By: Ronald Hedley
Have you ever made a recipe from scratch? I mean really from scratch. If it were a pasta recipe, you made the noodles by rolling out the dough and running it through the pasta press. You hung the pasta from a drying rack. You hand peeled your homegrown tomatoes, chopped the garlic, and mixed the parsley, sage, rosemary, and thyme (I’m a big Simon and Garfunkel fan.) and basil to create the perfect vegetarian, simmering, bubbling tomato sauce. And you didn’t forget to add a little red wine to awaken the palate. No store-bought pasta. No cans of diced tomatoes. Just good old-fashioned labor of love. So, how does the above Italian recipe connect to sourcing? Good question. Let me think. (Picture a writer scratching his beard, rubbing his balding head, and, then, having an epiphany.) Well, one must first procure the ingredients for a great recipe. And, to create a successful procurement department, just like creating a delicious recipe, one must have the best ingredients, and one must know what one is doing. What follows is one man’s recipe for creating a successful, albeit delicious procurement department. I know you will eat it up.
Jerry Chico is the Vice President of Procurement at Cross Country Healthcare. Three years ago he joined the company to lead its new procurement department. Chico started from scratch.
Recipe for Creating a Delicious Procurement Department:
Ingredient One: Experience
Chico was previously Director of Procurement at Cross Country Home Services (six plus years). Before that he was Procurement director at Royal Concrete Concepts (five plus years) and, prior to that, he was Lead Sr. Supply Chain Analyst at Intersil Corporation (five plus years).
Ingredient Two: Desire
Why would a perfectly normal human leave these great procurement positions and start anew? “It appears that I’m building a career on stepping into organizations and building procurement departments from the ground up. This is my third time stepping into an organization and, doing so, I establish a five-year business plan and evaluate it every year.” Chico is competitive and goal driven. “One thing about me is my competitive nature. I grew up playing sports. That’s the way I was raised. When I dedicate to something, I totally dive in.” He has coached his son in football for six years. He offers his children the following advice about commitments: Whether it is the flute or football, “Don’t quit once you start something.”
Ingredient Three: Self Improvement
Chico has had many “indirect” mentors in his life. By “indirect” he means that his mentors were unaware of their impacts on him. He learned from their positive leadership style how to be a better person. “I have learned multiple things: handling myself with poise, not taking things personally, balancing work and family, and staying true to myself.”
Chico loves to read articles about both procurement and leadership. The self-improvement text that has influenced him the most is Steven Covey’s Seven Habits of Highly Successful People. He first read it during his undergraduate studies, and he still refers to the book often. “I feel that I have incorporated many takeaways from the book. I have worked and continue to work on self-mastery. I also focus on building collaborative relationships throughout life, never being satisfied, always looking for continuous improvement. Finally, I look to influence and inspire others.” Perhaps Chico has found success because he has integrated into his character what this humble writer believes to be the essence of Covey’s book: that Character Ethic (self-discovery, integrity, honesty, patience, and courage) is more important than personality. “The Character Ethic taught that there are basic principles of effective living, and that people can only experience true success and enduring happiness as they learn and integrate these principles into their basic character.” (Stephen Covey)
I love this next quote from Seven Habits of Highly Successful People. “In the last analysis, what we are communicates far more eloquently than anything we say or do. We all know it. There are people we trust absolutely because we know their character. Whether they’re eloquent or not, whether they have human relations techniques or not, we trust them, and we work successfully with them.” Covey believes that who you are, your character, is the measure of your success that matters most. Chico has chosen wisely his go-to self-improvement source.
Ingredient Four: Strategic Sourcing
“How do you define strategic sourcing?” I asked. “Strategic Sourcing is having the ability to be brought in early in a sourcing engagement. The business identifies a need to acquire a service or a product that’s going to have a financial impact on the business. The key for me is to get procurement involved early, making sure there are collaborative teams built throughout that process. Every stakeholder is thought of cross-functionally. Everything is evaluated as a team, not just pigeon-holed within a department or business, actually understanding and embedding through a methodology.” Chico understands that they still have work to do. “We are not 100 percent there at CCH. This is our third year. Typically, my goal is to make sure that we are at least 90 percent of what we consider tier one strategic sourcing initiatives. We are still growing to get there.”
Chico’s next objective is to go live with a Procure to Pay (P-2-P) solution. He sees a wonderful opportunity for his company: “That’s going to help us to move the needle because it’s going to help us get a better understanding of our controllable spend and identify our weaknesses.” Chico wants to build on their success. “We did a good job last year and this year. We have aligned major projects and budget shifts for our internal business partners, particularly in IT and Marketing, making sure we schedule projects throughout the year to drive our strategic initiatives.”
Chico believes that working cross functionally is important part of strategic sourcing.
