Are Rotational Programs the Answer to Procurement's Millennial Question?

To prepare for ISM2018, the Procurement and Strategic Sourcing experts at Source One are recording a new podcast series. Every week on ISM2018 Session Insights, specialists from the leading Procurement Services Provider sit down to discuss the topics that will figure into the conference's agenda.

This week, Senior Project Analyst Jennifer Engel joins the podcast to discuss the potential benefit of rotational programs. Talent optimization promises to dominate the conversation at ISM2018. Experts have suggested that rotational programs could help incoming millennial professionals develop the skills they need to accept leadership roles. Jennifer agrees. She offers tips and best practices for developing these programs and effectively nurturing young Procurement talent.

Haven't had a chance to download the episode? Here's a transcript of the conversation:

Source One: How has the strategic evolution of Procurement changed the mold for an effective Procurement professional?  What new skills do professionals require to set themselves apart?

Jennifer Engel: Procurement isn’t as simple as tactical purchasing anymore.  Before, suppliers could be selected based on who could provide the materials at the lower cost.  This meant that sourcing efforts could be driven by the stakeholder, or that a procurement professional could source virtually any category through a straightforward process.

With the evolution of strategic sourcing, the person or team involved in the sourcing process must be a subject matter expert in the product or category being purchased and fully understand sourcing best practices.  There is nothing boilerplate about strategic sourcing, and the more diverse a sourcing professional’s skillet, the more value that can be driven for the organization.

S1: What is it about Procurement that commands such a diverse skillset?

JE: Procurement impacts so many parts of an organization.  Aside from having an understanding of the direct and indirect materials being sourced, procurement’s activities involve collaboration from quite a few other internal departments.

First, procurement professionals need category specific knowledge. They have to understand market trends and any factors that might impact pricing and demand. They should also maintain an awareness of emerging technologies and constantly look for leverage points that can support negotiations.

They need to be familiar with Logistics as well. These days, Procurement is focused on total cost of ownership. That means professionals in the space need to understand the intricacies of how products are transported and inventory is managed. The best know how to use this information to reduce costs and achieve better agreements with suppliers. 

They've also got to understand payment terms and financial processes. Collaborating with Finance, they should work to make savings calculation simple enough to be repeated and approved. This will ultimately help the entire business recognize Procurement's considerable financial impact.

Next, they should make themselves experts in Accounts Payable. This will enable them to streamline the Source-to-Pay process,  implement processes and workflows that prevent maverick spend, cut down on savings leak, and eliminate non-strategic purchasing. 

Procurement also needs to familiarize itself with IT and Data Management. The biggest challenge when preparing for a sourcing initiative is oftentimes collecting and cleansing category data.  Sourcing professionals need to build the intelligence necessary to navigate databases, understand spend, and extract what is needed to accurately take products to market and construct baseline documentation.

And finally, Procurement needs to develop legal expertise. During the negotiations and contracting phases, Procurement professionals have to understand enough legalise to protect the business, and identify areas where compromise might provide additional value.  Sure, legal can provide contract templates for use during negotiations, but knowing where leverage lies beyond pricing and business terms will lead to a more successful and faster negotiation period.

S1: What does the incoming generation of Procurement professionals have that their predecessors didn’t? What are they missing?

JE: This generation is coming in at the tail-end of a major transformation in the Procurement space.  They didn’t have to make the switch from tactical to strategic purchasing mid-career, they are already coming in with a strategic mindset.  Operational management and supply chain focuses are more and more common at universities, and the they're learning analytical skills from the get-go.

The gap still remains, however, in the external knowledge that only comes with exposure and experience.  You can teach financial principals and business law, but each organization and industry comes with variables that are best taught by watching, doing, and evolving.  They are also missing the subject matter expertise which is more common in today’s purchasing landscape than in previous years.  Sourcing and category managers now have specific focuses, whether on direct or indirect categories, and tailor their skills and knowledge to support these specific categories.

S1: How are companies locating applicants with the right skillsets? How are they ensuring they mature to reach their full potential? 

JE: Recruiting strategies remain the same, it is the desired skillsets and talent pool that are evolving with time.  Sourcing strategy is something that can only be learned overtime.  The variant is that companies are now looking for candidates with the core skills to support growth and development.  For example, in a role that will focus on strategic acquisition of MRO Supplies, a company may desire a candidate with a heavy analytical and critical thinking background, and trust that the MRO knowledge will be learned on the job.  Diametrically,they may seek a candidate with a warehousing background and teach the necessary skills for analysis and sourcing on the job.

Of course, the ideal would be to acquire a candidate familiar with both, but those are not always as readily available, and will not necessarily achieve better results.  Cultural misalignment could still occur with a candidate who on paper has all of the necessary skills.

The primary issue that companies face is figuring out where their training strengths are and striking that balance.  If an organization has strong analytical training, recruiting with a focus on subject matter expertise would yield more successful results than recruiting a strong analyst who never fully has the opportunity to immerse themselves in a category.

