Chief procurement officers are called upon to make presentations all the time. But not many can claim to be natural showmen, able to engage, entertain and enthuse an audience of over 1,000 people, like the one at the Ariba Live conference in Boca Raton, Florida, recently.
Roy Anderson is one CPO who can, as he ably demonstrated during a 30-minute keynote speech and then again for more than an hour the following day in a packed breakout session of the kind that are so easily dull and lifeless affairs. The MetLife vice-president and former purchasing director of John Hancock Financial Services combines passion and energy with the humour of a stand-up comedian. (While in full flow during his main presentation, for example, he had the presence of mind to toy with the cameraman following his frenetic movements across the stage; suddenly darting back the way he’d come so as to go out of shot.)
But Anderson is also a serious player in the US procurement world and a big advocate of technology and “virtual” working. Once he’d recovered from his exhausting double-header, CPO Agenda asked him how these figure in the transformation he’s engineered at MetLife and his plans for the future.
What changes have you made to the size and structure of the procurement team since you arrived at MetLife?
When I joined the company in August 2001, procurement was very transactional. My office was in the basement! Of the 100 people in the department, 70 were doing transactional work and about five were doing strategic sourcing. Today we have 92 people in total, of whom 15 are doing transactional work based in India, and all the rest are doing strategic sourcing, supplier management or driving the technology infrastructure to keep the 48,000 associates in MetLife tied to our supplier base.
In 2001, our 70 buyers handled $400 million of spend a year – $5.7 million per person. Today, those 15 buyers in India are responsible for over $2.1 billion, or $140 million per buyer. That’s a twenty-five-fold increase. On the strategic side, in 2001 the department did about $50 million-worth of sourcing. Today we close over $800 million a year in sourcing – a sixteen-fold increase. Our savings now are seven and a half times what they were then from a department that is 10 per cent smaller.
To achieve that, I’ve used a concept of simplify-eliminate-automate, where we looked at every single desk, simplified the process that each associate was going through, eliminated the work that was valueless, and then automated as best we could. By doing that, we freed people up to spend more time doing strategic work, working with suppliers and internal customers in areas where we felt the biggest opportunities were.
Did you move transactional work to India for cost reasons?
My budget is always an issue. I’m driving to keep my budget flat year on year. But MetLife is much more of a global organisation than ever before, and in this particular case it was the fact that we needed a global footprint and this was an opportunity for us to grow into that part of the world. That was the driving force. The company has made an effort to create local organisations where we do business, and India is one of those.
Is it an outsourced operation? How does it fit with the rest of your US-based team?
No, they are MetLife associates and it’s a MetLife operation based in Noida in north-east India. The team started this year and it’s in the growth stages right now. They are all local people that we have recruited and trained. It’s not a call centre, it’s not a backroom administrative operation, it’s a vibrant, robust, very interactive, dynamic environment working with internal customers and suppliers. Those 15 people are the buyers, so they are handling day-to-day orders, resolving customer issues, dealing with invoices and doing low-level sourcing – items that we don’t necessarily have a preferred supplier for or a contract in place. They are handling most of the transactional activity of the department. They use the same technology, the same systems that we use domestically, and it is basically a virtual operation – whether I deal with one of my staff in St Louis or in Tampa or in India, there is no difference.
Was the decision to locate those buyers in India controversial within MetLife?
Both management and my staff were very much in favour of extending our reach, because our task is to be a global procurement operation. That requires us to have people on the ground across the globe. Having people in India was just a natural extension of our operation. We were looking for the most efficient way of getting the transactions done.
How do you ensure that people on the strategic side don’t get bogged down in transactional work?
Their objectives, their workload is all being managed online and they are being driven to do the larger, aggregated multi-million dollar deals across the entire organisation. They are gathering internal customer requirements, understanding the marketplace, driving requests for proposals and reverse auctions, coming to the final solution with the right number of suppliers, bringing it to a contract close, setting up the systems for those suppliers so that they can get online bids, online purchase orders, send in their invoices. We have a sourcing plan across the organisation, so they have 20, 30, 40 events that they need to run in a given 12-month period. They don’t have the time or energy to do transactional work. They have to move the transactions to where they are most efficient.
And where are they most efficient?
We want our internal customers, who like to have control over the goods and services they order, doing as much self-service as possible on the transactional side. That has helped us to eliminate transactions from our buyers’ desks and give them directly to the supplier. Back in 2001, only 1 or 2 per cent of our activity was going from internal customers to suppliers. Today, almost 90 per cent of our transactions are not touched by a buyer; they are automated from catalogues directly to the supplier base, using preferred suppliers and preferred pricing.
Some of the bidding is going to self-service too. So in the case of commercial print, we have a self-service environment – an electronic “sandbox” – where internal customers can put in statements of work, design descriptions, specifications and get bids from preferred suppliers. It’s real-time competition.
The aim of this is to become what I call the low-cost customer. By driving efficiency into the process, we make it easier for suppliers to do business with MetLife. They get more accurate orders and they get paid on a timely basis, which reduces the cost to the supplier and enables them to reduce our costs.
What has been your approach to managing this change?
Change management is an ongoing effort to give people the opportunity to develop their skills into the areas where we need them, give them the training they need. We have development plans for every individual in the organisation, and those clearly outline whether they are in a transactional area that over time is going to move to a more cost-effective or a more efficient approach.
You have to be honest about this. I talk a lot about simplify-eliminate-automate. I tell my staff: you have to simplify your job, eliminate what’s not required and automate the balance, because I have another job for you to do. When we put in place a new organisational chart with brand new job descriptions, everyone had to apply for these roles. About 30 per cent of the staff here today were here five years ago.
