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Do you know where
your skill gaps are?
Cengiz Bayazit
Steffen Fuchs
Katie Smith
Operations (Americas) February 2015
2 Do you know where your skill gaps are?
Leading organizations have long understood that
consistent high performance in a tailored set of
business capabilities translates into business impact.
To build capabilities in crucial functions, executives
have made employee training a top priority, but
ready learning programs are usually standardized.
They do not account for the status quo ante at
each company, with its existing strengths and
weaknesses. Time and resources are expended
evenly—which is to say overmuch in some areas
and insufficiently in others. Only customized learning
programs can reach the weaker areas with the focus
needed to lift them into line with best practices. The
path to the bottom-line impact companies seek
consequently begins with identifying the individual
skill profile of each employee.
What is the best way to approach such individual skill
assessments? A recent survey of global executives on
capability building indicated that companies that are
effective at capability building rely on more objective
assessments of their team’s core skills.1
Consequently,
we are developing such an assessment tool, which is
designed to fit seamlessly into McKinsey’s tailored and
integrated capability-building approach (Exhibit 1).
The McKinsey Capability Building Assessment:
Early experience in procurement
The McKinsey Capability Building Assessment (MCBA)
is being developed in a number of functional areas,
including procurement, supply chain, pricing, and
leadership. Strong demand from procurement leaders
has accelerated the development of the MCBA for
procurement, and it was the first of the assessments
to have been deployed. The procurement MCBA is an
objective individual capability assessment covering
the essential elements that define the procurement
process: the fact base, the sourcing strategy, and
execution, across key components (Exhibit 2).
The online skill assessment is designed for easy
global rollout and quick follow-on analysis. The
assessment uses questions based on experience
and real content, which are crafted to provide the
baseline data for effective capability building in
procurement. Across the key components, the results
show overall organizational scores, benchmarking
against industry peers, assessment by role and
department, and improvement opportunities at the
corporate and individual levels. With this data, chief
procurement officers will have the enabling points of
Do you know where your skill gaps are?
The path to high performance can begin with an objective skills assessment.
Exhibit 1
2015
MCBA Procurement
Exhibit 1 of 3
The capability-building assessment fits seamlessly into our overall
capability-building approach.
McKinsey’s capability-building approach
Understand
organizational
and functional
capabilities
Make interventions
in actual work
Identify and train
change leaders
Manage
performance
Assess
individual
capabilities
Apply
adult-learning
techniques
Prove concept
and scalability
Institutionalize
and continually
improve
capabilities
Estimate
total value
Align business
processes and
systems
Roll out and
scale up
1 4 7 10
2 5 8 11
3 6 9
Diagnose Design Implement Sustain
Communicate
3Do you know where your skill gaps are?
Exhibit 2
2015
MCBA Procurement
Exhibit 2 of 3
The capability assessment is built around the main procurement themes and their
constituent elements.
Key procurement themes and topics
When is the best time to launch a request for proposal (RFP)?
a. Before developing the category strategy
b. Once the category strategy is developed and key cost-saving levers have been identified
c. After there are savings targets assigned to a commodity/category
d. While developing the category strategy to refine cost-saving levers
Sample questions
Based on supply positioning and supplier account valuation provided, which supplier would
likely make the most successful partnership?
Supplier A, Supplier B, Supplier C, or Supplier D
Our perspective on supplier Supplier perspective on us
Clean sheets
Linear
performance
pricing Total cost
of ownership
Contracting
for performance
Negotiating
excellence
Effective RFPs
Stakeholder
alignment
Sourcing
strategy
Spending
analysis
Supply-
market
analysis
Supplier analysis
Impact
on end
product
Difficulty obtaining supply
High
Low
Low High
A
B
DC
Relative
value of
business
Account attractiveness
High
Low
Low High
A
B
D
C
Develop
robust
fact base
Develop
sourcing strategy
Execution
4 Do you know where your skill gaps are?
departure for developing a customized curriculum
based on real needs. The profile that emerges
from the assessment will also help identify areas of
strength—the roles, geographies, and experience
levels where expertise is concentrated. These areas
can provide change leaders and role models for the
learning journey.
The procurement MCBA was developed from
McKinsey’s long experience in procurement in all
sectors. Early results and responses are promising.
Chief procurement officers are citing the assessment
as a source of significant insights, which they are
using to create the knowledge programs they need to
improve performance, enhance savings, and thereby
boost margins.
