Because my last procurement parable (see http://goo.gl/HJZ4f if you missed it) was so well-received, I thought I’d share another with you. Enjoy…
Luke was the chief procurement officer for a large manufacturing company. He joined the company in 2007 after 15 successful years at another manufacturer where he started as a junior buyer and received several promotions until he reached his last position with that company as the Vice President of Procurement. Business was good at the time Luke joined his current company. But that changed soon thereafter.
With the economic collapse in 2008, like many procurement leaders, Luke had to make tough decisions about who to let go from his team. Many extremely talented procurement professionals from Luke’s company and thousands of other companies were suddenly out there looking for work.
As the economy began improving in late 2009 and 2010, organizations who were re-entering growth mode had some good candidates to choose from as they restocked the human capital in their procurement departments. Business eventually got strong and stable enough for Luke and his other C-level peers to receive the board of directors’ approval to increase headcount. Luke was given the green light to add 10 positions, most of them entry-level.
With the most recent quarter’s GDP growth in the positive, many good candidates previously seeking work had found new purchasing jobs. However, unemployment has hovered in the 9% range, so there are still good candidates out there for the taking, thought Luke.
“This is the time for transformation,” Luke declared. “We are only going to have the best and brightest people in every single position in the procurement department. We need top notch talent to deliver on our ambitious goals. So, we will leverage the economic situation and get the best so that we can become the best.”
In the interview process, which Luke personally wanted to be involved in, he was amazed at the level of talent that walked through his door. To Luke, the opportunity to work in his organization was an attractive one to job seekers – even highly, perhaps overly, qualified ones. He thought how great it would be to snatch up uber-qualified candidates at pennies on the proverbial dollar.
In days gone by, Luke would be happy to get someone with an associates’ degree for his entry level positions. But with the quality of candidates walking through the door, Luke felt like he was staring at a golden opportunity. Luke even offended some of his employees who appropriately recommended friends. “Sorry, but your friend doesn’t have an MBA and I got an inbox full of resumes from MBA’s who would love to work here. Tell her to do herself a favor and go back to school,” Luke would say.
He offered all of the entry level jobs, each of which paid about $35,000 annually, to candidates who had MBA’s and an average of seven years of procurement experience among them. Though some of them declined, most accepted.
“This is great,” thought Luke. “Now I have the players I need for this long-overdue procurement transformation.” He prepared a presentation for the board of directors outlining his transformation plan. Within two years, Luke’s newly staffed team would trim the company’s supply base from 30,000 to 8,000 suppliers, save $50 million despite increasing commodity prices, and have Lean Six Sigma fully implemented. The board of directors applauded at the end of Luke’s presentation.
But Luke ran into some difficulty translating his presentation into reality.
Just one month after “the big hire,” one of the new entry-level employees left the company to join a local service industry company as its Director of Strategic Sourcing at double the salary. “No big deal,” thought Luke. “We had plenty of other candidates.”
Luke was right this time. He called one of the other interviewees – who happened to have an MBA and six years of procurement experience but was still seeking work – and quickly filled the open slot.
But the following month, two of the other new hires bolted for “greener pastures.” Replacing them wasn’t so easy. In fact, before the second of those two was replaced, a fourth of the new employees from “the big hire” gave her two week notice.
This became a pattern. Luke’s department was losing more people than it was bringing on board.
As the months went on, Luke became more and more desperate. The board of directors was grilling Luke for updates on the transformation project that was behind schedule almost from the get-go. And Luke and his managers were spending the bulk of their time not on those strategic transformation tasks, but on reading resumes and interviewing candidates. Instead of running a department that did procurement, Luke felt like he was running a department that did hiring.
A little over a year after “the big hire,” Luke took a week off of work. Not to vacation, mind you. Rather, to clear his head and contemplate what had gone so terribly wrong with his transformation efforts. For the 10 new positions, only six of those were filled – one employee had been on board for six months, two employees had been on board for three months, and three of those employees had been on board for less than one month. In addition, the 90 other positions in Luke’s organization had their fair share of vacancies and turnover.
What went so wrong? At one time, Luke was so sure that his department was the optimal place to work. Now, he wondered if it was actually the worst place to work in the city, if not the country.
Luke began looking at the profiles of the individuals who had come and gone. MBA’s. Decades of experience. Track records of success. Just the kind of people who could make a transformation happen.
But then he started looking at job descriptions and pay.Place orders.Follow up with delinquent suppliers.Bring home a $2,200/month net paycheck.
Was there a mismatch? You bet there was!
What was the price of that mismatch? The precious time of Luke and his management team – the very people who could make the transformation happen.
They were not dedicating their time to reducing the supply base, sourcing and negotiating new deals, and implementing Lean Six Sigma as they had planned. In fact, they had done very little in these areas over the past year.
“What we need is a capable, stable workforce,” Luke said to himself. “A workforce that executes their duties and goes above-and-beyond the call of duty, but will stay with us for more than a darn month.”
After his week off, Luke shared his thoughts with his direct reports.To his surprise, they agreed that they need to hire people whose qualifications were more appropriate for the positions.
Luke asked how long had it been since they came to the same realization. They said they thought that they were hiring overqualified candidates from the very beginning.
“So why didn’t you tell me, that?” Luke asked, at a higher volume than he normally speaks.
Luke’s direct reports told him that they saw how passionate he was about the idea of getting “the best and the brightest” into every position. And with the economy being what it was, they thought there was a chance he may be right although their guts told them otherwise.
Luke immediately revised his thinking. He distributed to his direct reports copies of a crude, handwritten note with his “three-prong approach to hiring.” The three bullet points on that note were:
- Hire people whose qualifications make them happy with their roles and their pay
- Hire people who can execute their assigned duties at a high level and go above-and-beyond
- If you think a candidate may be overqualified, hire the candidate with the high potential not the long resume
So, the two year anniversary of “the big hire” finally arrived. Was the transformation complete? Was the board of directors satisfied?
Well, after adopting a new hiring mentality, things stabilized.In fact, there was only one departure after Luke’s week off.And all but one position remained vacant.
This stability helped Luke’s team begin the transformation. No, they didn’t hit their goals. But there were two things that helped Luke get a one-year extension to deliver on his vision.
First, it was the progress that the team made. Better late than never and things were actually moving in the right direction, giving the board hope.
Second, it was Luke’s humble admission to the board.
“I’ve learned the hard way that turnover is the most costly thing a business can endure,” Luke told the board, almost with a tear in his eye. “But that lesson has been learned and I now understand what I have to do to successfully lead this department to our objectives. I will hire the right people. I will develop them because they may not have had the most robust training and education prior to joining us. And I will lead them.”
And, from that point forward, he did every single one of those things.
To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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