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Erste Group is one of the largest financial services providers in Central and Eastern Europe. Its core activities include serving the financial needs of private individuals and providing advisory services and support for corporate clients in financing, investment and access to international capital markets, public sector funding and interbank market operations. Erste Group Procurement is a discrete entity established to manage all external spend for all majority owned entities within Erste Group. Its mission is to efficiently satisfy demand while at the same time aiming for cost reduction and sustainable savings across the whole group. Like most procurement organizations, Erste Group Procurement had done a fairly good job at fulfilling its mission, but there was room for improvement. No one could have fairly described Erste Group Procurement as being “world class” a few years ago, yet achieving world class procurement performance was certainly a goal.

Three years prior to this writing, US-born p r o c u r e m e n t executive Robert Semethy was brought on board as the Managing Director and, later, Chief Procurement Officer of Erste Group Procurement. He describes his work with the organization as a “journey.” Where was Erste Group Procurement’s headed? It was taking them to world class status as a procurement organization. This case study describes the steps in this journey to world class procurement and how the Next Level Purchasing Association and its Senior Professional in Supply Management® (SPSM®) Certification played a role in an impressive procurement transformation.

Background: New Leadership Sets Procurement Group On A Journey To World Class Status

When Mr. Semethy entered the Erste Group Procurement organization, he made several observations about its operations. Some were good, some were not. As a seasoned veteran of procurement, having enjoyed successful stints in leading the procurement departments of companies like Mattson Technology, Flextronics International, and Solectron, he couldn’t help but notice some obstacles that were preventing the Erste Group Procurement organization from reaching its potential.

One of those obstacles to success was related to the lack of standardization in terminology among the teams in the different regions in which Erste Group Procurement operates. “A lot of our problems stemmed around communication and semantics,” Mr. Semethy recalls. “Even though we were attempting to communicate in English, our jargon was different.” While, on the surface, lack of terminology

A Rough Start

Robert Semethy Chief Procurement Officer

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While the challenges faced by his new organization were steep, Mr. Semethy was undaunted by them. He set the vision for the journey to include adopting procurement best practices, changing the culture of the organization, and enabling his staff to possess the training and qualifications that would placate internal customers who doubted the capabilities of the procurement team. In terms of that last point regarding training and qualifications, Erste Group Procurement selected the Next Level Purchasing Association to provide its Senior Professional in Supply Management® Program to the staff members in pursuit of each staff member earning the prestigious and globally-recognized SPSM® Certification. When asked what made the organization seek out additional training, Mr. Semethy was emphatic about his desire to ensure that every staff member was brought up to a base level of skills and knowledge. While some organizations are perhaps overly meticulous at picking and choosing the right combination of courses for each individual, Mr.

Semethy’s mantra was “don’t assume anything” regardless of any staff member’s years of experience. He was keenly aware of the value of training everyone on all relevant topics to ensure that no latent gaps in skill levels remained after training. As a component of Erste Group Procurement’s professional development initiative, certification was extremely important. With the procurement organization positioned as a service provider to the business units, “we are sometimes requested to provide proof of training and certifications of our employees,” Mr. Semethy said. In this environment, it is obvious that nothing short of stellar customer service is acceptable. If there were procurement disappointments, internal customers might rally to wrest control of procurement activities related to their own business units. As such, accomplishing certification early in the transformation was desired, not just to enable the implementation of best practices but also to manage perception among internal customers.

The Transformation

standardization sounds minor, it prevented the subgroups within the organization from adopting standardized best practices that could produce optimal results. Different subgroups were doing things “their own way” instead of “the best way” and this lack of unity across the organization stood in the way of making progress. Another obstacle to success was internal customer resistance. As a separate entity, Erste Group Procurement originally felt like an “outsider” to the Erste Group business units. Essentially, the procurement organization had no credibility with the business units and had a

lot to prove. As an example of the high demands and little faith that the business units had in Erste Group Procurement, service level agreements were put in place as a means of holding the procurement organization accountable to their responsibilities. One of the aspects of the service level agreements was the requirement that the procurement organization prove that they employ a qualified staff. From this alone, it is easy to see that the trust level was not optimal, making for a challenging situation in which to perform.

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Not long after enrolling staff members in the Senior Professional in Supply Management® Program, Erste Group Procurement started seeing improvements in the results they were delivering for the business. In discussing the methods of measuring performance, Mr. Semethy said that Erste Group Procurement “went from a very ambiguous methodology [in the previous year] and measurement to now a very rigorous one” in the current year and that results are “better this year, as our team has done more and more training.” At the time of this writing, over 50 Erste Procurement Group staff members have earned the SPSM® Certification. In addition, the organization has implemented many of the practices covered in the SPSM® Certification curriculum, including eSourcing, supplier performance reviews, and the latest procurement key performance indicators. The positive effects of the SPSM® Certification were seen in many ways that contributed to those improved results. Mr. Semethy and Mr. Strauss cited four specific areas where the impact of the SPSM® Certification was felt:

Team Unity: As mentioned earlier, one of the barriers to achieving consistently good performance was the lack of standardization in terminology and techniques employed by Erste Group Procurement. The SPSM® Certification helped Mr. Semethy address this issue and he says that “everybody is talking the same language” and the team has “aligned our jargon.” But beyond the team unity brought about by such standardization, Mr. Strauss also notes that achievement of the SPSM® Certification has made the team more of a productive, close-knit group that he refers to as a “community.” He expresses that all of the employees who have earned the SPSM® Certification “really feel a part of the community.” Mr. Semethy was somewhat surprised at the unexpected pride that has galvanized his team in the wake of their success in earning their SPSM® Certifications. He shares that the engraved awards that the Next Level Purchasing Association sends to those who earn the SPSM® Certification “are all over every single office” as each SPSM®-certified

Where The Journey Has Led

“Everyone thinks they can do purchasing,” jokes Jorg Strauss, Country Manager for E r s t e G r o u p Procurement Austria. But having a p r o c u r e m e n t certification enables members of Erste Group Procurement to provide assurance

of high degrees of competency and to say to business units who believe they are best suited to making procurement decis ions independently, “Look, we are certified here. There is a minimum standard of quality [that we meet] and processes we know about,” he says. So, Erste Group Procurement’ staff members eagerly began working on, and completing, the Senior Professional in Supply Management® Program.

