire value chain. 3. Recruiting and hiring draws from outside the typical pool of procurement and sourcing specialists. Softer skills like relationship management, intellectual curiosity and business acumen are highly valued. 4. Procurement s culture is defined by successfully challenging the status quo, influencing leadership to try something different. It is a constructive disrupter, displacing traditional, less efficient processes with new, creative solutions that are able to scale with the future strategy. 27

28 Procurement talent management requires an integrated approach aligning with business strategies and desired outcomes Business and Function Strategies Integrated Talent Management Outcomes Skills Supply Industry and geographic trends Core skills trends Talent pool trends Skills Demand Business and function mission and goals Function roles & responsibilities Organizational culture Identify Talent Needs Workforce Planning and Succession Management Acquire Talent Recruiting Hiring 3 rd Parties Integrated Talent Management Develop Talent Learning and Development Drive Employee Performance Appraisal Retention Collaboration & Knowledge Sharing High functional performance Engaged, high performing staff Improved staff retention Right people with right skills Aligned culture 28

29 Procurement must lead this talent management effort in collaboration with HR. Don t expect any different Workforce planning and succession management 22% 49% 30% Retention 11% 19% 49% 22% Managing performance 11% 29% 42% 18% Learning and development 8% 13% 42% 37% Recruiting and staffing 14% 51% 24% 11% Function consults, but process is owned by HR Close collaboration with HR, but HR drives the process Close collaboration with HR, but function drives the process Function leads with limited or no HR involvement Q3.8 Please indicate the extent to which your Procurement function owns the following human capital programs for its own personnel. 29

30 Critical to procurement s talent management success is the continued drive towards specialization Procurement Management Team Customer Management Spend Management Tactical Sourcing Purchase-to-Pay Knowledge Center-of-Excellence Other less common components: Innovation, sales support # Maturity of evolution 30

31 Hackett s competency model for example aligns desired attainment level of skills to each of roles within Procurement The Hackett Group Competency Model 31

32 Niche Majority Utilization Broadly Used Ubiquitous Mixed outcomes from recruiting and hiring practices Poor Performers Underperformers Second Tier Top Tier Recruiting from other Parts of Organization Internet Job Websites Search Firms High Few recruiting practices are highly effective Hiring from External Service Providers Social Networking Sites Referral Programs Intern Program Aptitude Tests Behavioral Interviewing Involving Best Employees Even highly effective hiring practices are not very broadly used Top Performers make more use of intern and employee referral programs Low Signing Bonuses - Psychographic Profiling and Testing Effectiveness Low High RECRUITING HIRING 32

33 Niche Majority Broadly Used Ubiquitous Utilization From a development perspective classroom training may be broadly used but many have not found it effective Poor Performers Underperformers Second Tier Top Tier On-the-job on- training High Web-enabled L&D Prog Formal Classroom Training Industry Education - Stretch Assignments Leadership Develop Programs Coaches and mentors Coaches and mentors can make a real difference, but are among the most difficult practices to implement Low - Effectiveness Low High 33

34 What helps drive retention and supports appraisals? Broadly Used Ubiquitous Majority Niche Utilization Poor Performers Underperformers Second Tier Top Tier Annual Performance Reviews Learning & Development Regular Informal Performance Conversation & Feedback Career Progression High 360 reviews and forced rankings are much more effective for Top Performers vs. Peers Compensation/Bonus Recognition Programs 360 Degree Appraisals Flexible Working NOTHING is as effective as regular informal performance conversations and thus the heightened demand for good people managers Forced Ranking Appraisals - Low Effectiveness STAFF RETENTION STAFF APPRAISAL Low High 34

35 Most companies have not implemented career paths, despite them being a key tool for retention Entry level to first management position Are multiple paths needed? 22% 17% 22% 6% 14% Exploring / piloting implementation Implemented on small scale 33% Implemented on significant/large scale First management to middle management 24% 16% 21% 11% 17% Exploring / piloting implementation Implemented on small scale 28% Implemented on significant/large scale Middle management to executive management 21% 11% 18% 22% 24% 22% Exploring / piloting implementation Implemented on small scale Implemented on significant/large scale Peer Top Performer 35

36 Thoughts on orchestration and intelligence augmentation Over time I think we will probably see a closer merger of biological intelligence and digital intelligence - Tesla CEO Elon Musk Ultimately, it s not going to be about human vs. machine. We humans have creativity, empathy, emotion, physicality, and insight that can then be mixed with powerful A.I. computation the ability to reason over large amounts of data and do pattern recognition more quickly to help move society forward. - Microsoft CEO Satya Nadella 36

37 How will different activities and industries be affected by intelligent automation? Industry Sector Managing People Applying Expertise Interfacing with Stakeholders Unpredictable physical Collecting data Processing data Predictable physical Automation potential % Accommodation and food services Manufacturing Agriculture Transportation and warehousing Retailers Mining Other services Construction 47 Utilities 44 Wholesalers Finance and insurance Arts, entertainment and recreation Real estate Administrative Health care Information Professionals Management Educational services Source: US Bureau of Labor Statistics, McKinsey Global Institute 37

38 The question of our time: What will Procurement look like in 10 years? It will look very different from today Transactional tasks may be entirely automated Sourcing activities may be executed electronically with little need for human intervention Data analysis will be embedded into our information systems However.. There will always be a need for interpersonal relationships, values based decision making, creativity, and judgement to harness the value of the supply network. As humans have in the past, we will adapt our personal value and our surroundings for success 38

39 Contact information KURT ALBERTSON PRINCIPAL, PROCUREMENT ADVISORY 1000 Abernathy Rd Suite 1400 Atlanta, GA Tel.: