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COMPLEXITY IS FORCING PROCUREMENT TO ADDRESS COGNITIVE OVERLOAD

Published 28 August 2023 - ID G00778716 - 11 min read

By Ryan Polk, Fareen Mehrzai

--------------------------------------------------------------------------------

Rapid procurement transformation is creating new complexity for procurement and
leaving staff cognitively overloaded. To offset the overload, chief procurement
officers must design simplicity into how procurement operates and challenge
traditional talent management models.



OVERVIEW




IMPACTS

Accelerating complexity and staff cognitive overload will:
 * Increase employee burnout and reduce employee willingness to support future
   changes.
 * Reduce the effectiveness of many procurement roles that have historically
   been poorly defined and broad in nature.




RECOMMENDATIONS

To address accelerating complexity and staff cognitive overload, Chief
Procurement Officers must:
 * Track and monitor staff user experience as a measure of leadership success.
 * Design simplicity into how procurement operates by developing templates,
   process maps, workflows and decision rules for all new value streams in
   procurement to make transformations clearly visible and easier to implement.
 * Consolidate and separate tactical work from strategic work across all
   procurement roles to reduce mental switching costs and cognitive load.
 * Build, design and manage staff competencies at the individual role level, not
   function-wide level, to manage talent in a more targeted way.




INTRODUCTION

We are living through a Great Acceleration. Since the mid-20th century, the pace
of socioeconomic trends (e.g., world population, water usage, energy usage,
technology) and earth system trends (e.g., atmospheric carbon, biodiversity
loss, surface temperature, deforestation) has rapidly increased. The
accelerating world around us has driven rapid change to procurement’s operating
context, challenging procurement leaders to keep pace (see Figure 1).

Figure 1: The Great Acceleration






In response to the pace of change, almost half (47%) of procurement leaders tell
us they have added to procurement’s overall responsibilities in the last two
years, and another 52% tell us that they plan to within the next year.1 These
additional responsibilities, coupled with an already challenging external
environment, are creating tremendous complexity for procurement staff to
navigate. Procurement staff stated the number of tasks they are responsible for,
the number of task workarounds they must navigate and the stress they feel today
have all increased.

Put simply, the push for rapid procurement transformation, coupled with an
increasingly complex operating environment, is leaving procurement staff
cognitively overloaded.

Cognitive load refers to the total amount of information that working memory can
handle. Cognitive overload happens when informational input exceeds cognitive
capacities leading to multiple elements that need to be simultaneously
processed, sometimes leading to compromised decision making.
Source:  National Library of Medicine



IMPACTS AND RECOMMENDATIONS





COGNITIVE OVERLOAD WILL FORCE LEADERS TO DESIGN SIMPLICITY INTO HOW TEAMS
OPERATE


Baseline economic data from the past 30 years tells us worldwide productivity
has essentially stalled despite a better-educated workforce with
always-improving technology at its fingertips (see Figure 2). Does this mean
employees are really no more productive today than a decade ago? Or is something
else going on?

Figure 2: Changes In Worldwide Productivity






One potential explanation for stalled productivity lies in how productivity is
measured. Today, productivity is measured as output per time (e.g., hour, week,
month, year). While this works for the economy, it does not accurately describe
what’s been happening in procurement as it doesn’t account for increasing
complexity over time.

To illustrate this point, consider the analogy of a computer. Imagine that a
computer is running five simple programs at the same time. Now imagine one of
those programs was closed and a more complicated program opened. The computer is
running the same number of programs, but the RAM required to execute those
programs has increased. If you were to continue swapping simple programs for
more complicated programs, the computer would eventually run out of RAM and not
be able to run as many programs at the same time.

Would we say that a computer running fewer complex programs is less productive
than a computer running more simple programs? Or would we say that the computer
running fewer, more difficult programs is much more complex?

This is what is happening to procurement staff as complexity accelerates and the
demands on their cognition increase. The procurement staff isn’t necessarily
less productive. Rather, the cognitive load in managing the complexity of new
responsibilities has increased such that it appears as if they are.

