Reducing Risk in Procurement Executive Search
Hiring a new executive can be a risky business if you don't have the right guidance and approach.
We sat down with Tim Noble, Head of Procurement at Transpennine Express, and Sourcing Solved MD Iain McKenna, to discuss the challenges of executive search in procurement, and what value means to them.
How can companies be more proactive to ensure new hires are a good fit in their organisation?
It’s important to know your own organisation, and the types of people who are successful within it. That may sound obvious, but for example if you work in a large public sector organisation, the way in which things are done is completely different to an entrepreneurial company. There will be more stakeholders to influence, and if you have a candidate that lacks those influencing skills that becomes a poor fit. Although they might be technically very good, without those critical people skills they won’t be able to make a success of their role.
Getting the “right” fit is key, and sometimes it’s down to the employer to be honest with candidates, to explain how the organisation works and establish if they would be comfortable within that culture. A wrongly placed candidate can absorb a lot of a CPO’s time; it can be damaging for the reputation and credibility of the function if you have someone who isn’t seen as being aligned to the values and priorities of the business.
Getting the chemistry wrong in the recruitment process can have long-term negative effects, and that’s where a good recruitment partner can be enormously valuable. They will take the time to get to know the organisation, and will be able to match the right fit of candidate. But they will also know the market and the best people out there: who is adaptable, who is suited to a public or private sector approach, and who is somewhere in between. That’s where their skill and knowledge of the function truly comes in, so if you have practitioners in the recruitment team that makes a big difference.
Before beginning their search, companies need to have a clear understanding of what’s important for the business. Often when an organisation is looking to hire, whether it be mid-management or at executive level, the typical approach tends to be taking an existing job specification, adding a few more skill sets, and getting it out quickly to the masses, whether that be through LinkedIn or another online job portal.
The first step should really be planning: where are we now, where do we need to get to, and how are we going to get there? Rather than focusing on the typical skill set, consider the function of the new hire. Take the time to look beyond the core skill set; identify where the gaps lie in the management team, and aim to bridge these gaps with the new hire.
For example, there might not be enough sales discipline in the team; they might be too casual towards tight deadlines and quality control. This discipline would then become a necessary attribute in the new hire.
What are the key differentiators between hiring at an executive level, and hiring mid-management?
Mid-management is about good control, knowledge of processes and spend market segments, but when you go up a level it’s different. At an executive level, you need to be ensuring that procurement is effective within the context of what the organisation wants.
Thinking about my experience in the transport sector, it is notable that at National Express the Group Procurement Director originally comes from a finance background, and at Arriva, their top procurement person now also has responsibility for fleet and engineering. The positions required individuals with broad business skill sets because there’s a greater level of ambiguity to manage at executive level. Professional procurement skills get taken as a given, but the real skill is in translating them into tangible action; can you work with people so that procurement doesn’t operate in isolation? The challenge to be effective becomes more cross-organisational.
When hiring at an executive level, you need a recruitment partner who understands those complexities and ambiguities, and the requirement of the organisation. You can hire people who are fantastic professionals with in-depth knowledge, but that’s not always enough. A good recruitment partner will recognise whether the individual has the confidence to step up a level and go outside that procurement silo, and act as a broad contributor to the business.
Procurement managers are a channel of communication within the organisation: they pass major decisions to executives, and company goals to lower level employees. The skill set of middle-management is centred around leadership; a procurement manager must be able to motivate, influence and guide a team. They will become a role model and demonstrate the desired quality of work to members of staff. They have good decision making skills, creativity and vision. They set clear and measurable objectives, and are skilled in presenting, persuading and influencing people.
This is very different to an executive, who is dedicated to continuous improvement: they don’t settle for good enough, and they work long hours which means they must come to terms with what a work life balance means to them. They know what they want for the company: they may not understand exactly how they’ll get there, but they’re committed to finding their way through action and experimentation. A successful executive will make decisions on less information and change it if they’re wrong, rather than let the decision-making drag on for months. They have a presence, they are risk takers and they don’t mind making mistakes.
These are very different skill sets, so it’s essential to understand the key differentiators to be able to go out into the marketplace and spot these individuals quickly and efficiently for clients. Time is always of the essence during the hiring process.
How can a CPO maximise efficiency without sacrificing too much of their time?
During the recruitment process it’s common to receive a pile of CVs that have been sent through without filtering. You find yourself trawling through a lot of CVs, which not only is a poor use of your time, but it also takes a lot longer to find the right person.
Once a procurement executive is in a post they can start to deliver value, but if it takes six months more to find that candidate then you’ve lost six months of value creation. The smart recruiter will know the candidates who are looking for a career move, they’ll know the candidates who will fit an organisation, and they will send, in my experience, a limited number of very suitable candidates to a prospective employer.
Firstly, have a clear and precise idea in your mind of what the key objective is: what do I need this person to do, and how will it impact me if they don’t perform as well as I need them to? The next step is defining the role. Look at the organisation: what skills are lacking? Be aware that everyone involved will have their own agenda: the CPO, CFO, HR, so collaboration is essential. You will need to produce a specification that meets everyone’s requirements, and is also aligned with the stakeholders’ expectations.
If you are using a headhunter to avoid sacrificing your own time, be aware that you will still need to spend time with them initially to develop the specification. The more time you spend going into detail at this stage, the less time you will need to spend throughout the process. Knowing what your deal breakers are, knowing the profile of the individual, knowing what your company’s selling points are: having all this in place will allow the headhunter to conduct a highly targeted, efficient search.
