How to match the right Category Managers to the right categories

How to match the right
Category Managers to
the right categories
2
Contents
Page
Introduction
The three main skills required by a Category Manager
Presenting the tool – a case-by-case analysis by category
Definitely not ‘one size fits all’
Conclusion
About the author
4
5-6
7-12
13
14
15
Contents
3
Introduction
Category Management has become an integral element in the development of the
procurement profession and, at its broadest, can be defined as a mini CPO role.
The working CIPS definition of Category Management is in fact the “entire art and science
of procurement applied to a single genre of spend”.
But categories vary, and so do, therefore, the skills needed to manage them and the
experience and knowledge required to apply them. Only through achieving this balance
can a procurement professional excel, as skills plus market knowledge equals excellence.
In addition to professional knowledge, the three main skills required by a Category
Manager today are in the fields of strategy, relationship management and domain expertise.
Of course Category Management is best analysed through a case-by-case basis. This paper
explores the role of a Category Manager in several key sample categories - stationery,
engineering, aviation, contract labour, laptops and mainframe acquisition - to illustrate both
its needs, and ultimately, its value, as mapped out by Tony White FCIPS, CPO at Leighton
Holdings.
The content of this publication is largely a transcript of the presentation Tony gave at the
4th CIPSA Category Management Forum in Sydney in April 2011. This presentation is
reflected in the language and style of this paper and we are indebted to Tony for his
license to reproduce his insights in this CIPSA White Paper.
Jonathan Dutton FCIPS
Managing Director
CIPS Australasia
September 2011
4
Introduction
The three main skills required by
a Category Manager
‘A good Category Manager is not just a vanilla product; it’s very much categorydependent in my experience’ - Tony White, 4th CIPSA Category Management Forum in
Sydney, April 2011.
The main skills
The three main skill term areas required by a Category Manager lay in the fields of
Strategy, Relationship Management and Domain Expertise.
I. Strategy (commercial acumen, procurement expertise etc.)
II. Relationship Management (influencing, communications, credibility with
stakeholders and suppliers etc.)
III. Domain Expertise (knowledge of specifications, supply markets, cost drivers,
regulatory environment etc.)
Relative importance of Category Management attributes
Strategy
Strategy
39%
Relationship Manag
Management
36%
Domain
omain Exper
rttise
Expertise
25%
0%
5%
10
10%
%
15
15%
%
20%
25%
30%
35%
40%
45%
Source: CIPSA White Paper, “The state of the art of category management” (March 2011), research by The Faculty
commissioned by CIPSA.
The above graph outlines the attributes required for a successful Category Manager. Respondents in
The Faculty research were asked to rank in order of importance Relationship Management, Domain
Expertise and Strategy. These scores were then weighted to provide an overall picture of the relative
importance Category Managers placed on each of these areas. Domain Expertise ranked least
important with Strategy being considered the most important attribute followed by Relationship
Management.
For more information on the study and further details, this White Paper can be downloaded at
http://www.cips.org/en-au/Resources/Knowledge-Bank/White-papers/ (CIPSA Log In required) or
copies can be obtained from CIPSA Head Office, Level 8, 520 Collins St, Melbourne, VIC.
The three main skills required by a Category Manager
5
There are detailed skills supporting these three main areas, the levels of which vary by
category. So, a good Category Manager is not just a vanilla product; it is very much
category-dependent. And, if you fail to get it right, even great Category Managers can fail.
The detailed skills to consider fall into 10 segments, within three main skill areas
I. Strategy
Strategy
1.
1. Deep experience and formal procurement
process and skills qualifications = MCIPS
2. Strategic Thinking
II. Relationship
Management
Management
3.
4.
5.
6.
7.
7.
III. Domain
Expertise
Expertise
Te
echnical qualifications / complexity experience
8. Technical
9. Supply Industry experience
10. Detailed business experience for requirements knowledge
10.
Stakeholder credibility and relationships
Stakeholder
Supplier credibility and relationships
expertise
Change Management expertise
Cultural contexts
Consultative sales skills
Consultative
I. Strategy
The formal experience related to procurement as a profession or as a process. Usually
someone with MCIPS has a good score on that particular dimension.
Strategic Thinking is the other, more obvious, element to strategy.
II. Relationship Management
Change Management expertise could be very relevant for a particular category at a point
in time, or ongoing, and needs to be considered.
The cultural context. Certain questions need to be considered, such as, is it a category
that is just being run and dealt with in Australia? Or is it something like steel where it is
sourced from many different countries globally with many different cultural contexts in
which to negotiate and develop the relationships?
III. Domain Expertise
Technical Skills. Do you need to be a rocket scientist to buy rockets? Possibly. If they
are very complex categories, it is important to determine how much experience that
particular person has or needs to develop.