> In other words, automating away simple tasks like invoice reconciliation and
> asking staff to repurpose their newfound free time toward initiatives like
> sustainability or innovation is placing significant new demands on their
> cognitive “RAM” in ways that are difficult to measure.


This means that managing staff productivity can no longer be about creating more
hours to allocate toward an activity. It must become about creating more
available cognition across the team to allocate toward an activity. In other
words, we must acknowledge the difference between available time and available
cognition.

There are three ways to increase available cognition on any procurement team.
Leaders can increase headcount, invest in artificial intelligence, or focus on
reducing the cognitive load of new or existing responsibilities. Adding
headcount is challenging even in the best economies. Artificial intelligence,
while promising, is still relatively new, costly to implement and for many comes
with a fear of the unknown. In the interim, leading organizations are focusing
on designing simplicity into how teams operate to reduce the cognitive load
required for executing responsibilities.

Designed simplicity is a user-experience-based approach to business process
management that seeks to reduce complexity by deliberately designing procedures,
tools and stakeholder interactions to be easy to understand and/or execute.


RECOMMENDATIONS


Design simplicity into how the staff operates. This is like helping someone
navigate from point A to point B in the easiest way possible. For example, if
you wanted to help a friend go to a new location, and were able to pave a road
for them to follow, that would make their journey a bit easier than hiking
through the woods. If that road also had guardrails, streetlights and signs,
their journey would become even simpler. If you also provide that person a GPS,
they will barely have to think. That is designed simplicity in action.

Procurement leaders have designed simplicity before — even if it wasn’t by
conscious choice. Strategic sourcing is a great example. The development of a
7-step sourcing process established templates, policies, procedures and decision
criterias for how staff do sourcing and has become the roadmap they follow. It
provides a frame for staff to know and understand the “if this, then that” of
their job. It reduced the cognitive load placed upon them when executing the
sourcing process.

Leaders seeking to offset the impacts of complexity and reduce cognitive
overload will need to scale what happened in sourcing and design simplicity into
all emerging value streams within procurement (see Figure 3).

Figure 3: Design Simplicity Into New Value Streams






This will require procurement leaders to:
 * Incorporate simplicity as a measure of success. Go beyond employee engagement
   surveys, and track staff user experience to a much greater extent. Monitor
   staff complaints, specific workflow usability, ease of use, process error
   rates, number of clicks and technology dwell time to inform where steps in a
   process aren’t so simple.
 * Establish internal excellence teams to rapidly develop templates, process
   maps, workflows and decision rules for all new value streams in procurement
   (e.g., category management, supplier management, sustainability, risk,
   innovation, and diversity, equity and inclusion [DEI]).
 * Challenge managers and leaders to refrain from falling back on the adage: “I
   need more strategic staff in order to become more strategic;” instead,
   challenge them to say: “I need to make strategic work simpler so that more of
   my staff can participate in the strategic process.”




COGNITIVE OVERLOAD WILL REDUCE THE EFFECTIVENESS OF SHARED RESPONSIBILITY ROLES


The history of procurement transformation has been entirely additive.
Traditionally, procurement leaders have focused on delivering cost, quality and
speed contributions to the business. Today, procurement is tasked with new
expectations, including sustainability, innovation, risk and diversity (see
Figure 4). As technology and society continue to evolve, the pace of new
additions to procurement’s responsibilities will continue to accelerate.

Figure 4: Increased Complexity in Procurement’s Value Proposition






For procurement staff members, each additional responsibility represents a step
change in the number of tasks and activities they are responsible for. However,
just like the CEO of a startup that wears multiple hats when first launching a
company, there comes a point where staff reach a level of cognitive saturation
that dictates they cannot do it all. The CEO will hire a C-suite to offload
responsibilities; the procurement leader will eventually have to take a similar
approach to continually narrow the focus on roles.

A great example of this in procurement is the category manager role. Today, many
procurement organizations expect category managers to simultaneously design
category strategies, execute sourcing activities, manage suppliers, manage
supplier risk, and drive toward emerging stakeholder priorities like
sustainability and diversity. This is unsustainable for the category manager,
and a typical outcome of this approach is subpar strategic execution. When staff
are tasked with both strategic and tactical activities, tactical aspects of the
role will always garner more staff attention (see Figure 5).

