We’ve observed significant growth in salaries in these sectors in the past three years and we’ve attributed much of that to the supply and demand equation in markets characterised by skills shortages.
However in the final quarter of 2016 we started to notice some changes of mentality in the market as some organisations responded to the climate of political and economic uncertainty.
Given our extensive network in these sectors we are uniquely well placed to research this subject and spent part of January 2017 questioning business leaders in our network about their approach to end of year pay reviews, basic salary and bonus differentials. We specifically asked if Brexit, Trump or any other factors had a tangible impact on their decision making.
We have received an interesting range of responses to the question “has the current economic climate had any impact on your decision making around salaries and bonuses for 2017?” Here are a selection of the responses that reflect the overall picture:
Spend Management Technology
Several cases here which demonstrate the range of performance across the sector:
Case 1 – Spend Analytics Company
“We are doing really well so growth is very much on the agenda and there has been no real Brexit impact on our sales. However our overseas salary costs for the team have gone up because of the weakness in the pound so we are looking at reshoring some of that team.
What has changed is that we are giving relatively small pay rises (in line with inflation and no more generally) but offering the opportunity to earn more through better bonus schemes. We are moving away from purely annual to monthly, quarterly and yearly bonuses, the first two of which are based on personal and the yearly is based on company performance. This has two benefits – it mitigates against the rising salary costs and it encourages certain key behaviours that we want to develop.
So in summary the Brexit impact has increased our salary costs due to weakness of pound and led to realignment of fixed versus variable remuneration.”
Case 2 Mid Tier Spend Management Company – UK focused
“We haven’t experienced any real change as yet, we think it’s more likely next year. We’ve had a great year so most people have got 100% of bonus capability. There are pay reviews to come, so any early signs in 2017 maybe factored in but no specific concerns as yet.”
Case 3 Mid Tier Spend Management Company – International
“We missed several key targets last year, largely because we had to address some issues with our product, so pay rises weren’t really on the agenda anyway, but there has still been a tangible shift towards greater bonuses to keep sales people motivated without exposing the business to higher basic salaries.
Client retention is at the top of our agenda, so we are heavily bonused for that.”
Case 4 European arm of a US owned Spend Management Company
“Nothing has been announced in terms of any official policy, however its noticeable that the payment of ad hoc bonuses has increased for high performers whilst base salaries have stayed the same.”
Case 5 Mid Tier Spend Management Company – UK focused
We’ve made a small number of redundancies because it’s clear that P2P deals aren’t progressing through the pipeline the way they were a year or so back. Analytics and invoicing are our strongest areas currently. Also professional services is doing quite well which suggests customers are sweating what they’ve got rather than going to market for new technology. We also saw signs of declining overall investment in 2016.” However this company hasn’t materially altered it’s approach to salaries.
Further Anecdotal Evidence
We know from our conversations with business leaders and established sales people that the bigger players are enjoying really healthy growth, and several of the sales people are earning impressive bonuses based on exceeding ambitious sales targets.
The market leaders continue to hire aggressively across Europe, both from direct competitors and other neighbouring sectors suggesting they remain bullish about their growth prospects.
On balance we believe the sector remains in rude health as companies with a strong product offering and clear go to market strategy continue to thrive. That said, there is clear evidence of keeping costs under control and a greater desire to retain staff through better performance related pay rather than big increases in fixed pay.
Big multi-disciplinary consultancies have, in our opinion, been falling behind on salary and particularly bonus numbers for some time now but continue to command a lot of loyalty from their staff. However it’s increasingly difficult for them to hire externally at Senior Consultant, Manager and Senior Manager grades because many other consultancies and corporates are paying better salaries.
Furthermore in procurement technology consulting some of the smaller niche players are consistently winning projects against bigger consulting players on the strength of greater expertise and agility combined with lower costs, so this is something they have to contend with.
One of our regular niche consulting customers in the technology sector told us:
“We had a really good year in 2016 and our pipeline is as strong as ever so there’s no need for us to factor any wider concerns into our salary and bonus decisions at this stage. Our business has a nice spread across Europe, so we expect to be insulated from Brexit. Also we’re not really involved in the US so we can’t see any direct impact from Trump at the moment.”
A concern for this type of organisation is that their staff are being targeted by the bigger consultancies so staff retention is a key driver. Thankfully they are in a position where they can reward their staff well which often makes them unaffordable for the bigger consultancies who have rigid salary bands.