How can you reduce the risk of hiring an executive that does not meet your requirements, whilst also ensuring a positive candidate experience?
It’s important to know if you want someone to complement or challenge what you have already. Being explicit in what you want is a good starting point in terms of ensuring your hire doesn’t become a misfit.
A good recruiting partner will liaise with a smaller number of candidates, and through a mature discussion with each candidate, quickly determine whether they represent a good fit. They will liaise regularly with both the client and the candidate, making it clear where candidates are in terms of their propensity to move, and where the client is in the process. It’s important to give people clear views of when things will progress or if they’re not going to.
The risk is often down to the client not clearly expressing what their real requirements are; it sounds simple but we often find that very hard. In my own experience, one of the businesses I worked for had recently been audited by one of their customers and concluded that they needed to bring in procurement and supply management experience. Their knee-jerk reaction to the audit findings was to think that they needed an experienced permanent senior procurement manager, but in reality it was to manage a fairly low level spend (£15-20m per annum) which was spread across a large number of diverse spend categories. In these circumstances, introducing a good mid-level professional and/or bringing in interim resource to drive a number of focused projects would have been a more appropriate approach.
You can find yourself in a difficult situation if the new hire has moved in to a role where they don’t know whether they really have a sufficiently substantial task to take on, and the business wonders why they have brought in someone on a high salary, who is unable to deliver the level of added value to which they aspire.
A recruiter may not feel it’s in their interest to talk down a job and salary, but if you want that role to be sustainable, they need to have the maturity to challenge the candidate’s needs.
Not long ago an organisation I know received 140 applicants for a position; they then had to spend time whittling this down to four. I would say that around 80% of the candidates who applied for this role didn’t have a positive experience and this will be down to a poorly managed recruitment process. If senior management delegate the project without a clear plan, it’s going to be very much what I classify as ‘panic recruitment’. Top management hasn’t communicated what they need to middle management, who in turn haven’t communicated with HR. They’re running off a specification that isn’t clear, and the result is a high number of candidates, with a very small number who meet the high-end requirements.
When an organisation is trying to reduce risk in hiring, they firstly need to understand what the business needs and how the new position will fulfil these needs. If you’re working with a headhunter they will spend a lot of time getting to understand your organisation; if the initial setup is thorough then straight away you’re reducing risk and only targeting well-matched individuals.
Candidates’ feedback in this process is so important, and when you’re working in a senior management capacity you’ve got to try and give feedback to each individual person. If there’s no feedback given it creates a negative experience from the candidate’s perspective. At some point in the future you may be looking for someone else to fill a gap in your management team and that individual may be suitable, but because of that bad experience in the past they won’t consider your business.
Is it possible to balance the cost of an executive search against the value delivered?
Many companies have traditionally run an auction for a recruitment project, or have a framework with around four providers run through a third party. That’s the way it’s done because that’s how it’s always been done, but this can become a bit of a straitjacket if the same approach is taken for every hire. Requirements for a role will always change; someone who might be the right fit as a procurement executive one year might not be the same choice in a year or two. Personalities change, CEOs change, business objectives change. You need to ensure you’re not caught in a rigid system which is constraining you from targeting the best candidates.
I question to what degree people do look at the difference between paying a percentage in recruitment fees in the region of 30-35% and 10-15%. The common argument is that ‘we might find the right candidate through the lower cost route’, but more often than not you don’t. It’s an expensive gamble if they’re not the right fit and they don’t deliver the value that the right candidate would have done. Once you start to add up those opportunity costs, I would argue that the difference in recruitment percentages quickly becomes dwarfed by the lost opportunity that would accrue.
It’s important to balance the cost against the added value that the right candidate is going to bring. If you hold the recruitment budget you’ll look at your own cost, but you may not consider the wider implications for the business. Sometimes there’s a danger of looking at one cost element in isolation and not joining the dots with other parts of the organisation.
To understand the difference in value, consider the cost of going through a low cost provider. You may run an auction and get a recruitment company to work at a low percentage. Next you receive a large number of CVs and you need to begin the selection process. At this point companies often find that support for their recruitment process is not adequate, which is understandable as low percentage business will not be a priority for a recruitment company.
The recruiter’s business must be profitable too, and many organisations don’t think about that; their heads are in percentage mode. They may think ‘I will be getting a good percentage, I have reduced the recruiter’s rate significantly’. On paper that looks fantastic, but once you scratch the surface you’ll start to see the delegation; individuals who are working on your project will be a lot less experienced, possibly graduates who are learning on the job, so unfortunately all the risk will be on your shoulders.
Although it may feel like you’re saving money initially, if you look at the retention rate for placed candidates it’s usually quite low, around a year to two years. As many organisations discuss the war on talent and how difficult it is to retain talent, the crux of the problem generally begins at the recruitment stage.
Now if you look at a specialised executive search firm in comparison, they will spend time profiling and compiling shortlists based on a very specific brief defined by the executive, be it the CFO or CPO. Because less candidates are targeted, the level of care and attention given to each individual is far greater. As a result, the candidates feel more valued and the chances of them staying longer are far greater. This is reflected in a much higher retention rate; at Sourcing Solved our placed candidates stay an average of 4.5 years.
Juggling the balance of cost of an executive search against the value delivered is about what the retention looks like and what cost is attached to that. If you do your maths and look beyond the percentage, you’ll see great value.
Article originally published in Procurement Leaders