Entwining Procurement and HR

The tipping point has been reached for the increased collaboration between HR and procurement -- but creating value is not as easy as bringing the teams together. A strong relationship starts with a foundation of mutual understanding and respect for one another's competencies.

The worlds of human resources and procurement have become increasingly entwined as the greatest cost to most organizations these days is that of human capital. To better manage this important and complex resource, HR and procurement professionals have had to collaborate and strategize more than ever before.

The traditional procurement organization has evolved into a "sourcing and procurement- service organization" or strategic sourcing organization." This elevated, more-strategic function of procurement is working closely with HR now more than ever before.

Sourcing professionals usually handle the high-value, high-risk, high-reward and highly complex types of purchases (mainly focused on services or specialty items) while procurement is focused on the operations side ("procure to pay" and "invoice review and recovery").

The trend is clear and is likely here to stay -- more HR services are now purchased with sourcing and procurement departments used as an intermediary. To be effective, HR and procurement teams must understand how to unlock value from one another by building a relationship that helps generate efficiencies and, ultimately, more effective acquisition of talent and other HR-related services (i.e., healthcare insurance) for their companies.

The Tipping Point

No longer new to one another, HR executives and procurement professionals are at a stage where their partnership has reached a certain level of maturity. HR executives -- once used to managing their own supply base, developing relationships with vendors and negotiating their own deals -- are bringing their procurement counterparts to the table.

Likewise, procurement teams are striving to add value and show that they are not just a formality that needs to be managed in the purchasing process.

Creating value is not as easy as bringing HR and procurement teams together and asking them to collaborate. The teams must establish a strong working relationship that starts with a foundation of mutual understanding and respect for one another's competencies.

Here are five ways HR and procurement teams can best collaborate to unlock their combined value:

1. Speak the same language.

Anyone who works amongst peers of the same discipline every day has a tendency to speak in their own language. To set clear objectives and manage processes effectively, HR/procurement teams must understand one another clearly.

Avoid HR/procurement- speak and, in instances where it's unavoidable, explain what terms mean. If you don't understand what something means, ask. For example, if the procurement team is discussing "aggregation" (combining buying power in specific categories within the various business units within a company), it may not be a familiar term or idea for the HR executives with whom they are working.

It would be important when discussing aggregation to be sure everyone in the room understands the concept so that they can provide input on where aggregation would be optimal.

2. Trust and value one another's expertise.

Procurement and HR teams must engage with one another without one side trying to dominate the other. Both parties must come to the table with the understanding that the ultimate objective is to meet the business goal (i.e., secure the right talent and HR services for the company's needs) and that, in partnership, they will deliver a more valuable solution.

Without this foundation of trust and respect, working together toward that end goal becomes increasingly complex and tedious, which can create detrimental results.

3. Remember your soft skills when establishing your partnership.

HR procurement is an area where a hard-skills approach must be balanced with a soft-skills approach. The procurement team must position itself as a strategic partner to HR, guiding the department in the direction it recommends vs. "taking over" negotiations or vendor relationships.

HR must remember that procurement's agenda isn't necessarily contradictory to its own, and should be open to other ideas and recommendations. Having a candid dialogue and leveraging the expertise, experience and knowledge of both parties will lead to a more effective solution for the company.

4. Create a consistent approach to vendor relationships.

Uniting HR and procurement has provided companies with a single view of their supply base, rather than each HR specialty knowing only about its own suppliers. This can lead to cost efficiencies due to scale/scope of services provided to the overall organization. However, most organizations that have procurement teams still have a large portfolio of HR services providers to manage.

Creating a consistent approach to vendor relationships not only helps the vendors come to expect a certain working relationship with your company, but can help ensure consistency in management of that relationship between procurement and HR as well.

A consistent approach to managing and negotiating with suppliers can eliminate gray areas between HR and procurement during the process, while also helping to generate efficiencies throughout the partnership.

5. Bring services purchasing expertise to the table.

HR procurement is vastly different from materials purchasing. Service purchases are more often based on relationships and are not returnable. Bringing a pure cost-savings mentality to HR procurement can hinder an HR/procurement team's relationship from the onset; value, not cost savings, is the ultimate goal. Staff quality and agency service levels are just as important as generating cost efficiencies.

At the end of the day, clearly defining roles from the onset and throughout the decision-making process is critical to a combined HR/procurement team's success. Who makes the final decision? Who has the lead on the decision timeline? Who is in charge of the process? Those organizations that get it right stand to improve in their efficiency, value and risk management.

Those organizations that allow ineffective procurement/ HR relationships to continue are missing a great opportunity to unlock value in their human-capital strategy.


[About the Author: Bernadette Kenny is chief career officer and senior vice president of human resources for Adecco Group North America. She is responsible for the human resources functions for Lee Hecht Harrison, Ajilon Professional Staffing, Ajilon Consulting and Adecco General Staffing.]