If you would like to discuss any of the issues raised in this post or want up to date salary advice for yourself or your team, please contact us via email@example.com
Politicians and entire governments have fallen, through failing to recognise the views of stakeholders; Chairmen, CEO’s and whole boards have lost the initiative by ignoring how those with influence feel; you too could fail in your procurement leadership role, if you choose not to engage the entire subject of stakeholders.
You can also fall fatally on your sword if you pay lip-service to stakeholders, or patronise them, or, even worse, seek their views and then dis-regard them.
And if you really want to brass them off, talk about stakeholder ‘management’, rather than ‘engagement’; talk about “mapping” them; label them as ‘negative’; describe their views as “irrelevant”…are you getting my drift?
I come from a school of thought that in the process of successful procurement, there is a mission-critical requirement to embrace and engage the people who can or will be affected by what you are trying to achieve, in business-as-usual, and in the development of new strategies. Pass this opportunity over at your peril.
Who then, is a stakeholder? Let’s use an example.
In the travel and meetings category, who are the stakeholders? Those who make bookings? The actual travellers or meeting organisers? Their functional managers? All of the above? What’s your view?
My belief and my experience tell me that anyone in the organisation who has the power, influence, or authority to either ENABLE the success of your strategy, or DISABLE it, is a stakeholder.
In my travel example, the Sales, Finance, and HR Directors, may well be stakeholders, because a policy of classes of travel or hotels which meets the objectives of convenience, budget control, corporate image, and attractiveness to their staff, has been adopted. That policy has been communicated and is being enforced.
The sales-force, however, are not stakeholders – they are users, or internal customers.
In this example, the sales-force’s requirements need to be collected and taken into account, and their boss has to sign these off as legitimate requirements.
Your procurement job is to devise a strategy that fulfils their requirements (and those of others), implement and roll-out the strategy, and measure the benefits and the compliance.
If you devise a strategy that the Sales Director doesn’t buy, or that fails to meet the sales-force’s legitimate needs, you are doomed! That strategy is going nowhere!
A stakeholder then is a key influencer in the organisation; you need to identify them, and you must embrace them in your day-to-day activity, and in the process of making changes.
I am continually asked how many stakeholders should be engaged in a sourcing strategy’s creation, and how they should be engaged.
On the ‘how many’, there is no standard answer – there is instead good practice for identifying the stakeholders, and for establishing what they need (their legitimate business requirements), and for building a picture of how receptive they are to your approach.
There could be 2 of them, there could be 22, but if you think you have identified 222, you have not understood what you’re trying to do here – do not plan for early retirement!
How stakeholders should be engaged is more formulaic, at least in process terms, but your success will ultimately be determined by your behaviours and your personal style in engaging these people.
Starting at the top, do you have a clear mandate for your intervention in the category of spend, and do you have clear sponsorship? If you cannot answer “yes” to both of these, take a step back (although as a caveat, your sponsor may also be a key stakeholder).
Next, do you know how the category currently works? What is the policy and strategy, and what actually happens? What are the metrics, what are the market dynamics, what are the technology drivers in the category, what are competitors doing, is the spend forecast to rise or fall, how critical a category of spend is it to your organisation, who are your current suppliers, what are their strengths and weaknesses, what is our current relationship with them, and so on?
Your category team, the people you have enlisted to help you develop and deploy a new strategy, are key in all of this. They must work with you to identify the stakeholders and to assemble the facts and data.
Then, with the knowledge you have amassed, welcome to the world of stakeholder engagement, the world in which you and the team decide who engages which stakeholder, and how you ensure that the engagement is a truly bilateral process.
I advise you against megaphone communication – that is for crowd control, not for stakeholder engagement. You and your team must ensure that the way you engage your stakeholders is mature, consistent and drives the debate constructively. Your role in stakeholder engagement is to bring their legitimate views and concerns to the party, keep them informed with progress, and involve them in key decision-making (without turning the whole thing into a debating society).
The overall objective is to ensure that in the actions you take, and the strategies you develop, your stakeholders willingly take ownership – they can identify with what you are proposing, they recognise it, they are happy to take the baton, and move forward into implementation. That is your initial measure of success – clearly speed of deployment and subsequent compliance also matter.
This is also the route to building constructive ongoing relationships with your stakeholders, who, over time, will become increasingly appreciative of your inclusive approach, and the value of your activity.
Remember though, that there will be some turnover in your stakeholders, and their priorities may shift – in either case, you will need to re-engage.