The assessment has so far revealed that participants
tend to have better-developed execution skills,
including negotiation and contracting, than knowledge
of procurement fundamentals. Development needs
are more often identified in the elements of fact-
base building and strategy development: basic skill
areas that are instrumental to maximizing financial
impact for companies (Exhibit 3). This outcome is
unsurprising, since most purchasing personnel
engage in negotiation and contracting with suppliers,
and many organizations focus their training programs
on negotiations. However, we have seen wide variation
in the level of preparation attained before negotiation,
as well as in the negotiation results themselves.
In our assessment database, companies scoring
in the top decile in building a robust fact base and
developing sourcing strategies enjoy gross margins
that are 7 to 18 percent higher than industry averages.
The advantage cannot be attributed solely to better
knowledge and application of core procurement
tools, but it is clear that leading companies approach
negotiations with a solid fact base and articulated
sourcing strategies. Less prepared companies wind
up leaving savings on the table, no matter how skilled
their teams are at negotiating.
The good news is that the capability assessment
provides companies with the objective view needed
Exhibit 3
2015
MCBA Procurement
Exhibit 3 of 3
The assessment revealed lower scores in fact-base building and strategy development—
fundamentals for maximizing negotiated savings.
Procurement capability-building assessment: average scores of participants, %, n = 2,000
Building a
robust
fact base
Developing
sourcing
strategies
Execution
(negotiation
and contracting)
Top decile Top quartile Average Bottom quartile
68
62
56
52
71
65
58
53
82
75
64
57
5Do you know where your skill gaps are?
to improve. By identifying the actual skill profile, the
MCBA in procurement helps procurement leaders
shape customized training curricula to develop talent
equipped with the right tools and analyses to bring
savings to the bottom line.
Continue to watch this space. We are learning more
and gathering further data as the assessment gains
wider use. The importance of customized capability-
building programs and their impact on organizational
health and financial performance are becoming
clearer every day.
1 	
Richard Benson-Armer, Silke-Susann Otto, and Gina Webster,
“Building capabilities for performance,” January 2015,
mckinsey.com.
Cengiz Bayazit is an associate principal in McKinsey’s
Stamford office, Steffen Fuchs is a principal in the Toronto
office, and Katie Smith is a specialist in the Atlanta office.
Operations (Americas)
February 2015
Copyright © 2015 McKinsey & Company
mckinsey.com

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Do You Know Where Your Skill Gaps Are

  • 1. Do you know where your skill gaps are? Cengiz Bayazit Steffen Fuchs Katie Smith Operations (Americas) February 2015
  • 2. 2 Do you know where your skill gaps are? Leading organizations have long understood that consistent high performance in a tailored set of business capabilities translates into business impact. To build capabilities in crucial functions, executives have made employee training a top priority, but ready learning programs are usually standardized. They do not account for the status quo ante at each company, with its existing strengths and weaknesses. Time and resources are expended evenly—which is to say overmuch in some areas and insufficiently in others. Only customized learning programs can reach the weaker areas with the focus needed to lift them into line with best practices. The path to the bottom-line impact companies seek consequently begins with identifying the individual skill profile of each employee. What is the best way to approach such individual skill assessments? A recent survey of global executives on capability building indicated that companies that are effective at capability building rely on more objective assessments of their team’s core skills.1 Consequently, we are developing such an assessment tool, which is designed to fit seamlessly into McKinsey’s tailored and integrated capability-building approach (Exhibit 1). The McKinsey Capability Building Assessment: Early experience in procurement The McKinsey Capability Building Assessment (MCBA) is being developed in a number of functional areas, including procurement, supply chain, pricing, and leadership. Strong demand from procurement leaders has accelerated the development of the MCBA for procurement, and it was the first of the assessments to have been deployed. The procurement MCBA is an objective individual capability assessment covering the essential elements that define the procurement process: the fact base, the sourcing strategy, and execution, across key components (Exhibit 2). The online skill assessment is designed for easy global rollout and quick follow-on analysis. The assessment uses questions based on experience and real content, which are crafted to provide the baseline data for effective capability building in procurement. Across the key components, the results show overall organizational scores, benchmarking against industry peers, assessment by role and department, and improvement opportunities at the corporate and individual levels. With this data, chief procurement officers will have the enabling points of Do you know where your skill gaps are? The path to high performance can begin with an objective skills assessment. Exhibit 1 2015 MCBA Procurement Exhibit 1 of 3 The capability-building assessment fits seamlessly into our overall capability-building approach. McKinsey’s capability-building approach Understand organizational and functional capabilities Make interventions in actual work Identify and train change leaders Manage performance Assess individual capabilities Apply adult-learning techniques Prove concept and scalability Institutionalize and continually improve capabilities Estimate total value Align business processes and systems Roll out and scale up 1 4 7 10 2 5 8 11 3 6 9 Diagnose Design Implement Sustain Communicate