Obama's Seven Lessons for Radical Innovators

Barack Obama is one of the most radical management innovators in the world today. Obama's team built something truly world-changing: a new kind of political organization for the 21st century. It differs from yesterday's political organizations as much as Google and Threadless differ from yesterday's corporations: all are a tiny handful of truly new, 21st century institutions in the world today.

Obama presidential bid succeeded, through the power of new DNA; new rules for new kinds of institutions.So let's discuss the new DNA Obama brought to the table, by outlining seven rules for tomorrow's radical innovators.

1. Have a self-organization design. What was really different about Obama's organization? We're used to thinking about organizations in 20th century terms: do we design them to be tall, or flat? But tall and flat are concepts built for an industrial era. They force us to think - spatially and literally - in two dimensions: tall organizations command unresponsively, and flat organizations respond uncontrollably.

Obama's organization blew past these orthodoxies: it was able to combine the virtues of both tall and flat organizations. How? By tapping the game-changing power of self-organization. Obama's organization was less tall or flat than spherical - a tightly controlled core, surrounded by self-organizing cells of volunteers, donors, contributors, and other participants at the fuzzy edges. The result? Obama's organization was able to reverse tremendous asymmetries in finance, marketing, and distribution - while McCain's organization was left trapped by a stifling command-and-control paradigm.

2. Seek elasticity of resilience. Obama's 21st century organization was built for a 21st century goal - not to maximize outputs, or minimize inputs, but to, remain resilient to turbulence. What happened when McCain attacked Obama with negative ads in September? Such attacks would have depleted the coffers of a 20th century organization, who would have been forced to retaliate quickly and decisively in kind. Yet, Obama's organization responded furiously in exactly the opposite way: with record-breaking fundraising. That's resilience: reflexively bouncing back to an existential threat by growing, augmenting, or strengthening resources.

3. Minimize strategy. Obama's campaign dispensed almost entirely with strategy in its most naïve sense: strategy as gamesmanship or positioning. They didn't waste resources trying to dominate the news cycle, game the system, strong-arm the party, or out-triangulate competitors' positions. Rather, Obama's campaign took a scalpel to strategy - because they realized that strategy, too often, kills a deeply-lived sense of purpose, destroys credibility, and corrupts meaning.

4. Maximize purpose. Change the game? That's 20th century thinking at its finest - and narrowest. The 21st century is about changing the world. What does "Yes We Can" really mean? Obama's goal wasn't simply to win an election, garner votes, or run a great campaign. It was larger and more urgent: to change the world.

Bigness of purpose is what separates 20th century and 21st century organizations: yesterday, we built huge corporations to do tiny, incremental things - tomorrow, we must build small organizations that can do tremendously massive things. And to do that, you must strive to change the world radically for the better - and always believe that yes, you can. You must maximize, stretch, and utterly explode your sense of purpose.

5. Broaden unity. What do marketers traditionally do? Segment and target, slice and dice. We've become great at dividing markets into tinier and tinier bits. But we're terrible at unifying them. Yet Obama succeeded not through division, but through unification: we are, he contended, "not a collection of Red States and Blue States -- We are the United States of America".

Obama intuitively understands a larger truth of next-generation economics. Unified markets are what a world driven to collapse by hyperconsumption is desperately going to need. We're going to need not a hundred different kinds of razors - and their spiralling costs of complexity and waste - but a single razor that everybody, from the slums of Rio to the lofts of Tribeca, is overjoyed to use.

6. Thicken power. The power many corporations wield is thin power: the power to instill fear and inculcate greed. True power is what Obama has learned wield: the power to inspire, lead, and engender belief. You can beat people into subjugation - but you can never command their loyalty, creativity, or passion. Thick power is true power: it's radically more durable, less costly, and more intense.

7. Remember that there is nothing more asymmetrical than an ideal. Obama ended his last speech before the election by saying: "let's go change the world" Why are those words important? Because the world needs changing. A world riven by economic meltdown, religious conflict, resource scarcity, and intractable poverty and violence - such a world demands fresh ideals. We must mold and shape a better world - or we will surely all suffer together. As Obama said: "We rise or fall...as one people". In such a world, forget about a short-lived, often meaningless "competitive advantage". It's a concept built for the 20th century. In the 21st century, there is nothing more asymmetrical - more disruptive, more revolutionary, or more innovative -- than the world-changing power of an ideal.

Where are the ideals in your organization? What ideals are missing - absent, bankrupt, stolen - from your economy, industry, or market? What ideals will you fight and struggle for - and live? Because the ultimate problem with industrial-era business was, as Wall Street has so convincingly demonstrated, this: there weren't any.

That seventh lesson is the starting point for tomorrow's radical innovators - because it's the thread that knits the others together. And it's where you should start if you want to use these seven rules to start building 21st century institutions - whether businesses, non-profits, social enterprises, or political campaigns.

*Ref:HarvardBusiness.org.