Deloitte’s Take: Procurement Compensation in Talent Management

As the old saying goes, you get what you pay for. The same can be said of recruiting the best procurement talent into an organization. Spend Matters is continuing to feature excerpts from Deloitte’s recently published paper: Procurement Talent Management: Exceptional Outcomes Require Exceptional People. Today we take a glance at Deloitte’s thoughts on the compensation equation.

“Many procurement functions downsized extensively after the 2008 financial crisis. Early retirement packages led procurement groups in industries such as oil and gas, chemicals, utilities, transportation and metals and mining to lose considerable institutional knowledge and experience. To respond to this brain drain, a proactive approach is needed.

The salary question is central to how the business perceives procurement. Alignment of compensation to expectations is essential to selling executives on paying for skill sets and to selling candidates on giving procurement a chance. One benchmarking analysis found high-performing organizations paying top procurement talent an additional 30% or more than typical performing organizations, well into 6 figures.

Compensation initiatives can be augmented with innovative performance management and rewards programs. Procurement functions might reward an entrepreneurial approach, incenting top talent to take risks and improve the procurement organization. This may lead to a virtuous cycle, drawing talent to procurement and then persuading them to stay through innovative performance review, remuneration and rewards programs.”

Compensation matters at all levels of procurement – even entry-level positions. With ISM Richter scholars earning as much (or more) out of undergraduate university programs based on our seat-of-the-pants analysis than entry-level management consultants or investment bankers (at least before bonus in the later case), it is clear that some procurement organizations value getting top people in the door from the start. Yet this early willingness to pay materially larger sums at the pre-MBA level or for those with less than 5-6 years experience, is certainly still the exception and not the norm.

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