The overall point is, that if you devise an approach, and then you have to try to sell it to your stakeholders, you have not understood the subject.
Go back to the top of the article, and read it again!
Thanks for your reaction to our first article.
Many of you appreciated the distinction that I described between leadership and management, and a number of respondents asked us to explore a topical leadership challenge, relating to change management, and particularly applicable to procurement – effective governance.
I loathe bad governance…and I get really mad at those in business who don’t understand the role of effective governance in the procurement setting, and confuse it with authority and power.
The failure of some of the most successful organisations, and a number high-profile CPO’s, to embrace and engage the value of effective governance, is utterly astonishing.
I had a recent conversation with a colleague in the Asian group of a global procurement team, in a complex business, in which she confessed that “we don’t really invest much in getting governance right in this business”.
That sentiment is tragically endemic, and I just fail to comprehend why intelligent people, with sophisticated business and influencing skills, cannot grasp the significance of good governance.
Procurement, in a dynamic and fluid environment, requires the design and implementation of effective change.
Reliance on power and authority alone, to orchestrate that is crass and wasteful, whereas the investment in setting up good governance is always worthwhile.
Think about it like ensuring the oil is in the engine before it is first started, or, in the work setting, understanding exactly what your objectives, limitations and authorities are, prior to commencing a negotiation.
What, then, is governance?
Well, you’ll be able to find lots of definitions and opinions, but checking the word’s antonyms or opposites, is more amusing and instructive. They include impotence (not in the medical sense), incapacity, opposition, and weakness, all of which nicely help me with my proposition.
Attempting to drive change, using only your authority, is futile, in a complex and fluid organisation. Experience and history show us that engaging all legitimate stakeholders in change is essential to successful change, whether these stakeholders are in your chain of command or not.
We shall explicitly cover stakeholder engagement next time.
Meanwhile, a decent governance model will enable and mandate the steps of a change project, un-block barriers, allocate resource, provide advocacy and legitimacy for change, and importantly take a co-ordinated view across multiple work-streams in a complex change programme.
Sound too hard?
Here’s an illustration to bring the subject to life.
A de-centralised PLC with autonomous divisions decided to embrace strategic procurement, for the first time, designed and driven from the centre. A small number of categories of spend, like packaging, marketing, and IT hardware, were selected, to test the theory that the combined spend across three divisions could drive larger benefits than the individual businesses could achieve.
But, how to run these categories, when each division had its own procurement head and processes, stakeholders, specifications, pricing, suppliers, and managing directors? And each division had a different attitude to the initiative.
The answer, after a bit of trial and error, was a governance body, led by the person at the centre who had been charged with trialling the new style of procurement, supported by a change governance specialist, and including the MD’s and heads of procurement of the three participating divisions, and an internal data analyst.
Each of the heads of procurement led a category of spend, with sponsorship from one of the MD’s but not their MD.
The heads of procurement pursued their respective projects with a tailored procurement category management approach that the governance body had signed off.
Each project had a charter, a set of objectives, and a timetable, and each reported their progress against a set of agreed criteria, using a project-management RAG (Red, Amber, and Green) methodology.
Having established terms of reference for the governance body, and communicated the entire process effectively and consistently around all the divisions, the programme was out of the starting gate at a gallop, with all the players determined to illustrate their value and effectiveness to the process, and with any barriers and objections being tackled fast and constructively, as they arose.
Each category over-delivered, on value and time, and in all cases the whole was greater than the sum of the parts.
In addition though, the biggest benefit of this approach was the visible demonstration of the value of good governance, and the breakthrough of achieving collaboration between divisions who had previously managed to avoid any motivation for working together.
The example may ring a bell with some readers, and it is a model that has been replicated many times over, with local variations.
All the divisions acknowledged willingly that they could not have orchestrated the changes from the inside out, and could not have achieved the benefits that the combined effort achieved.
In the absence of robust governance, impotence, opposition, and weakness can prevail, and probably will, due to the lack of common purpose, or leadership.
In my opinion, this perfectly captures and explains why so much ‘big-ticket’ change fails to deliver in the private sector, and more visibly in the public sector, where the only motivation for change is an edict from the centre, often Westminster, and an expectation of local delivery.
Sorry folks, change just doesn’t work that way – in the private sector, we need more enthusiasm for good governance and less politics; meanwhile, maybe we need a new approach in the public sector, where government promotes good governance, to facilitate success, and maybe even an increase in capability – but I’m not holding my breath!
