… (and don’t worry, becoming a maths genius isn’t one of them)
In a world of change, commercial skills have never been more in demand – across all sectors, functions and job roles. The Association of Graduate Recruiters’ research found that commercial awareness is one of the most critical skills employers seek – but it is one that universities are failing to instil in their students.
Once you are in an organisation, commercial skills need to be constantly sharpened. For procurement professionals, it’s also about helping your stakeholders to be more business focused, and inculcating commercial capability within all members of your team.
Here, procurement practitioners, business owners and other experts share their tips on how to encourage a more commercial culture within and beyond procurement, whatever your level or organisation.
1. Hire commercial people
It sounds obvious, but far too many organisations and hiring managers overlook this simple step. So how can you establish whether a potential employee is ‘commercial’?
Ask questions that “allow candidates to think” during interviews, advises Christian McAleenan, founder of online shirt retailer Christian Benedict. “Favour candidates that show a good understanding of the sector and business, and encourage candidates to show the ability to consider strategy.”
Oz Hussein, marketing manager at MDA Training, adds: “Many people come undone when it comes to demonstrating their commercial awareness.” He advises also looking for communications skills, wider market knowledge, and financial awareness when considering a potential hire.
2. Make commerciality everyone’s business
Consider training existing members of staff to think more commercially and embed commercial thinking into their jobs every day. This training needs to be delivered in appropriate and manageable chunks and avoid the use of jargon, says Hussein, particular if the subject matter is heavily technical or financial.
“Presenting complex subjects in clear everyday language helps learners understand how they can improve their contributions to the underlying performance of their business units, and which value drivers they can influence. Everyone has a role to play in creating value,” he stresses. “It is not the preserve of senior management. A well-planned and structured learning solution can bring this to life.”
3. Collaborate with stakeholders
Leaders need to ensure that everyone – irrespective of their position and function – works together to spread knowledge and avoid silo thinking.
“The more interaction there is, the better employees will get a handle on new perspectives and understand what the business is about and how it works,” says McAleenan.
It’s critical to draw up strong lines of communication within an organisation, says Jim Carter, transformation director, government commercial function at the Cabinet Office. “Commercial touches many people outside specialist core procurement and commercial roles, so clarity for all of the organisation on their specific accountabilities, the consequences of their actions, and when and where to go for more specialist support is an important foundation,” he explains.
4. Establish what good looks like
As reported in the last issue of SM, a top government priority is to improve its commercial capability, and it is implementing, in Carter’s words, “ambitious plans in defining commercial standards of best practice, and assessing and developing our commercial staff including those that sit outside the core commercial function”. The benefit of defining what “great commercial acumen” looks like is that organisations can then be quite specific in understanding the existing capability gaps and seek to address them, explains Carter.
5. Challenge specs
It is often the case that the performance specifications against which procurement arranges supply contracts are not actually commercial, believes professor Alan Braithwaite, founder of LCP Consulting, a BearingPoint company.
As a result, they may be either over-specified for what the business and its customers really need or specified in such a way that drives waste and excess cost into the business elsewhere, says Braithwaite: “Commerciality for procurement is about challenging specification and requirements to ensure that the end-to-end cost-to-serve and customer value are just right.”
6. Measure the right things
One of the secrets of fostering a culture of commerciality within an organisation is making sure you are measuring the right things. Yet many procurement functions still focus on the wrong measurements, believes James Tucker, joint managing director of specialist procurement and supply chain recruiter 1st Executive.
They often have a process-driven transactional approach centred on cost rather than on a strategic relationship-driven approach where the emphasis is on value – however that is defined in your organisation. It is a misconception that commerciality is all about the numbers and cutting costs, Tucker says. Yes, it encompasses this, but it’s about so much more.
“Procurement teams need to be able to measure non-financial elements of a deal,” he says. “And if the function wants to rid itself of an unwanted reputation as a process-driven, unimaginative and non-creative function then it should look at how it delivers real intrinsic value – not just the lowest price. The focus on traditional value of spend and cost savings needs to evolve and the debate now needs to be around what we want that value to be.”
7. Consider demand
Drive contract negotiations and long-term purchases based on independent demand, advises chief executive of supply chain management consultancy Neturania Laurence Dupras, who agrees that too many processes focus on cost cutting and not greater end-to-end value. “Because the demand for direct materials comes from the demand for finished products, it is important that the independent demand and forecast for finished products is used to determine the requirements on direct materials,” she explains.
Keep a risk log to stay on top of the supply risks, she advises, and take accountability for the quality of the data held by their business and shared with suppliers. “The quality of the demand signal sent to suppliers can be poor, leading to the suppliers struggling to deal with short-term fluctuations,” she adds.
8. Embrace technology
Data can help companies understand behaviour throughout supply chains, and technology plays an enormous part in embedding a commercial mindset into any business. Why? “It’s because this is where your flow of information/intelligence comes from and by default you are almost retraining yourself to use the technology on a daily basis to provide the information to allow you to make informed decisions based on the data you are receiving,” says Gavin Foxall, director at Fox Green Procurement and former CPO at UK Business Services.
Durpas adds: “Hold yourself accountable for data quality and work with the business to resolve issues.”
9. Go beyond isolated initiatives
Getting every individual in the business to be “custodians of value” and make decisions as if the business funds were their own is challenging. It requires sweeping changes to be made across the board rather than just trying to implement individual isolated initiatives, advises Carter.
Engaging a business needs cultural change, with leadership prioritisation, accurate metrics, performance tracking and visible rewards, he adds.
“I’ve widely deployed analytics tools that give budget holders and commercial staff insights into the areas they are accountable for, but I’ve witnessed that, without an equal focus on business change alongside the technology, these tools can be under utilised,” he says. “It is so important that tools that provide insight can pass the ‘so what?’ test. What is going to happen differently? What action is going to happen? How am I going to track that these actions are taken?”
10. Get yourself some board experience
If you’re an experienced procurement leader looking to take your next step, you need to kick your commercial skills up another gear. Getting board experience is a great way to do so, and there are opportunities to be found as a non-executive director, a trustee on charity boards, or as a school governor.
One of the challenges of sitting on a board “is the ability to rise above the executive quagmire”, says Helen Pitcher OBE, chairman of Advanced Boardroom Excellence. “It requires a strategic view of finance and resourcing of an organisation, going beyond the budget process, with an insight and reconciliation of the sometime conflicting goals of an organisation.”
The benefit, she explains, is that: “It drives the executive to step outside a day-to-day involvement and develop the ‘helicopter view’, enhancing their capability and value in an executive role”.