The continuing development of my staff is one of the most important things I do. At least a third of my time is spent on development activities. We do a significant amount of internal training. So I take someone that is really good at reverse auctions and they run sessions on how to do a good reverse auction. I take people who are really good at critical thinking skills and developing RFP questions, and we have them train everyone else in the department on that. We bring in people to train our staff constantly, whether it’s from our legal or audit departments or our suppliers telling us what makes a good low-cost customer.
We also recognise success every day. We are a part of the chief administrative officer’s recognition programme; we have a procurement recognition mailbox that anybody in the department can send notes to; and at staff meetings we recognise individuals who have done things in a creative manner, or with an attitude that has made our suppliers and our internal customers satisfied.
It’s important that my staff are passionate and enthusiastic about what they do. We spend a lot of time being very positive, very optimistic, talking about all the can-do things. My approach is to pull from people all the time, to build their confidence, and to do it using humour. I start with the fact that you need to enjoy your work and have fun, so we are always looking for opportunities to do that. People work so much better when they are smiling than when they are frowning.
To what extent have you faced resistance to the changes you’ve made?
Resistance is a constant. Do individuals have the time to do capable work that is complete and where the deliverables are accurate, for example, in order to create a more open and transparent bid process? There is also the resistance from individuals who for years have been working their particular budget and with their suppliers. From the internal customer’s perspective, if procurement does a horrible job, they have to clean up the mess. If we do a mediocre job, they are no better off. If we do an outstanding job in bringing in new suppliers, new capabilities and lower the cost, people say: “Why didn’t you do this three years ago”? We need to realise that internal customers have a big stake in this activity, that they are putting themselves out to support it. They have to be the winner and take credit for all the good work that’s been done.
What is your vision for procurement at MetLife?
I am looking to become a truly integrated, technology-driven global procurement team. That means rolling out technology across the globe, having every team able to interact with the internal customers in a virtual environment, a mobile environment, no matter where they sit in the world, and bring the best suppliers from around the world to support MetLife’s customers and shareholders. We have a long way to go in building our global presence, but I look forward to being part of that.
The transactional work should be efficient, fast and effective. My task is to have my strategic team spending all of their time in the future, working on sourcing events 12 months ahead of time. That means we need to be working with internal customers in their budgeting process, their long-term plans, so that we understand the types of suppliers, the types of requirements they will need 12 months from now.
You seem to be passionate about mobile working. Why?
My customers and my staff are in constant motion. We are virtual – almost 70 per cent of my staff work from home or outside the office every week. Decisions need to be made very quickly and they also need to be auditable. So you need a system that can provide data in a package that they can take action on in real time, and that’s all about getting it smaller and smaller and into the BlackBerry or PDA type of environment. Our focus for 2007 is for all of our requisitions to be approved online, and we will pushing data in channels to those devices so that everyone understands what requisitions and contracts are coming down the line. I find that a more virtual environment gives my staff the flexibility so they can do a better job of balancing their work and their life.
Isn’t it a concern if people feel they are always “on call”?
It is a concern, but everyone needs to find their own balance. Before there were BlackBerrys and cellphones there were those individuals who stayed at work 20 hours a day, who had to call work as soon as they got home to pick up their voicemail. I always tell my staff that family comes first. When someone has any issue with their family and needs to get something done, I always say yes. I also do reviews with people who aren’t taking their time off and urge them to take it.
Around the globe there is always an internal customer, whether they are in Japan or Mexico or Korea, who is looking for products and services from my team. We need to have people and managers who understand their workload and what they can do to move to self-service. A BlackBerry or wireless card doesn’t create the environment, the person does.
What do you want from technology that it doesn’t do now?
The data is still in chunks that are too big, and it doesn’t flow as smoothly as it needs to. We need to have personalised data; that means the core data has to be tied to the baseline activities so that people can pull out the actionable requirements. I want to be able to get each manager the four things they need to get their job done right. That means I need more intelligence in my data, I need more intelligence in the flow of data to the right person, fast and in the format that they need it, whether that’s a cellphone, voicemail, a PDA message, a text or an e-mail that shows a report visually. I want to use technology to drive that activity and that requires a lot of work. You can get work to people, but making it easy is the challenge. It’s the difference between the iPod and every other MP3 player. People are looking for the easiest way to get their job done and you have to be a supporter of that, rather than a stop sign.
How close are you to having that kind of system in place?
We are very close in getting the key data to the right people, whether that’s for our online travel activity or our notification activity within our requisitioning and contracting process. We have a major technology upgrade this year, moving to the full Ariba suite. We’ll be rolling that out globally over the next 12-18 months. That’s very exciting, I’m very enthusiastic about the value that’s going to bring across our platform.
We believe the next-generation solutions that we are moving to globally will provide the personalised data. So I see early in 2008 that I’m really going to be able to accelerate the “any data to anywhere in any format” strategy, whether that’s to a BlackBerry, PDA or laptop. We use technology ruthlessly in order to be able to streamline the process, and then I hire the most creative people I can find. Good technology in the hands of uncreative people doesn’t go anywhere.
FACT FILE: MetLife at a glance
• Founded in 1863
• Headquarters in New York, NY
• America’s largest life insurer
• Number 37 on the Fortune 500 list of biggest US companies
• 48,000 employees (92 in procurement)
• Operates in 18 countries, including US, Argentina, Australia, Belgium, China, India, Japan, Mexico, South Korea and the UK
• Products: life insurance, annuities, home and auto insurance, long-term care and disability income insurance, financial planning
• Revenues in 2006: $53.3 billion
• Profits in 2006: $6.3 billion
• Procurement spend (influenceable): $2.3 billion
Interview by Geraint John