S1: What can companies do to nurture the necessary skillsets in their current employees?

JE: There are a few things that need to be done to ensure that employees are best prepared for a role.

From the start, employees should have an idea of what their goals are, both those that are quantifiable and those that are only able to be measured softly. Then, managers need to measure progress against goals so that employees remain motivated and are aware of areas that need additional work.

They've also got to consistently provide feedback. Feedback is important both in formal evaluation settings, and after each project or deliverable is complete.  It is important to point out errors and allow the employee to correct rather than fixing their work behind closed doors.  Even relatively small details like spelling errors or formatting issues should be brought to the employee’s attention with opportunity to correct.

Both internal and external training should also be made available immediately.  Both organization-specific and general knowledge training adds value to an employee's overall development and helps foster confidence.

Lastly, managers need to provide exposure. The more an employee can integrate themselves into the culture, goals, activities, and challenges of external departments, the better an understanding they will have of the overall organization, and the better they can focus their individual efforts on adding value.  More and more companies are recognizing the benefits of employee exposure in various sections of daily operations and have been forming formal rotational programs to give an employee opportunity to be involved in different departments.

S1: What does a rotational program entail?  How does an employer know if a rotational program is right for their talent pool?

JE: A job rotational program gives select promising employees an opportunity to transition among various jobs within an organization.  The scope of the program varies by company, but typically includes 3-6 months of exposure in each role, with 4-6 roles being transitioned throughout the duration of the program.  The idea is to give the employee enough time to become acclimated and immersed in a particular role, and experience the challenges and successes that a typical employee might realize.  This is not a shadowing exercise, the employee should be expected to perform tasks within a department or focus area as though they are an employee.

Rotational programs are best for employers that desire multi-faceted employees that have a deep understanding of overall company operations.  Sure, that's something that every employer wants in theory, but rotational programs require a considerable investment.  As employees move through jobs, there is obviously a ramp-up period while they learn the ropes.  Organizations need to have available resources in each area to train and guide the employees as they work through the rotation. 

S1: Why are rotational programs particularly appealing to employers? What do they offer that other programs for professional development and training do not?

JE: Rotational programs are essentially a way to custom train an employee to be an expert in a particular organization.  Silo'd departments often lead to misalignment and misunderstanding which can hinder collaboration.  Employees that undergo rotational programs are able to understand the culture in each area and translate that culture to work for everyone in collaborative projects.  It also prevents short-sightedness in decision making. Rotated professionals are encouraged to make decisions that benefit or have a neutral impact in each area.  For example, if a sourcing professional is developing a deal that would create issues in finance to track and calculate savings, time within the finance department would give that employee the knowledge to recognize this and adjust their strategy before friction occurs.

S1: Why is it appealing to employees? What about these programs is especially appealing to millennials in Procurement?

JE: The knowledge and skills that employees gain through a rotational program is highly concentrated.  An employee will be favorably exposed to multiple areas that can help further their career and foster growth.  Additionally, rotational programs are often tailored more towards promising employees with the end result being an achievable goal, often a promotion.

Millennials change jobs more frequently than any other generation.  A rotational program allows them to have their hands in many different buckets without the desire to jump ship.  Depending on the organization it may also allow opportunity for relocation geographically and travel while remaining with a single company.  It is a great way to sustain employee interest.

S1: What are some of the risks involved in implementing a rotational program?  How can employers mitigate these risks?

JE: One risk is that the employee will become overwhelmed or bored within their new role.  Employers need to ensure that workload is challenging enough, but will not be so stressful as to overwhelm the employee with new information and responsibilities.

Another is that while the employee is on rotation, their original department may face some resource strain picking up that employee's previous workload.  To mitigate this, employers need to ensure that remaining responsibilities will not put these employees over capacity. They may want to heavily monitor the transition period or consider hiring temporary labor.

Finally, employers need to ensure that the departments involved in the rotation have the bandwidth to support the employee being rotated in and not just throw them lower-level tactical work to keep them occupied.

The best way to foster a successful rotational program is to ensure that each leg of the journey has specific goals and objectives tied to it and that those goals are being measured against. 

S1: What ROI can an employer expect from these programs? How can they be sure their programs have proven successful?

JE: The proof will come in the success of the employees work upon completion of the program.  Procurement ROI will surely increase with the ease of collaboration between the employee and external stakeholders. Additional value adds that were previously ignored or misunderstood such as payment term adjustments, process automation, and innovative products will drive down costs and increase the overall procurement ROI.

Prior to the start of the program, s baseline of employee performance should be established in the form of qualitative and quantitative performance factors. Success can be directly measured based on this report.

Participating employees should be asked to provide candid 360-degree feedback about the process. As programs are developed and executed, adjustments should be made to focus on departments and roles that made the most impact, so that each rotation yields the greatest possible result.

S1: Thanks, Jen.

JE: Thanks for having me.

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