Talent Management 2012 A Benchmarking Perspective

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1 Talent Management 2012 A Benchmarking Perspective A benchmarking survey from ISM, CAPS Research and Zycus identifies current talent management issues and strategies. By D. Steven Wade Table of Contents Introduction... 1 Background... 1 Talent Management 2012 Survey...2 Benchmark Benchmark Benchmark Benchmark Benchmark Benchmark Benchmark Benchmark Benchmark Benchmark Benchmark Benchmark Benchmark Benchmark Benchmarks 15 and Metric Report....6 Conclusions...6 Endnotes Introduction Over the past five years, much has been written on the topic of talent management and the importance of implementing an effective talent management program to retain and develop a workforce capable of meeting the challenges of an evolving economy. There is a wealth of online resources and information on talent management issues, ranging from recruitment to developing and maintaining a high-performance workforce. However, companies still struggle with how to create opportunities for highly talented individuals, recognizing that tomorrow s supply management employee will likely require a different set of skills to operate in a different economic climate. Talent management no longer means simply hiring the most likely candidates to fill job openings. Human resource organizations are still integral to the talent management solution, but effective supply management organizations are starting to consider talent management to be a viable business strategy. Talent management, like other evolving business strategies, will adapt to shifting global business dynamics and sourcing locations; will integrate highly efficient tools and technologies into the workplace; and will evolve as economic and political climates continuously impact operational processes. When adopting this new business strategy, supply management organizations will require different professional development methodologies and employee retention approaches that recognize generational and geographic differences. Successful enablers will also be effective in recruiting and training talent from developing economies. Background In November 2009, CAPS Research published its first benchmarking report on talent management 1. The survey and report were developed in collaboration with the Ohio State University Fisher College of Business and Rutgers Business School. The talent management benchmarking report provided detailed information pertinent to recruitment, development, retention, evaluation, compensation and advancement opportunities for supply management employees. Also addressed in the 2009 report is information on

2 how technology has impacted (and will impact) an organization s talent management business strategy. During a recent CAPS Research event for Fortune 500 chief procurement officers 2, two of the world s leading experts on supply management research Phillip L. Carter, DBA 3 and Robert M. Monczka, Ph.D. 4 identified specific megatrends that are impacting supply/value chain strategies in this changing decade. Their discussion and presentation was based on supply management research conducted by CAPS Research over the past few years. Their in-depth analysis of various research studies provides insight into the megatrends and value chain strategies that will be critical for companies to develop in order to cope with external trends and business model changes. Carter and Monczka point out that one of the eight critical supply/value chain challenges that organizations will face in the next decade is talent management. Companies must learn to address a variety of talent management issues, including topics such as supply management career expectations, generational conflict, uneven distribution of supply management talent across different global regions, the need for new training/development and retention programs to address generational differences, the potential for labor shortages in developed countries and labor growth in rapidly developing economies. This key research, along with the earlier (2009) benchmarking research on talent management, set the foundation for the most recent benchmarking survey, which was released in February The metric report published in late March 2012 includes responses from 90 organizations. Talent Management 2012 Survey Are there sufficient numbers of new and existing jobs available for supply professionals who are moving forward in their supply management careers or who are new to the profession? What functions in the supply management organization offer the best opportunity for employment? What is the likelihood that my company will outsource or offshore some procurement-related functions? Is there a shortage of supply management talent at my company, and if so, how is my leadership addressing the shortfall in talent? In today s marketplace, what am I worth to the company? As noted above, CAPS Research was asked to release a survey on talent management and, where feasible, compare some of the outcomes with results from the talent management survey launched in In addition, updated information on the role that technology plays in formulating an organization s talent management business strategy was included in this summary report. Throughout this