Talent Supply is Broken. Whose Job is it to Fix it?

With organisations struggling to fill talent gaps, it may be time for procurement to grasp the talent nettle to fix a major organisational problem.

Talent. It’s the one thing that organisations cannot function without. And yet, sometimes, it’s also the one thing where category management strategies fall by the wayside and it’s entirely uncontrolled. Over the past 18 months, the talent situation has drastically changed. In the ‘old world’, talent was in plentiful supply and obtaining it at reasonable margins was relatively simple. Now? Well now things are a whole lot more complex. 

Currently, demand for talent is vastly outstripping supply. There’s a deep mismatch between what employers are offering and what employees are demanding. And, as with many issues, the ball has landed firmly in procurement’s court to find an answer and fix what is broken. 

Here’s what’s happening on the ground – and what procurement must do to save the day. And if you’re still not sure after all that, you’ll need to register for this Wednesday’s webinar, which helpfully provides all the answers!

What’s happening in the talent market at the moment? 

Right now, many organisations are finding themselves in a terrifying situation: they simply can’t find the talent they need to keep their businesses going. Because of this they are having to increasingly rely on external talent, or contingent labour, to plug these gaps. This is fundamentally changing how HR category managers manage relationships with their contingent talent suppliers. 

In the past, contingent labour was used mainly to save costs, to help organisations bring people on board quickly when they wanted to scale up, and to have a workforce that was easier to scale down. However, over time, outsourced providers and MSPs developed stronger capabilities and were able to provide more comprehensive services focusing on skills and talent access. And the kicker was that this happened at a time when organisations needed it more than ever.

But in mid-2021, for a variety of reasons, the market flipped on its head. Procurement was left in a position where it had to shift from an on-demand relationship with MSP providers, to one of greater reliance. All of a sudden, hiring managers became desperate to hire at the same time that internally filling gaps was no longer possible. 

What are some of the issues with how procurement is managing outsourced providers at the moment? 

Anyone procurement pro who has studied Porter’s 5 Forces knows that when the power balance shifts with suppliers like this, there’s going to be problems. And when it comes to managing outsourced service providers, the power balance has most certainly shifted. And procurement most certainly has a problem…

When demand was plentiful, an acceptable (and indeed, effective) way to secure better margins with outsourced providers was to negotiate better rates. But as reliance on these providers increases, managing talent this way, as well as other discounting methods (for example, labour arbitrage or trying to find lower cost workers) is no longer effective. 

Essentially, workers are demanding more, and now they have more options open to find what they want without having to compromise. 

This puts procurement in an extremely difficult position when it comes to managing these costs. Looking ahead to 2022, procurement is definitely wondering if it’s even going to be possible to reduce service costs. Even with options available, there may also be a need to create different goals for services spend, leaving procurement in a no-win situation.

What can procurement do to better manage talent? 

A severe talent shortage certainly puts procurement in a difficult position and fundamentally changes how this critical category needs to be managed. Fortunately, however, procurement does have a number of options to better manage the situation in the year ahead. 

One of these options is talent pooling, where procurement works proactively with HR to build lists of active and engaged candidates that may be able to fill future talent gaps. Another option is working with hiring managers to help them hire in a more flexible and less process-driven way, a change that is long overdue. 

However, as anyone in procurement who has sourced these services in the past knows, one of the key reasons that better outsourced provider management is challenging is a lack of clarity as to who ‘owns’ the process. Is it HR or Procurement? On top of this, the goals of these two functions are frequently misaligned, with HR seemingly wanting or needing things that Procurement can’t or won’t deliver.

Managing this delicate balance is possible, though it’s going to take some work on both sides to make it work. HR may need to hand over management of this category in its entirety to Procurement to mitigate the risks of competing goals. But Procurement also needs to make the lives of hiring managers easier by approaching this with greater flexibility and an understanding of the overall organisational needs.

It’s unlikely to be a smooth road, but it’s one that needs to be followed to solve the talent crisis.

Find out more about the current talent market, what’s broken, and exactly how procurement can work with HR to fix it in our upcoming webinar, Talent Supply: Are you breaking your own chain?, this Wednesday. There’s still time to register – click here!