Working With Procurement

It was agreed by all that the meeting was to be held in the strictest secrecy.

Only first names were to be used, and nothing was to be put in writing. Even though I was the head of recruiting and staffing for a large, multi-national company, I was putting my team in serious jeopardy just by having this conversation. Fortunately, the liaison was successful — we were not caught that day, and so far no one has discovered that we met together.

What am I describing? An international spy ring? The sale of competitive intelligence?

No, it was something much more serious. I was talking with a vendor … without a representative from the Procurement department present.

This will doubtless be remembered as a bumpy year for those of us in this profession. While finding talent in a market that has been turned upside-down represents a major challenge, it’s the secondary effects of this economic downturn that will truly test those of us in Talent Acquisition. I recently wrote about the likely increase in “executive referrals” resulting from current economic conditions. Other secondary effects could include anything from a reduced talent pool in the coming years (as families struggle to justify the return-on-investment of a college education), to an almost certain delay in the migration of the Baby Boomers to the Happy Hunting Ground of retirement.

While these effects are years away, there is another implication that you’ve probably already encountered — the increased influence of Procurement and Purchasing departments in the Recruiting function. And with so much renewed emphasis on spending, I predict you’ll see Procurement play an even greater role in the coming months.

No matter which side of the recruiting aisle you sit on (corporate or vendor), you’ve doubtless encountered Procurement departments by now. They’re the group that coordinates RFPs, negotiates prices, and even gets involved in managing vendor “performance.” It’s becoming more and more difficult to spend a single dollar on a product or service without their involvement nowadays. How are people reacting? Some enjoy leaving the “negotiating” to the experts; others feel like involving strangers interferes with trust-based vendor relations that have in many cases been built over a period of years. Regardless of your opinion, however, this model is here to stay.

How did this happen? When companies decided to get “leaner” back in the 1980s, they started buying raw materials more strategically. As a result, they began seeing huge improvements in cost-of-goods-sold as trained professionals scanned the markets for price, managed supply-chains of goods, leveraged the trade-offs between volume and price, and generally took a long-term approach to raw materials purchase. With subsequent enhancements in technology, it became even easier for companies to begin purchasing from a global market.

Another interesting change then began to take place: in addition to purchasing bulk commodities like iron ore and precious metals, Procurement departments began getting involved with large national contracts to purchase office supplies, technology, rental car contracts, and even started establishing preferred airlines for their organizations.

This was nearly always great for the company. It increased efficiency, and drove costs down. The challenge that we’ve all started encountering is that such a cold and impersonal approach can have its limits, particularly when it comes to people. Let me first state that I am completely in favor of running businesses as efficiently as possible. I support the work Procurement does, and sleep better knowing companies are paying the true market price for steel and corn oil. However, a process that was developed to purchase bulk quantities of material, ship it in container vessels, and store it for months until needed has some rather interesting implications for the acquisition of top talent.

Take my secret meeting, for example. I was talking with a trusted vendor with whom I’d worked for years. Things were pretty simple in the past — a company would have an open position, I’d ask my vendor-partner to work on the job, and they’d fill it.

Now, my fairly-straightforward relationship suddenly becomes very complicated. For example, I must first get my trusted vendor on the Approved Vendor list. In the most common scenario, the Master Service Provider determines the bill rate or the mark-up that can be charged (which usually must also cover a 2%-3% fee for them). My trusted vendor might not be able or willing to work at those rates. As such, the “approved vendor list” I ultimately end up with might consist of untried and/or undifferentiated firms who were chosen based on price alone.

The second hurdle is how to efficiently communicate with the third-party vendors who are actually recruiting for my position. Third-party vendors are often prohibited from speaking directly to me by contract; instead I must enter my requirements in the Master Vendor’s system. Questions regarding my position are asked and answered in writing. Third-party vendor phone calls are made to vendor managers, who are then supposed to capture feedback and communicate it back.

My research leads me to conclude these processes often seem cumbersome and arbitrary to vendors. Measures that are important from a traditional procurement perspective (quick turnaround times, low fees, and long contract periods) are not necessarily the same measures that create an environment for finding top niche talent, but vendors are measured only on these key metrics.

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Clever vendors know where to pay their tribute. I’ve had my Procurement department inform me that they’d had extensive meetings with a job board, and were about to sign a major contract. Not only did I know nothing of the conversations, but I had rejected this particular tool months before. So why was procurement so anxious to sign? Because they’d negotiated a great rate, of course.

Procurement as a corporate function is here to stay. However, there are a few things you can do to make your relationship thrive.

Figure out who they are: Find out who comprises your Procurement department. Schedule time to meet with key leaders, and engage them before the next RFP. You have more in common with this department than anyone else; after all, you’re responsible for procuring a raw material every bit as important as printer paper. You’re responsible for procuring Talent!

Establish yourself as the decision-maker: Like any service function, Procurement wants to help you. They really do. As we’ve already seen, though, the prime measure of success is cost. And in 10 years of recruiting, I’ve never met a single hiring manager who told me that cost was the most important thing to them, and you probably haven’t either. Ultimately, you own the relationships you have with your vendors. Make sure Procurement understands that you are the decision-maker.

Find a way to work together: With the current emphasis on cost, you’re likely to see Procurement involved in nearly anything that involves paying an invoice. This year they may oversee your temporary labor contract, but next year look for them to become involved with retained searches and career fair giveaways. The point is that they have a job to do, and you do too. Invest in whatever is necessary to ensure you’re sharing information and working together.

Advocate for your customers: While learning to work together will necessarily involve compromise, never forget who you are ultimately there to represent: the job-seeker. Contracts that may seem advantageous to your company because they’ve resulted in huge rate reductions may end up costing you in the long run as vendors choose to simply not work with you, or not to send along their best candidates. I spoke with several vendors as I researched this article who said that they have been in situations where they were “asked” to accept maximum bill rates that were a third less than the amount of some candidates’ actual pay rate! While this looks great on a “vendor scorecard,” it means those companies never even get to see top candidates.

Share successes publicly: Chances are, you can learn a lot from your Procurement colleagues. And they can learn from you. Once you have that first shared victory together, be sure to publicize it. Executives love hearing how the company attracted top talent, but they love hearing how money was saved even more! Setting a public example of how to engage Procurement effectively is a great way to build your own organization’s brand as well.

Some people say good times are just around the corner; others say more bad times are ahead. In either case, companies are sure to continue using Procurement professionals to keep costs down. Learn what these colleagues do, and learn to work with them. If you do, it will mean getting the right talent into your organization at the right price. And that beats secret meetings any day of the week!

He started his career as a research chemist in the laboratory. Now, Michael Kannisto has tried to apply a similarly disciplined and science-based approach to the fields of recruiting and talent management. His long-term interests include employment branding, multiple generations in the workforce, and using Six-Sigma methodology to improve recruitment outcomes.

His current passion is the development and use of mathematical models to predict future staffing and development needs (a remarkably more accurate form of “workforce planning” than what is traditionally employed). Call it predictive modeling, call it “big data” ... but the information sitting in your HRMS right now has the potential to change the way you think about talent forever.

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