report are references to both the 2009 and 2012 surveys. Benchmark 1 On average, the number of supply management employees (SMEs) assigned to the supply management organization account for 2.5 percent of total company employees, with the median percentage at 1.6 percent. This median value closely approximates the average number reported in the November 2011 edition of the CAPS Research Cross-Industry Report of Standard Benchmarks, which is 1.8 percent. Benchmark 2 Figure 1 lists various supply management functions that may be included in supply management organizations, and the percent of SMEs assigned to support these functions. Figure 1: Percent of Participants Reporting the Following Functions Are Included in Their Supply Management Organizations, and the Percent of Percent of Participants Reporting the Following Functions are Included in Total Their Supply SMEs Management Assigned Organization, to Each Function and the Percent of Total SME Assigned to Each Function Accounts Payable Administration Support Contract Administration Logistics Procurement/Purchasing Quality Assurance Risk Management Supplier Relationship Management Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of SM Orgs. Percent of SMEs Assigned Benchmark 3 Figure 2 shows that more than half of the sample population (51 percent) reported an increase in the total number of SMEs during the past two years. About 27 percent reported a decrease, and the remaining 22 percent reported no change. It is important to note that the total increase reported represents 10.4 percent of the total number of SMEs reported by the survey participants. Figure 2: Percent of Survey Participants Reporting Their Total Number of Percent of Survey Participants Reporting Their Total Numbers of SM Employees SMEs Increased, Decreased or Did Not Change Increased, Decreased or Did Not Change 51.22% 21.95% 26.83% No Change Decreased Increased 2

3 Benchmark 4 The survey question corresponding to this benchmark asks, During the past year, did your organization experience a talent shortage in any of the functional areas listed? About 80 percent of the population reported they experienced talent shortages in one or more of the functional areas listed below. In the 2009 CAPS Research Supply Management Development and Retention Benchmarking Report, only 46 percent of the survey population reported a talent shortage. Figure 3 shows the percent of the survey population that reported experiencing shortages in the supply management functions as listed in the 2012 survey. As noted earlier, all the survey participants reported that procurement/purchasing functions are part of their supply management organizations, and 37 percent of all supply management employees are assigned to support that function. Figure 3 shows that about 56 percent of the survey participants reported experiencing a talent shortage in their procurement/purchasing functions. In contrast, about 77 percent of the participants reported that administrative support is included in their supply management organizations, and less than 10 percent reported experiencing a shortage in their administrative support staff. Figure 3: Percent of Participants Reporting the Functions Below Are Included Percent of Participants in Their Supply Reporting Management the Functions Below Organization, Are Included In and Percent That Their Supply Management Organization, and Percent That Reported Talent Shortages in Each Reported Talent Shortages in Each Accounts Payable Administration Support Contract Administration Logistics Procurement/Purchasing Quality Assurance Risk Management Supplier Relationship Management Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Part of SM Org. Talent Shortages Benchmark 5 In response to the question, Was your organization able to fill all of the open positions with qualified candidates? about 58 percent of the participants said yes. As noted in the 2009 benchmarking report, about 80 percent of the participants reported they were able to fill open positions with qualified candidates. Although there are some differences in the survey population for each reporting period, the data indicate that it is more difficult to fill supply managementrelated job openings with qualified candidates today than it was in Benchmark 6 Reasons why the survey participants were not able to fill all the open positions with qualified candidates are listed in Figure 4. Reasons Given For Not Being Able to Fill All Open Positions Figure 4: Reasons Given for Not Being Able to Fill All Open Positions Lack of Qualified Applicants Hiring Freeze Compensation Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of Survey Population Other reasons why the survey participants were not able to fill all the open positions include the following: CFO wanted an ROI before authorizing new positions. My crystal ball was not able to tell me which contracts we would review over the next few years in order to generate firm cost-avoidance numbers, and he would not take historical information. Difficulties to contract imposed for the <country> legislation. Geographic needs not aligned with local talent supply. Managing to a reduced budget through open positions. Market pressure due to overall increase in hiring in companies like ours and customers