Recently, I learned a very interesting strategy that one organization is using to ensure they are tying back key corporate strategic goals to individual contributor objectives. As a product manager, I tend to split my time between speaking to users and prospects and our internal teams. One of the things that I love most about my role at Ariba are the interesting conversations I get to have when I speak to customers. This is my favorite part of my work because I am constantly learning new things from Ariba's clients.
A few months back, I spoke to one of Ariba's sourcing customers, in preparation for a presentation we were going to give at a conference. We discussed a wide range of issues, covering not only sourcing process covered by existing Ariba application functionality, but also discussing the processes and policies of their sourcing and procurement organization. From my perspective, it is important for product managers to understand these factors, in order to churn out features that will be innovative and meaningful. When we began to talk about the executive office's view of the sourcing/procurement organization, I found out that the executive leadership really liked the sourcing and procurement organization a lot. Was it because they had consistently hit their numbers? No, but that probably helped. How about because they demonstrated ROI or created demonstrable process efficiency leading to savings? That turned out to be part of it. But, the key reason that this organization is really favored is because they have aligned their employees' individual objectives right up to the larger corporate strategic goals.
At first, that didn't sound too revolutionary at all to me. Although I've spent more career time in startups, every time I work for a large company I find myself using an HR tool to document my management objectives.Some of them (like SuccessFactors, for example) are even geared towards the cascading of goals from the top of the organization all the way to the individual contributor. However, it actually takes a quite a bit of effort to take a top-level corporate strategic objective and cascade it down three, four- how ever many- levels, and flip it around into a measurable line item or task that an employee can complete. Perhaps you can relate to this? Maybe you have not even tried to deal with cascaded goals, but instead have just struggled to create quantitative measurable goals for yourself or an employee? I know I just did recently. It isn't really easy; even when we know what we need to do to get the job done, explaining the measurable milestones along the way to getting it done can be a challenge.
Having given that a bit of thought, I decided to learn some more about how this customer handled their Sourcing Human Capital Management. A key corporate initiative was risk management. When the sourcing and procurement organization began to work on risk management and incorporating that into their plan, they began to create team and individual objectives. Typical objectives came up, like conducting risk management audits or more regularly updating financial risk ratings for certain vendors. However, the organization went further and took a slightly more inclusive and pragmatic view of risk management: disaster management. If suppliers were going to fail, possibly even critical suppliers, what do they do? The general conclusion was to always have Plan B. And while Plan B in many cases may have been an actual plan, in all cases Plan B began with OPTIONS. This organization then tasked their commodity managers to provide options, namely in the form of growing their supplier pool. Commodity managers had their performance measured by how much they had grown their supplier pool, and this metric was a factor in the compensation of the employee. It is also worth noting that the employee was given tools to accomplish this objective, in this case, Ariba Discovery for discovering new suppliers.
The key here is that the employee is not tasked with an objective like "reduce risk" or "implement risk management protocols." Instead, the supplier manager was given a set of objectives, which when mapped up, would CREATE risk management. The could be represented as the following top-down flow of objectives:
Company -> Practice Best-of-Class Risk Management
VP -> Implement Vendor Risk Management
Director -> Reduce Risk In Horizontal >>
Manager -> Grow Horizontal Supplier Pool >>
Employee -> Grow Supplier Pool >>
This type of top-to-bottom approach to HR in the sourcing organization can be very successful. In the organization I spoke with, the executive leadership had deep respect for the sourcing/procurement organization. The respect was not just because they made their numbers, and provided ROI, but because, additionally, the organization had lined itself up behind the corporate leadership and goals, and was able to map how each person in the organization was contributing to corporate objectives. It is paying off: rather than shrink in the economy, the group had modest growth. Ariba is growing it's relationship with them too, and I am just interested to hear what they will do with the additional resources they have earned.