Supply Industry experience. Is it relevant, useful or essential that somebody has actually
worked in the supply markets or have they worked for a supplier in some role that is
relevant to what we are talking about?
Business experience in own organisation. The law is, do they need very detailed business
experience in your own organisation in the area where the category is applied or used?
6
The three main skills required by a Category Manager
Presenting the tool – a case-by-case analysis
by category
(a) Stationery – a Category Manager in a large, stable organisation, stable
supplier and mature supply situation
On the scale, ‘1’ means ‘probably does not need a lot of skill’ or needs some at a basic level,
whereas ‘5’ means ‘needs highly developed skills in that area’.
In terms of MCIPS or equivalent, the Category Manager probably needs to be good, not
excellent or a superstar; strategic thinking is not that relevant or needed in that situation.
They need some reasonable stakeholder credibility and supply credibility – nothing out
of the ordinary and very little Change Management.
Since it is in Australia, the cultural context is not a big consideration, and they do not need
a lot of consultative sales skills. They need to know a little bit about the actual category,
technically, but it is not a very technically complex category generally. They do not need
Supply Industry experience to manage this nor a lot of business experience; just to be in
the business is sufficient.
Obviously, if the situation is different, the scores might be a bit different. If you are coming
off a base where there is 80 stationery suppliers and 200 stakeholders and you are trying
to bring it under control, you will most likely need more Change Management expertise.
A sample skill set for a Stationery Category Manager
1
Dimension
Skills
Strategy
MCIPS or equivalent
2
3
4
5
Strategic Thinking
Relationship
Management
Stakeholder credibility
Supplier credibility
Change Management expertise
Cultural contexts
Consultative sales skills
Domain
Expertise
Technical depth
Supply Industry experience
Business experience
Presenting the tool – a case-by-case analysis by category
7
(b) Engineering Consultants – bid partners
The person managing this category needs to have experienced and rounded-out
procurement skills; they need to be a good ‘strategic thinker’ because these bids are often
about alliances with the design companies to innovate and come up with something that
is different and is going to capture the imagination of the client.
The person that is managing these relationships with the large design companies need to
have a lot of experience and credibility with the stakeholders; they need to trust them.
And with the suppliers they need to have a lot of credibility because they are dealing with
often grey areas of trust and negotiation at the early bid stage.
There is a reasonable amount of Change Management expertise required because every
project is different, so you are always dealing with volatility and dynamics. The cultural
contexts are usually not quite Australia only; they often involve some international experts.
And a little bit more on the selling side – you have often got to sell the proposition to the
prospective design company.
They need to have technical depth at a basic level. It is ideal if they have some Supply
Industry experience so they understand the situation dynamics of the engineering design
company models and how they operate and they definitely need a reasonable amount of
business experience in our business.
A sample skill set for an Engineering Consultant
Dimension
Skills
Strategy
MCIPS or equivalent
Strategic Thinking
Relationship
Management
Stakeholder credibility
Supplier credibility
Change Management expertise
Cultural contexts
Consultative sales skills
Domain
Expertise
Technical depth
Supply Industry experience
Business experience
8
Presenting the tool – a case-by-case analysis by category
1
2
3
4
5
(c) Aviation Fuel – global airline
This is a category (for Qantas for example) that is sourced in about 90-odd ports around
the world.
The Supply Market dynamics and infrastructure particularly, is a big consideration, and it
varies very much by location and by time. So, the person doing this work needs the
following sort of profile.
They need to be excellent on procurement and Strategic Thinking; they need to deal with
changing Supply Markets; they need to know what is going on in the supplier companies;
they need to have good stakeholder credibility – in other words, the stakeholders that use
the fuel have got to trust them to set up relationships that are going to make sure planes
are not, for example, stranded without fuel.
They need to have a lot of credibility with the suppliers because, in times of shortages,
they need to pull on those relationships to achieve supply and continuity - often they are
asking for things ‘out of the box’.
A sample skill set for Aviation Fuel
1
Dimension
Skills
Strategy
MCIPS or equivalent
2
3
4
5
Strategic Thinking
Relationship
Management
Stakeholder credibility
Supplier credibility
Change Management expertise
Cultural contexts
Consultative sales skills
Domain
Expertise
Technical depth
Supply Industry experience
Business experience
Presenting the tool – a case-by-case analysis by category
9
(d) Contract Labourer – fragmented blue collar
Looking at a major project development company for example, the person to look for
to do blue collar contract labour needs the following profile. They need to be reasonably
good at procurement skills overall; Strategic Thinking should be normal; stakeholders
credibility needs to be high (there’s about 30 odd permanent recruiters around the
organisation) so they need to have strong credibility with them to work together.
As the market is so broad, the supplier credibility is not such a big issue. And, if like many
companies you are going through a fair bit of change, there is quite a lot of diversity of
elements. Thus it is a sales exercise with the recruiters in the business and those skills
need to be fairly well developed.
