Procurement’s Growing Divide: Talent Inequality

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Spend Matters welcomes this guest post from Naseem Malik, managing partner at MRA Global Sourcing.

Just as the debate surrounding income inequality rages this election season, procurement is confronting its own unequal distribution of wealth in the battle for top talent. While we aren’t espousing the virtues of making anything great again or promising a new era of talent revolution, we at MRA are on the front lines as organizations grapple with the growing divide in all things talent, including remuneration. In fact, several recent cases have taught us that the smarter, more progressive companies do actually understand the priorities of top procurement performers when it comes to the million-dollar question.

Procurement’s Got the Power

As the labor market continues to tighten, especially in the professional services sector, attracting and retaining supply management talent is still at a premium. Just last week the Federal Reserve Bank of New York announced that, for the first time since the economic recovery, there are more middle-wage jobs open than not — and these openings are outpacing both higher- and lower-paying ones. The New York Fed also said there are approximately 5.6 million job openings in the U.S., which is good news for job-seekers and a strong sign that companies remain in hiring mode.

While this is a marked reversal from the Great Recession, the same dynamics didn’t apply to the world of procurement hiring. Not only did the function manage to keep its unemployment levels in check but it also prevented jobs from sliding into the lower salary rung. When the economy was in the doldrums, there were six qualified candidates for every opening, according to the Wall Street Journal. Based on our own hiring data, we would venture that the number was closer to four qualified candidates per procurement opening. As soon as the economic tide turned, the race was on to woo top performers away from their current employers.

The Haves and Have-Nots

With the ensuing recovery coupled with the rising stature of the procurement function, companies are experiencing a whole new level of stress when it comes to talent management. There’s a clear dichotomy between the proactively aggressive companies and the laggards as they both compete in an ever-shrinking pool of impact players. The former companies are cognizant that there are many factors at play when it comes to acquiring talent — including changing demographics, worker mobility resulting from real estate dynamics, dual income couples, work/life balance and compensation. The latter seem to focus mainly on the compensation piece.

The irony is that such a monetarily-driven approach usually falls short of winning over the prospective candidate. One way to avoid going from a have to a have-not status for talent is to go on the offensive when it comes to retaining your best people. A private equity client confronted this reality when it realized one top performer at the firm was in jeopardy of being stolen by a competitor. The prospect of a promotion with more money was enticing, and had this top performer not taken his manager into confidence, he would have surely fled. The company realized that that talented individual was too valuable to lose and matched the title and money and gave him additional responsibilities. The rationale was that if this individual is as good as he thinks he is, it would be a win-win. If he fails to live up to the heightened expectations, he will be promptly replaced.

Another key element that’s underrated is the significance of speed. Sometimes an organization can do everything right and still fail to get the desired person due to extended hiring lead times. The sooner a company pounces on the right person, the better its chances of securing the preferred candidate. We had a leading consumer-packaged goods (CPG) client that made up for its mediocre compensation package by moving at a brisk pace in hiring preferred candidates, which made them feel wanted and prone to accept an opportunity. Contrast this with a relatively smaller services organization that could pay competitively but took its sweet time in deciding. With that approach, the company constantly lost out as candidate interest waned and prospects moved on.

To be fair, there are a few clients that have a clear strategy and stay the course. They will not ruminate over a missed candidate and firmly believe it’s just a matter of finding the right one at the right time for the right price. Unfortunately, this is a circa 2010–2011 approach to procuring talent, and it isn’t quite effective anymore.

The Price is Right

Here are two examples of companies taking a successful, modern approach. First, a medical device manufacturer seeking a hard-to-find, much sought after skillset in an obscure Midwest town. This company had a lot going for it, including a high-growth and appealing industry that continues to gain ground with the impending greying of our populace. To land the candidate, it shattered the old insular thinking and aggressively upped the ante by offering a compensation package the candidate couldn’t refuse. Of course, it also helped that the CPO was a renowned leader with an accomplished track record and that this career opportunity broke new ground in the realm of indirect sourcing.

The second example involves a global financial services client in a large metropolitan city that changed its hiring goal posts after finding the perfect candidate. This stellar applicant represented such an upgrade that the company escalated to the highest levels of its organization to get her what she needed to say yes. In situations like this, the common theme is that when a game-changer is on the table, you need to do what it takes to bring them on board.

Bottom line: As procurement talent demand continues to outstrip supply, it will become increasingly difficult for companies to attract the best and brightest unless they’re relentless in bridging the talent gap. Save for the handful of the desirable blue-chip companies or the high-tech gems out there that sell themselves, the rest of us have to sell our employment value proposition to attract the A players. No longer can organizations afford a slapdash campaign where they pay below market value and expect optimal outcomes with a candidate pool comprised of B and C players. Ultimately the disparity between A players and the rest will widen the inequality, so whether it’s grown organically or brought in externally, the key is that to win in today’s marketplace, companies need these talent superstars.

First Voice

  1. Bill Kohnen:

    Interesting thoughts. My observation agrees that while there are many unfillled positions companies still drag out the hiring process for far to long and I would add have candidates “jumping through hoops” that were barely relevant 20 years ago.

    Also would add that many forward thinking companies do not care where you live. In the Silicon Valley hi tech world a surprising number of people fly in (company paid) to SF or San Jose from AZ, Texas and even FL. Same goes for global multi nationals where people are managing a global team anyway.

    Ultimately I do agree that some previously strong purchasing organizations are losing ground relative to others and it is not just about pay.

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