Figure 5: Strategic Work Is Difficult When Stuck in a Tactical Cycle







RECOMMENDATIONS


Critically examine shared responsibility roles. The value procurement drives for
the organization has evolved exponentially, but the nature of its roles have
not. Procurement leaders should ask: “Do we have a procurement organization of
jack-of-all-trades roles or are we more specialized?”

When faced with the need to fill a vacant role, procurement leaders commonly
look at existing job descriptions, make a tweak or two (at best) to one, and try
to get it posted and filled as soon as possible. This behavior over decades has
caused the function to have roles that are poorly defined, vague and completely
detached from the value to the organization.

Procurement leaders should:
 * Increase role clarity in their organizations by critically examining the work
   to be done and the roles they currently have established to complete that
   work. Be specific in your job descriptions. Tasking category managers with
   category strategy creation, risk, sourcing and buying is adding to their
   overall cognitive overload and greatly reducing their effectiveness. Looking
   instead at the separate components to be accomplished and better aligning of
   employee skill sets to tasks yields better outcomes. Write engaging job
   descriptions (see Writing Engaging Procurement Job Descriptions to Acquire
   Top Talent) that not only help to attract top talent but also retain that
   talent via a strong match with the job requirements and the employee’s skill
   set.
 * Peel back the layers of tactical work that permeate every procurement job,
   and consolidate that work into roles specifically designed to execute on the
   tactical responsibilities of the function. Further, evaluate possibly
   outsourcing, offshoring or automating that work. Procurement center of
   excellences (COEs) are specifically situated to consolidate tactical work and
   also support governance and other tools to streamline that work into fewer
   more qualified areas of the function. Gartner’s related hiring guides contain
   great examples of these two very different job profiles (see Category Manager
   Hiring Guide and Procurement Operations Specialist Hiring Guide).
 * Establish competency-building strategies at the role level, not only the
   overall function level. According to the 2023 Procurement Competencies
   Survey, only 14% of procurement leaders believe they have the talent to meet
   future business requirements, yet only 31% of procurement leaders believe
   their staff finds their competency models relevant to their daily work.2
   There is a gap between the skills needed and those being fostered in
   procurement organizations. Procurement leaders can use Gartner’s Ignition
   Guide to Building a Competency Model for Supply Chain to establish an
   effective role-based competency approach for their team.


A great example of narrowing the focus of staff members’ roles, creating
efficiency and reducing employee burden can be seen in Case Study: Customizable
Team Role Designs (UCB).


EVIDENCE

1 Gartner 2022 Procurement Organization Design Survey. This survey was conducted
online from 10 May to 23 May 2022 among 93 respondents from Gartner’s
Procurement Cohort list and an open link that was distributed via various
channels. The purpose is to understand how procurement organizations have
responded to the challenges of COVID-19. Qualified participants work in sourcing
and procurement with knowledge of the procurement function’s organizational
structure at the beginning of the pandemic compared to today.

2 Gartner 2023 Procurement Competencies Survey. This survey covers the current
state of procurement functional competency building and assesses the function’s
readiness for the future. Gartner surveyed clients online, along with community
members and a wider group of practitioners in procurement globally, and received
111 complete responses from 5 May through 8 June 2023. Respondents were spread
across multiple industries, including technology and telecom (n = 14);
manufacturing-industrial (n = 13); banking, finance and insurance (n = 12);
manufacturing-consumer goods (n = 10); manufacturing-food and beverage (n = 10);
healthcare and life sciences (n = 9); energy and utilities (n = 7);
manufacturing-others (n = 7); retail (n = 4); services (n = 3); education (n =
2); government (n = 2); transportation (n = 1); and others (n = 17). There were
62 organizations with at least $5 billion in annual revenue and 49 with less
than $5 billion. There were 49 organizations with less than 50 full-time
equivalents (FTEs) working in the procurement function, and 63 organizations had
more than 50 FTEs working in the procurement function.

Disclaimer: Results of these studies do not represent global findings or the
market but reflect sentiment of the respondents and companies surveyed.

 

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