TODAY’S HANN STAND: Procurement $$$ misaligned with today’s market realities

November 24, 2011

Companies sell themselves short: Can’t always attract the best talent where demand is HIGH and supply is lower than ever.

Despite continuing high overall unemployment and a “soft” economy, combined with concern over a potential meltdown in European debt markets, it is indeed amazing to consider just how buoyant the Strategic Sourcing/Procurement employment marketplace has remained, particularly here in Canada.  Companies scramble to beef up their Sourcing teams (for contract and permanent positions), putting their focus on increasingly narrow skill sets for real experts with high level knowledge and depth in categories such as IT Software, Unified Communications, Core Network Infrastructure, Facilities Management, and Outsourcing, to name a few. In this hunt for greater expertise and top talent, it is critical that employers keep a close watch on their overall compensation bands for these roles, in order to prevent them becoming misaligned with market expectations and realities.

To put it bluntly, this market segment has become “RED HOT”, (much the same as IT contract became fifteen or twenty years ago), and as always, the market dictates salaries and overall compensation.  Continued growth in this sector means that qualified Purchasing and Supply Chain candidates are in massive demand. The supply of these candidates is actually growing, but not nearly fast enough to keep pace with an explosion in demand amongst employers. What’s driving this growth is not nearly as important as recognizing that the shortage of skilled talent persists, and is showing no sign of letting up anytime soon.

As a specialist in SCM, Argentus’ very narrow focus on this particular talent vertical gives us a unique perspective, and qualifies us to honestly and realistically evaluate current market realities and expectations. Our job is to assist companies in attracting and hiring the best talent suited to their needs. Part of this role involves using a consultative approach to working with clients and using our up-to-the-minute marketplace intelligence to advise our clients as to how best to proceed, given the situation as it now exists. Our goal is to work with companies to ensure that their Supply Chain teams are, in fact, staffed with the best the market has to offer.

But that’s sometimes a bitter pill to swallow for employers who need to educate themselves on just how competitive (or uncompetitive) they are in this market. While some may perceive that we are sometimes “locking horns” with our clients, we feel strongly that our role is to facilitate a process, to utilize market intelligence to our client’s benefit and to get results within that framework. This includes evaluating clients’ open requirements against what other similar companies are paying for like talent. There is absolutely no point in leading a company to believe they will get what they want, a fit at the package they are offering, if in fact the market is currently offering ten to fifteen percent higher for exactly the same role. Providing our clients with honest, accurate advice about what the market will bear, and how best to tackle the mandate, is to my mind one of the key advantages of dealing with an organization such as ours.

So here’s what I am seeing right now. Experienced candidates – sole contributors as well as seasoned managers mentoring mid to large teams – have very quickly become more expensive as the market has tightened. Yet companies are proving rather slow to adjust the compensation ranges they are offering. As a result, the salary ranges that would have been appropriate a year or two ago for managers with, say, 5 years experience are now probably more appropriate for “sole contributors” with 2-5 years experience.

Sole Contributors with at least 2 to 4 years experience are now earning well in excess of $85,000 (as an overall package) – and anyone with over 5 years of relevant and current management experience is earning well in excess of $100,000 as a base. Additionally, it’s a reality that packages now include bonus plans, and other pay-for-performance incentives. In this environment, you aren’t going to attract those Procurement experts with solid management experience with an offer in the $95K-105K range – especially if your open position is one that is not “bonus eligible.” If you’re looking for someone who has managed teams of 5-15 people, for instance, that carries a premium. Much work these days is project-based and collaborative, rather than being hierarchically organized, and so traditional managerial experience is actually more rare. $100K for a role like this simply isn’t going to be enough to get the right person excited about working for you, since that person is almost certainly already making that or more.

Having said that, not every organization is “behind the curve” on this, however. Some are listening carefully to what the market is saying and are starting to work creatively to market their companies better to attract talent with more competitive overall compensation packages.

The bottom line? If you are managing a Strategic Sourcing group today or looking to support the hiring strategies of an SCM internal group within your organisation, you need to be asking yourself regularly if your salary ranges are enough up to snuff to attract, but more importantly, KEEP the best talent. You’re going to find it increasingly difficult to entice the best candidates to leave their current positions and come to work for you if you don’t at least offer competitive compensation. Your company’s good name will only carry you so far – that’s a reality check. Given current market conditions, if you do find someone who is willing to accept your role for less, you should ask yourself why. There are likely better people out there and they are worth every penny – because they can save your company MILLIONS.

Over and out

Bronwen

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