  • 3. 3Do you know where your skill gaps are? Exhibit 2 2015 MCBA Procurement Exhibit 2 of 3 The capability assessment is built around the main procurement themes and their constituent elements. Key procurement themes and topics When is the best time to launch a request for proposal (RFP)? a. Before developing the category strategy b. Once the category strategy is developed and key cost-saving levers have been identified c. After there are savings targets assigned to a commodity/category d. While developing the category strategy to refine cost-saving levers Sample questions Based on supply positioning and supplier account valuation provided, which supplier would likely make the most successful partnership? Supplier A, Supplier B, Supplier C, or Supplier D Our perspective on supplier Supplier perspective on us Clean sheets Linear performance pricing Total cost of ownership Contracting for performance Negotiating excellence Effective RFPs Stakeholder alignment Sourcing strategy Spending analysis Supply- market analysis Supplier analysis Impact on end product Difficulty obtaining supply High Low Low High A B DC Relative value of business Account attractiveness High Low Low High A B D C Develop robust fact base Develop sourcing strategy Execution
  • 4. 4 Do you know where your skill gaps are? departure for developing a customized curriculum based on real needs. The profile that emerges from the assessment will also help identify areas of strength—the roles, geographies, and experience levels where expertise is concentrated. These areas can provide change leaders and role models for the learning journey. The procurement MCBA was developed from McKinsey’s long experience in procurement in all sectors. Early results and responses are promising. Chief procurement officers are citing the assessment as a source of significant insights, which they are using to create the knowledge programs they need to improve performance, enhance savings, and thereby boost margins. The assessment has so far revealed that participants tend to have better-developed execution skills, including negotiation and contracting, than knowledge of procurement fundamentals. Development needs are more often identified in the elements of fact- base building and strategy development: basic skill areas that are instrumental to maximizing financial impact for companies (Exhibit 3). This outcome is unsurprising, since most purchasing personnel engage in negotiation and contracting with suppliers, and many organizations focus their training programs on negotiations. However, we have seen wide variation in the level of preparation attained before negotiation, as well as in the negotiation results themselves. In our assessment database, companies scoring in the top decile in building a robust fact base and developing sourcing strategies enjoy gross margins that are 7 to 18 percent higher than industry averages. The advantage cannot be attributed solely to better knowledge and application of core procurement tools, but it is clear that leading companies approach negotiations with a solid fact base and articulated sourcing strategies. Less prepared companies wind up leaving savings on the table, no matter how skilled their teams are at negotiating. The good news is that the capability assessment provides companies with the objective view needed Exhibit 3 2015 MCBA Procurement Exhibit 3 of 3 The assessment revealed lower scores in fact-base building and strategy development— fundamentals for maximizing negotiated savings. Procurement capability-building assessment: average scores of participants, %, n = 2,000 Building a robust fact base Developing sourcing strategies Execution (negotiation and contracting) Top decile Top quartile Average Bottom quartile 68 62 56 52 71 65 58 53 82 75 64 57
  • 5. 5Do you know where your skill gaps are? to improve. By identifying the actual skill profile, the MCBA in procurement helps procurement leaders shape customized training curricula to develop talent equipped with the right tools and analyses to bring savings to the bottom line. Continue to watch this space. We are learning more and gathering further data as the assessment gains wider use. The importance of customized capability- building programs and their impact on organizational health and financial performance are becoming clearer every day. 1 Richard Benson-Armer, Silke-Susann Otto, and Gina Webster, “Building capabilities for performance,” January 2015, mckinsey.com. Cengiz Bayazit is an associate principal in McKinsey’s Stamford office, Steffen Fuchs is a principal in the Toronto office, and Katie Smith is a specialist in the Atlanta office.
  • 6. Operations (Americas) February 2015 Copyright © 2015 McKinsey & Company mckinsey.com