hiring these types of resources. We have not been able to afford several qualified candidates over the past year or two since their salary expectations were beyond our established salary range for the position. Benchmark 7 This benchmark reports the degree of difficulty survey participants reported experiencing when filling job vacancies with qualified candidates. Data indicate that it is more difficult to find qualified candidates for more complex tasks such as risk management, quality assurance, procurement/ purchasing and contract administration. About 40 percent of the survey participants reported it was not difficult to find qualified candidates for their organizations procurement and purchasing function, and 53 percent of the participants reported that it was difficult or very difficult to do so. This is likely due to the different levels of supply management experience being sought. One company that hired a significant number of new employees during the last year focused on recent graduates for entry-level positions that required little or no practical experience. 3

4 Figure 5 shows the percent of participants who reported it was either not difficult, difficult or very difficult to fill job vacancies with qualified candidates. The expression don t know indicates the percent of survey population who were not aware of any difficulties being encountered. Figure 5: Percent of Survey Participants Who Reported That Filling Job Vacancies Within the Following Functions Was Either Not Difficult, Difficult or Very Difficult Function Not Very Don t Difficult Difficult Difficult Know Accounts Payable 100.0% 0.0% 0.0% 0.0% Admin. Support 66.7% 12.5% 0.0% 20.8% Contract Admin. 45.5% 33.3% 9.1% 12.1% Logistics 47.1% 23.5% 5.9% 23.5% Proc./Purch. 40.4% 38.3% 14.9% 6.4% Quality Assurance 37.5% 62.5% 0.0% 0.0% Risk Mgmt. 16.7% 50.0% 16.7% 16.7% Supplier Risk Mgmt. 28.0% 32.0% 4.0% 36.0% Benchmark 8 When supply management positions are not filled with qualified job candidates, the work is being completed by someone else, the task is being automated or the work is just not getting done. There are a number of options a company can consider, and each alternative presents its own set of risks and rewards. For example, some companies have found it worthwhile and cost-effective to invest more heavily in automated tools to offset staffing shortages, outsource certain supply management functions or hire temporary employees. Both the 2012 survey and the 2009 survey asked the participants to rate the importance of different courses of action taken when job positions were not filled with qualified candidates. Participants rated different choices on a scale of 1 to 5 (1 = not important, and 5 = very important). When looking at Figure 6, there doesn t appear to be any significant change in the degree of importance assigned each of the choices listed. For example, having the flexibility to assign additional work to current SMEs was rated very important in 2012 and 2009 (average = 4.4 in 2012, and average = 4.1 in 2009). Figure 6: Rating the Importance of Alternative Choices to Complete Work Rating the Importance of Alternative Choices to Left Unfinished Due to Talent Shortages Complete Work Left Unfinished Due to Talent Shortages Outsourced the Work Assigned Additional Work to Current Personnel Hired Temp. Personnel With Required Skills Hired Personnel Without Required Skills and Provided Training Transferred Personnel From Other Areas and Provided Training Automated Work to Eliminate the Need for Additional Personnel Work Was Not Completed Ratings: 1= Not Important, 5 = Very Important Benchmark A talent shortage may require some organizations to exceed salary guidelines in order to attract qualified candidates. Survey participants were asked if normal salary guidelines were exceeded in both survey years (2012 and 2009). In 2009, 24 percent of the responses indicated salary guidelines were exceeded, and in 2012, 31 percent of the survey population also reported that salary guidelines were exceeded. The participants were also asked to provide the percent that normal salary guidelines were exceeded (1 percent to 5 percent; 6 percent to 10 percent; 11 percent to 15 percent; and more than 15 percent). Figure 7 shows there isn t a significant difference between the two survey years, but there is an indication that companies have been more willing to exceed established salary guidelines in 2012 to hire qualified candidates. Figure Percent 7: of Percent Oranizations of Organizations Who Reported Salary That Guidelines Reported Were Salary Exceeded Guidelines and Were Exceeded Percent Above and Normal Percent Salary Above Guidelines Normal Salary Guidelines Percent of Survey Population 70% 60% 50% 40% 30% 20% 10% 0% 1-5 percent 6-10 percent percent 15 percent or more Percent Where Salary Guidelines Were Exceeded Benchmark 10 This benchmark provides information on the first of two questions about future demands. The 2012 survey question asked, In the future, many new demands are expected to be made on supply management. Using a scale of 1 to 5 (1 = highly unlikely, and 5 = highly likely), what is the probable likelihood that each of the following statements will occur 4