Andrew Daley was invited by Philip Ideson from the excellent Art Of Procurement podcast to discuss two of his favourite topics, Talent Attraction and Career Development, both of which should be of interest to the modern Procurement or Spend Management professional.
The Rules Of Talent Attraction should be of particular interest to any hiring manager who is focused on recruiting the best people they can find into their team. It covers key areas like recruitment processes designed to attract as well as assess strong candidates, the supply and demand of various core procurement skills and how to avoid some common recruitment mistakes.
The Strategies & Tactics You Need To Secure Your Dream Procurement Job is geared towards the procurement professionals personal career objectives. Philip and Andrew discuss the importance of networking, how you present yourself to the external job market and what skills you will need to develop to progress your career.
Both interviews have been very well received by the audience and have resulted in some excellent feedback.
If you would like to discuss any of the issues raised in either interview, please get in touch directly with Andrew via firstname.lastname@example.org
Want to read more about recruitment market conditions – here’s the latest Procurement & Spend Management Quarterly Update.
We are pleased to share a very useful article written by one of our long standing partners Iain Stewart.
A client recently asked me how to approach the process of re-applying for her job, as a consequence of a major re-organisation, with a new boss who she does not know.
She told me that although she hires people quite regularly, she has no template for interview preparation, and has not herself been through an interview for many years.
Here is what we defined as her approach, which, as a generic preparation tool, I want to share with anyone who needs to sharpen up their process, either as an interviewer or a candidate.
First of all, as a candidate, consider the interview as a competition you intend to win – only when you have a job offer do you need to make a final decision about accepting the role or not, a decision which should by then be informed by your due diligence, and the quality of the offer.
Prepare for the prospect that a good competent interviewer should be testing the candidate on three critical, go/no-go questions.
- Could this person do the job?
- Could this person be an effective member of my team?
- Could I work with this person?
Subordinate areas of the interview will focus, in more detail, on the candidate’s competence in the three areas of:-
- a) Content Knowledge relevant to the job;
- b) Leadership;
- c) Behaviours,
and, in addition to having credible answers ready for the interview, the candidate should always be prepared to provide evidence, to support their initial answers – make sure that your answers have precision and conciseness.
Content Knowledge is reasonably self-explanatory, but be sure to have a clear definition of the role, and an excellent understanding of what would be required to satisfactorily undertake the job, from the perspectives of resources, processes, tools, and governance, striking the right balance between theory and practice.
Leadership is often mistakenly considered to be synonymous with Management.
Everyone has had an attempt to define Leadership, but let’s simplify it here.
Management is about the organisation and deployment of resources in order to create outcomes which meet organisational goals, for example achieving production outputs, or customer service levels.
Leadership, on the other hand, involves knowing what good management looks like, but additionally organising resources and people to make the enterprise achieve its strategic goals, and to be competitive and durable; for example identifying the need for additional capacity, or new products and services, and facilitating the successful implementation of these developments.
Not all leaders are great managers, and not all great managers are wonderful leaders!
Knowledge and leadership ability need to be augmented by, and deployed through the application of appropriate Behaviours.
Some of these are innate, others are learned, and everyone has a subtly different make-up from the next person.
However, in the interview setting, some behaviours, which could almost be classed as values, will always be important.
These include integrity, honesty, decisiveness, relational skills, energy, ambition, cultural sensitivity, political awareness, attitude to risk, reasoning ability, and many other ‘soft’ attributes.
In all of the behavioural areas, the interviewee is just as responsible as the interviewer for assessing the level of fit between their personal style and the environment of the recruiting employer.
There is also a school of thought that interviewers are seeking their potential successors – that may be true, although in some cases, organisations are looking for content specialists or experts, who may never have the breadth to succeed their boss.
A decent interviewer is however likely to be studying a good candidate, and wondering if the candidate is:-
…their potential successor, or;
…someone they need in their team as a specialist, but not their potential successor, or;
…someone they should not hire!
In any event, do not appear in the interview as though you want the interviewer’s job…yet!
There, then, is some generic structure for the preparation for interviews, and engaging in them.
Of course, do the preparation and the research, on the organisation, and the individuals who you will be meeting.
Of course listen carefully and observe body language, and tailor your responses to questions and situations in a considered and appropriate way.
As a crude rule of thumb, if it feels right, then it probably is, and if it doesn’t feel right, back your instincts – it probably isn’t!
Director – Medinrun Limited