“Procurement is not just a department within itself. For example, individuals in IT have procurement responsibilities. In marketing, in HR, wherever they sit in, they have the authority to spend. They play a role in procurement for that organization.”
Ingredient Five: Internal Adoption
I asked Chico what he considered to be his biggest starting-from-scratch challenge. “The biggest challenge is getting adoption from our internal business partners. This is never an easy task. How do you get your business partners to buy in? You start by understanding what makes them tick. What are their goals and objectives? How can we help them meet their needs? What does procurement mean to them? What experiences have they had with procurement? What are their biggest concerns as it relates to procurement? Once we understand the current state and their mindset, we work to align with their goals and remold their impression of procurement. This isn’t only at the executive level but throughout the organization. A great example is, as a finance department, we had a goal to reduce the number of checks that were cut. Our AP manager wanted to convert every vendor to an ACH (Automated Clearing House) program. This was the fast and easy way to get them off checks, but we had a goal to convert payables into a revenue stream. The way to do that was to move them to an E-payable solution that would charge the vendors a fee (like a credit card). The AP manager was resisting, stating that the vendors would not sign up for such a program. After some time and buy-in from her management team, we were able to launch our campaign. We successfully enrolled our targeted vendors and are getting rebates.”
Ingredient Six: Key Suppliers
Chico believes that developing stronger relationships with key suppliers drives innovation. His relationship with key suppliers is surprising reciprocal, quid pro quo if you will. “It’s having open dialogue and communication and having them (key suppliers) provide insight on how we may operate differently around a certain category, or as they see shifts in the markets. Chico believes that a reciprocal relationship with key suppliers can stimulate internal conversations and help his company pilot solutions in the future. “It’s a way to continue to innovate as a company.”
I asked for an example.
“When we go through the credentialing process, we look at some of the pain points in the current process.” (Note: credentialing is the vetting of healthcare professionals. The quicker the healthcare professional is vetted, the quicker the healthcare professional can get on the job. The tighter the process, the more positive the monetary impact for all parties.) “They (key suppliers) have built-in technology that could automate some of the things we have been doing manually. They also have security measures in place to make sure that nothing falls through the cracks.” CCH is looking to incorporate some of these technologies into their system.
Chico’s goal is that key suppliers will work directly with the CCH team. “The key suppliers could schedule their labs and do the work that we our currently doing ourselves.” Collaboration with key suppliers will add value, service, and improve innovation.
Ingredient Seven: People
So how does one recruit? When Chico builds a team, he looks to recruit from two sources: within and without. “I might bring in someone (from the outside) that’s got specific procurement experience or general experience, or I can see if there are any opportunities from within the organization. It’s important that the internal candidate is a subject matter expert in the business already, someone who has demonstrated the ability and desire to learn procurement.”
“Which candidate (internal or external) is the best recipe for success?” I asked.
“It depends on the DNA of your current department. I look at bringing in a procurement manager with experience, but, if I’m looking for a second person, I look to bring in someone internally. Chico believes in balance. “You need to have a balance of both because we have to leverage our strengths.”
“How do you keep good people?” I asked. “As a leader, I need to ensure that I am treating my team well, I am treating them with respect, and I am making it an enjoyable place to work every day. I need to help build a collaborative atmosphere. If I have a positive impact, people are going to desire to stay and be productive.’
Ingredient Eight: The Executive Table
The pasta is steaming beautifully on the serving plate. Your guests are hungry. The sourdough French bread, lightly tossed arugula salad, and roasted Brussel sprouts are ready for consumption. Do you eat standing up? Of course not. You sit at the executive table and consume the beautiful meal in harmony and joy. Unfortunately, Chico and his team are not there yet, but he is happy to be represented at the table, especially since, three years ago, his procurement department didn’t even exist. “In my current level, I am one level below it. I am currently reporting directly to the CFO. I feel the voice of procurement is responsive at the table, either directly through our CEO, or CFO, and, even now, our COO. Because I have been able to establish those relationships, a lot of those discussions are taking place, whether I’m at the table or not.” Within two years, I predict, Chico will have his seat at the table.
Like all good chefs, Chico has learned from his mistakes. “The first time I stepped into an organization I came in swinging a big stick. I went through the proper steps trying to identify the controllable spend, but I could have been more collaborative with the internal business partners. That was a good learning curve. I have learned to build collaboration across the organization.” Chico has learned quite a bit over the years and now offers the following advice:
Don’t be introverted.
Don’t hide behind your desk.
Get out and navigate throughout the organization.
Seek to understand in order to be understood.
And, most importantly, if you start something from scratch, be it pasta or procurement, do it well, and do it with passion.
”Find something you’re passionate about and keep tremendously interested in it.Julia Childs