5 during the next two years (for your company)? Data in Figure 8 indicate that participants appear to be more likely to increase their use of automated tools and technology rather than outsource supply management job functions. However, most companies reported it highly likely they will need to increase the skill level of their personnel to meet the future demands expected to be placed on their supply management organization. Figure 8: Future Demands on Supply Management Organizations Average Statement Rate Likelihood There is a need to increase the skill Highly level of existing personnel in my 4.22 Likely supply management organization. Outsourcing of supply management job functions is expected to increase Likely We will increase our use of automated tools and technology Likely Benchmark 11 Figure 9 shows how the survey participants responded to our second crystal ball question. In this instance, survey participants were asked to respond to six different statements about the increased demands being placed on supply management employees (scale: 1 = highly unlikely, and 5 = highly likely). Figure 9: Increased Demand on Supply Management Employees Average Statement Rate Likelihood Job/skill levels will be upgraded Likely The number of qualified professionals on the team will increase Likely Work will be outsourced to thirdparty service providers Unlikely Supply management employees will utilize new or updated technology to 3.66 Likely automate certain functions. Supply management employees and responsibilities will be delegated to 1.88 Unlikely the business unit level. Supply management work will be offshored Unlikely Benchmark 12 Participants were asked whether or not their organizations have a formal process in place to measure the skills of their SMEs, such as ADR s Development Needs Analysis (ADR DNA ). Overall, only 31 percent of the survey population reported their organization has a formal process in place. The survey did not ask the participants who reported they do not currently have a formal process in place if they planned on doing so in the next two years. A list of processes and tools is included in the metric report that corresponds to this summary report; see page 6 for additional information. Benchmark 13 The survey participants reported an average of US$982 is spent each year on professional development/training for each SME. Figure 10 shows the data ranging from a high of US$4,333 per person to a low of US$0 per person. Figure 10: Average Professional Devlopment/Training Spend Per Supply Average Professional Devlopment/Training Spend Per Supply Management Employee Average Training Spend $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ Survey Participants It s not uncommon for professional development and training spend to be reduced in a downward business economy. An improving economy may signal that additional dollars are budgeted for development and training, but this may not necessarily be the top priority for supply management leaders. However, as noted in Benchmarks 10 and 11, survey participants rated improved job training and skills development as being of key importance during the next two years, which will likely influence the amount of dollars budgeted for professional development/training. Benchmark 14 The survey asked participants to indicate the extent to which your organization encourages supply management employees to improve their professional skills, where a score of 1 indicates no encouragement and a score of 5 indicates the organization highly encourages individuals to continuously improve their professional skills. The data in Figure 11 show that 78 percent of the survey participants believe their organizations encourage (47 percent), or highly encourage (31 percent), their supply management employees to improve their professional skills. At the other end of the scale, 6 percent (2 percent little encouragement and 4 percent no 5

6 encouragement ) reported their organizations are not offering their SMEs the level of encouragement to improve their job skills. Figure 11: Encouraging Supply Management Employees to Improve Their Encouraging Supply Management Employees Professional to Improve Their Professional Skills Skills Scale: 5 = Highly Encourage, 1 = No Encouragement Benchmarks 15 and 16 These two benchmarks focus on the percent of organizations that actively encourage supply management employees to pursue a professional certification (i.e., CPSM, CPSD, CSM, etc.) and adjust compensation based on this professional certification. The survey asked for this data in two questions, and the metric report provides this information as separate benchmarks. Data were received from 93 percent of the survey population. Every participant who answered the question about actively encouraging professional certification also answered the question about compensation being adjusted for professional certification. The bottom line is that 64 percent of the organizations surveyed encourage their supply management employees to pursue a professional certification, and only 19 percent of these companies adjust salaries based on professional certifications. Figure 12 is a side-by-side comparison of the data provided by the survey participants. Figure 12: Actively Encouraging Certification and Adjusting Compensation Actively Encouraging Certification and Adjusting Compensation