Jorg Strauss Country Manager

“When we started implementing it, it was much, much easier because we did not have to convince the people” that it was a valid idea, Mr. Strauss says. Instead, he paraphrases the reaction of the team as “We heard in the SPSM® it’s world standard – let’s do it!” Supplier business reviews are another best practice taught in the Senior Professional in Supply Management® Program that Erste Group Procurement integrated into its repertoire. Leveraging eSourcing and holding supplier business reviews, and securing the associated benefits, were “never done before, so I look at those as areas where the SPSM® very much assisted us in getting [new procurement methods] culturalized in our organization,” says Mr. Semethy. For getting the team primed to try procurement techniques that had not been attempted before, Mr. Semethy said that the SPSM® material “helped us a lot to show the people there’s a world outside,” to which Mr. Strauss adds that “I think it really broke some ice.” In summarizing how the Erste Group Procurement leadership team leveraged the Senior Professional in Supply Management® Program, Mr. Strauss says that “We have seen SPSM® as a change management tool…to support the people to go on the journey to get to world-class procurement [and] supporting the whole change process within our company.” Credibility With Internal Customers: Finally, Erste Group Procurement has achieved the long-sought-after credibility with its internal customers. The dramatic skills improvement of the team members has not gone unnoticed. Internal customers “know that we’ve done the training, they know that our folks have passed,” reports Mr. Semethy. “It has gained us credibility where, two years ago, we did not have credibility.” Obviously, that credibility has led to cooperation and cooperation has led to better results for the company

employee “proudly displays it” and “they brag about their scores” to which Mr. Strauss adds that SPSM®-Certified employees are often so excited by their achievement that they “update their LinkedIn profiles right away!” Filled Skill Gaps: Early on, Mr. Semethy had a strong preference against allowing certain members to opt out of certain training opportunities based on their experience or perceived skill levels. That turned out to be a smart decision. As a result of this train-everyone-on-everything approach, “we now have a base that everybody has in the organization, from our top buyers down to our entry-level buyers,” according to Mr. Semethy. Mr. Strauss elaborates that the Next Level Purchasing Association training helped the team get past assumptions of skill levels that previously served to limit the professional development to which they would expose themselves. He said that team members who originally felt strong in a topic and assumed that there would be “no news in the training” on a subject, ended up being pleasantly surprised and making admissions like “Wow! I never thought about [that]! Very good!” In summarizing the effect of the SPSM® Certification on skill levels, Mr. Strauss states that “it really filled some gaps.” Change Management: Going from any starting point to world-class procurement requires adopting new tools and techniques. Of course, such adoption qualifies as “change” and, naturally, people can be resistant to change. However, participation in the Senior Professional in Supply Management® Program helped to eradicate such resistance among the Erste Group Procurement team. As an example, Mr. Strauss recalls a rather friction-free experience in getting the team to use an eSourcing tool where, previously, leadership may have felt reluctance from the team.

From the results discussed in this case study, it is obvious that the content of the Senior Professional in Supply Management® Program was right on target for helping a procurement team go from a respectable starting point to world-class status. However, content alone was not the only reason Erste Group Procurement was successful at leading such a large team through a rigorous educational program. Functionality and service mattered also. When asked what he liked most about the Senior Professional in Supply Management® Program, Mr. Semethy replied “Other than the content, the fact that it was online and [employees] could do it on their free time…or here at work” was helpful. “There wasn’t a lot of travel involved,” he said. “That really helped

us get a lot of folks through the program.” Asked the same question, Mr. Strauss cited three components of the program that worked particularly well. The first component was the kickoff web conference that the Next Level Purchasing Association conducts, at no additional charge, for its larger clients. “When [Next Level Purchasing Association personnel] were all in the web conference and explained to our people, ‘What is the aim [of] it?’ and how to use it, broke the ice,” he says. Secondly, he says that the Next Level Purchasing Association’s online classroom is “really easy to use.” Finally, he likes that each Next Level Purchasing Association online course incorporates “a mix of media” including audio clips, video summaries, hands-on exercises, and more.

Why The SPSM® Worked So Well For The Journey

Erste Group Procurement has made impressive progress in its transformation. In just a few short years, it has gone from an organization with few standardized processes and little credibility with its internal customers to an organization that is implementing the latest procurement best practices, achieving measurably better results, and delighting its internal customers. However, the journey is not over. Mr. Semethy and Mr. Strauss are supplying the

leadership necessary to implement continuous improvements, both in terms of refining the processes in use today and keeping an eye on new practices that may emerge. And they have an enthusiastic team, willing to embrace new ideas and ready to work hard at driving even better performance. The Erste Group Procurement journey is continuing and that journey gets better with each step.

The Journey Continues

Are you ready to transform your purchasing department into a center of excellence and achieve results like Erste

Group Procurement? Contact the Next Level Purchasing Association today to schedule a complimentary SPSM®

Certification Strategy Session. In that session, we will explore what your purchasing department needs in order to

move forward towards achieving even greater results in cost savings, productivity, and risk mitigation. You can reach

the Next Level Purchasing Association by calling +1-412-294-1991 or by email at: busdev@nextlevelpurchasing.com.