Supply Industry experience and detailed business experience are probably desirable, but
not that high on the scale.
A sample skill set for a Contract Labourer
Dimension
Skills
Strategy
MCIPS or equivalent
Strategic Thinking
Relationship
Management
Stakeholder credibility
Supplier credibility
Change Management expertise
Cultural contexts
Consultative sales skills
Domain
Expertise
Technical depth
Supply Industry experience
Business experience
10 Presenting the tool – a case-by-case analysis by category
1
2
3
4
5
(e) Laptops in a stable environment
This example mirrors, to a certain extent, stationery. The difference is that they need a bit
more stakeholder credibility – so the IT industry need to think you are pretty good or
worthwhile dealing with, and you need to understand something about the technical
nature of the subject matter.
A sample skill set for laptops in a stable environment
1
Dimension
Skills
Strategy
MCIPS or equivalent
2
3
4
5
Strategic Thinking
Relationship
Management
Stakeholder credibility
Supplier credibility
Change Management expertise
Cultural contexts
Consultative sales skills
Domain
Expertise
Technical depth
Supply Industry experience
Business experience
Presenting the tool – a case-by-case analysis by category
11
(f) Mainframe Acquisition
The Category Manager there has got to have highly developed procurement skills – they
are dealing with the bigger companies such as IBM and Fujitsu who are very organised, so
they have got to be very good at what they do as well.
And the next point is they have got to think fairly strategically and got to have great
credibility with the stakeholders and with the Supply Market. Change Management
expertise is not usually required.
Cultural context and consultative skills are not that relevant. This Category Manager needs
to understand something about it, probably not to the level of the technical team that will
be supporting you; however, you need to at least be able to understand the significance of
what they are saying, and that can take a fair bit of time sometimes. Direct Supply Market
experience is probably not necessary and having their own business experience is also not
that relevant.
A sample skill set for Mainframe Acquisition
Dimension
Skills
Strategy
MCIPS or equivalent
Strategic Thinking
Relationship
Management
Stakeholder credibility
Supplier credibility
Change Management expertise
Cultural contexts
Consultative sales skills
Domain
Expertise
Technical depth
Supply Industry experience
Business experience
12 Presenting the tool – a case-by-case analysis by category
1
2
3
4
5
Definitely not ‘one size fits all’
Summary of case studies
Dimension
Skills
Strategy
MCIPS or equivalent
1
2
3
4
5
3.25
Strategic Thinking
Relationship
Management
Stakeholder credibility
Supplier credibility
3.30
Change Management expertise
Cultural contexts
Consultative sales skills
Domain
Expertise
Technical depth
3.17
Supply Industry experience
Business experience
If we look at the ranges across these categories, you can see that it is definitely not ‘one
size fits all’ for the examples chosen. So, there is quite a wide range, which indicates that,
running through this exercise, when looking to appoint or develop a Category Manager, is
quite useful. If it was just a single answer, well, then we could write a single specification.
The averages of the three main areas for the particular examples offered up give a fairly
even distribution between those three main dimensions. This might be because there are a
couple of quite complex categories which probably skewed the graph a little bit towards
the domain expertise. A tip would be to use the extra granularity in the selection process.
Often for very high-complexity categories, a manager ‘home-grown’ over a number of years
is the only option due to the need for stakeholder credibility and detailed ‘own business’
knowledge.
And never, ever assume that an awesome Category Manager will be awesome in every
category without the necessary development.
Definitely not ‘one size fits all’ 13
Conclusion
Generally, Category Managers certainly need to be strong on the three main dimensions,
and it is normally in that order – Strategy, Relationship Management and Domain Expertise.
But by itself it is not enough.
Category-specific skill requirements also need to be considered. As does specific marketknowledge.
An experienced and expert procurer who is awesome in one particular category may not
be good in another category, and may need development before they can fill that role.
And for certain direct categories, ‘awesome’ cannot be bought or brought in, but can
only be developed in-house. The market-knowledge demanded will likely be close to that
organisation's core business and core competencies.
14 Conclusion
About the author
Tony White FCIPS is the Chief Procurement Officer (CPO) at Leighton Holdings. As a
Fellow of the Institute, Tony has extensive experience and outstanding credentials in
procurement. His background includes roles as CPO at both Qantas and at Carter Holt
Harvey and as a consultant at A.T. Kearney.
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About the author 15
© Tony White. Licensed to CIPS Australia Pty Ltd
Level 8, 520 Collins Street, Melbourne, Victoria 3000, Australia
Tel: 1300 765 142 • Fax: 1300 765 143
International Tel: +61 3 9629 6000 • Fax: +61 3 9620 5488
Email: [email protected] • Web: www.cipsa.com.au