for for Professional Professional Certification Certification Percent of Survey Respondents 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Highly Encourage Encourage Some Encouragement Little Encouragement No Encouragement Percent Yes 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Percent No Encourages Certification Percent of Survey Respondents Percent Percent Yes No Adjusts Compensation Metric Report The CAPS Research metric report titled Maintaining a Talented Workforce in the Supply Management Organization has been released to all the survey participants and is now posted on the CAPS Research website ( The metric report includes a list of participating companies as well as the following addenda: A list of other supply management functions provided by the survey participants that is included in their supply management organization (see Metric Report Benchmark 2) A list of other supply management functions and the total numbers of supply management employees assigned to each (see Metric Report Benchmark 3) A list of other functional areas that experienced a talent shortage in the past year (see Metric Report Benchmark 4) A list of other reasons for being unable to fill all open positions with qualified candidates (see Metric Report Benchmark 6) A list of other processes or tools being used to measure supply management employee skills (see Metric Report Benchmark 12). Conclusions Key indicators based on different studies and research indicate that supply management organizations are still experiencing, and will continue to experience, a shortage of supply management professionals in the years ahead. Companies reported that the major reason for not being able to fill all open job positions was the lack of qualified candidates. To remain competitive, companies will need to implement new training and professional development programs to improve their supply management employees skills to function in the new economy. As noted elsewhere in this report, most companies reported they have identified the need to increase the skill level of their personnel to meet the future demands expected to be placed on their supply management organization, and these companies are more likely to exceed normal salary guidelines to hire the right level of talent. Professional certification is valued but only a small percentage of survey participants reported that compensation 6

7 is adjusted when an employee achieves professional certification. Most organizations also encourage SMEs to improve their professional skills. CAPS Research believes any successful approach to resolving talent management skill issues will require companies to consider different skill sets including cross-cultural skills, analytical skills, business management skills and leadership skills. These factors should, in turn, strongly influence the decision to increase spend for professional development, training programs and skills development. More than half the companies participating in the 2012 talent management survey reported it was difficult or very difficult to hire qualified candidates for their organizations procurement and purchasing function. This is likely due to the different levels of supply management experience being sought. Moreover, companies reported they expect the job/ skill levels within their supply management organizations to be updated, that supply management employees will utilize new or updated technology to automate certain functions and that the overall number of qualified supply management professionals will increase. Endnotes 1 CAPS Research Benchmarking Report, Supply Management Talent Development and Retention, December CAPS Research presentation, Supply Management Strategies for Success in the New Economy, April Philip L. Carter, DBA, Executive Director, CAPS Research, and Harold E. Fearon Chair of Purchasing, W. P. Carey School of Business, Arizona State University. 4 Robert M. Monczka, Ph.D., Director of Strategic Sourcing and Supply Chain Strategy Research, CAPS Research, and Distinguished Research Professor, W. P. Carey School of Business, Arizona State University. Survey data indicate there is not likely to be a rush to outsource key supply management functions or delegate supply management responsibilities to a business unit level. CAPS Research and the benchmarking team would like to express their appreciation to the companies that participated in this benchmarking research. For information on this report and other benchmarking activities, please send an to the benchmarking team at metrics@capsresearch.org. D. Steven Wade is director of benchmarking programs for CAPS Research in Tempe, Arizona. For information on this report and other CAPS Research benchmarking activities, please send an to metrics@capsresearch.org. About Zycus With more than 200 solution deployments among Global 1,000 clients, Zycus has been the world s most trusted leader in spend analysis for over a decade. In the same spirit of innovation, we have now evolved our portfolio to a full suite of procurement performance solutions spend analysis, e-sourcing, contract management, supplier management and financial savings management to help procurement leaders drive increased profits and create even greater business advantages. To learn more, visit 7