Procurement Training Budgets vs. Sales Training Budgets by Charles Dominick, SPSM, SPSM2

Editor’s Note:  Charles is founder, president and chief procurement officer of Next Level Purchasing, which offers the SPSM (Senior Professional in Supply Management) family of certifications.

Be sure to check out Charles’ Purchasing Certification Blog.

I recently came across a research paper by Best Practices, LLC.  The topic was training of sales people in the pharmaceutical industry.  This paper can be found at http://goo.gl/qzQed.

Now, almost anyone with an interest in procurement will acknowledge that sales teams receive significantly more training that procurement teams.  This study helps to quantify that.

Here are some interesting statistics from the research paper:

• Sales training budgets for participants in Best Practices’ study averaged $5.87 million (US)
• Newly hired sales reps receive 32 days of training in their first year on the job
• Existing sales reps receive 10 days of training per year

One statistic that I would have liked to see for comparison’s sake is sales training budget expressed on a per-person basis.  Though that wasn’t provided, we can still do some extrapolation.

Procurement professionals receive much less training.  According to CAPS Research’s 2012 Cross-Industry Report of Standard Benchmarks, the training costs per supply management employee are just $912 per year.  To draw some comparison with the sales training budget previously mentioned, that means that an organization would have to have 6,436 procurement employees to have the procurement training budget equal the sales training budget.

Do you know of any organization with 6,436 procurement employees?

Me neither!

In a further comparison, my organization’s own research has consistently found that procurement professionals receive less than three days of training per year.  This would mean that experienced sales reps get nearly four times as much training as their procurement counterparts.

Are procurement professionals at a disadvantage?

You bet.

Why would an organization allow its procurement team to be at such a disadvantage?

Pondering this, I believe that it is tied to the metrics used by each profession.

The #1 sales metric is, well, sales.  Revenue.  The “top line” on an income statement.  For a profitable company, sales is the biggest number on its income statement.

The #1 procurement metric is usually cost savings.  There’s nothing inherently wrong with that.  But let’s consider how big that number is compared to sales.

The total value of purchases in an organization is a mere fraction of the total value of sales, especially in services organizations.  According to the CAPS Research study previously mentioned, managed spend is 47% of sales on average.  Furthermore, the CAPS numbers indicate that the average cost reduction savings is 2.5% of managed spend.

So, if sales were $1 billion, then managed spend would be $470 million, and cost reduction savings would be $11.8 million.

So, that $912 per person procurement training budget is 0.008% of the procurement department’s metric in a billion-dollar-a-year company.  A per person training budget based on 0.008% of the sales department’s metric would mean that each person would get $8 million in training per year in a billion-dollar-a-year company.  Obviously, that’s ridiculous!  But let’s just say that, because we know that sales professionals get about four times as much training as procurement professionals, that the sales training budget would be $912 x 4 = $3,648 per person.  Still, that’s a mere 0.0004% of the sales department’s metric.

That’s nothing!  No wonder why sales professionals get so much training!

When fighting for procurement training dollars, don’t allow management to use the “percentage of your metric” approach.  It looks big compared to what sales departments get.

Instead, communicate how your suppliers’ sales departments are getting trained to neutralize your efforts and the only way to stay ahead of them and protect your organization’s profits is to try to match the amount of training that your sales counterparts are getting – 10 to 32 days per year.  Suppliers’ sales forces are dedicated to getting smarter and smarter all the time and continually learning how to get more money in their pockets in less money in yours.  It’s your management’s choice to allow that trend to continue or to take action.

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