We attend a lot of procurement conferences and events and as a result we hear a lot of CPOs talk about their businesses, their priorities and their objectives.One of the common themes is the attraction and retention of talent.
In a recent report on the Future of Procurement by SAP Ariba they quoted some interesting statistics: 63% of procurement leaders do not have an established talent management strategy. The main barriers to achieving organisational efficiency enabled by digital procurement are:
Lack of data – 23%
Budgetary restrictions – 19%
Lack of internal talent/knowhow – 17%
Shortage of external talent – 13%
So when you combine the two figures for talent shortage (internal and external) you get 30% which effectively makes it the biggest barrier to organisational efficiency.
So CPOs are making all the right noises about the importance of people but what is the reality?
Or to put it another way, is procurement making savings or adding value in the recruitment process?
Procurement has gained significant savings in the recruitment category over the past 15 years. The implementation of PSLs and the leverage of the company’s buying power yielded easy wins. But with many recruitment companies now operating at tight margins the opportunity for further savings seems limited.
In light of this Procurement needs to add value to the business in terms of supply of recruitment services. Rather than view recruitment as a commodity to be bought mainly on price is there opportunity to find value? Let’s not forget, barely an annual report is published without a CEO reminding us that ‘people are our greatest asset’. So why is such a business critical category reduced to the lowest common denominator?
The commonplace commoditisation of recruitment is underpinned by the binary perception that a vacancy is simply either filled or not filled. Therefore it is just a question of filling the position for the lowest possible cost. To move away from this view requires insight in to time to hire and performance of the new recruit over a sustained period of time.
The first variable is easy to measure but a little harder to evaluate, particularly for highly specialist positions where the potential candidate pool is small. For example it’s unreasonable to compare time to hire for an office based admin position, where the candidate pool is huge, to time to hire for a rare skill set position, where only a handful of relevant candidates exist in a given geographical region.
Nevertheless, the recruitment supplier’s ability to find and place candidates as quickly as possible undoubtedly has a clear value to the hiring company, therefore should be part of the supplier selection criteria.
The second variable is the performance of the new recruit over a period of time. Anecdotally, most senior managers will know who their star team members are and who are only just meeting the minimum performance requirements. However, turning this into quantifiable data is a real challenge. And how often does the senior manager trace back the origins of the high performer in terms of which recruiter sourced the candidate, and then use this information to influence the choice of recruitment supplier going forward?
The typical PSL based contingency recruitment supplier arrangement serves to reinforce the commodity view. By instructing, say, three agencies on a vacancy using the ‘no placement, no fee model’ urgency is created amongst the suppliers. This helps minimise time to hire as the agencies race to ‘win’ the fee but incentivises the suppliers to submit only candidates they can access immediately rather than seek the best possible fit for culture and performance potential which may be a little more time consuming. In other words the long term value to the business may well have been sacrificed for speed.
Much is made by forward thinking procurement leaders of supplier relationship management. By forming a true partnership with suppliers they can create an opportunity for collaboration and innovation that benefits both supplier and customer. Examples cited often come from the procurement of components or raw materials but could this extend to recruitment services?
We have written many articles on how companies can improve their talent attraction, streamline their selection processes and get a deal done with the right candidate. Our knowhow and experience has the potential to be a game changer for a customer looking to be better. Will procurement embrace that opportunity?