2 September 2010 | Paul Snell
Recruitment may be on ice for much of the UK public sector, but elsewhere the situation is starting to thaw. Paul Snell reports on what looks to be an interesting year ahead for buyers
When SM last examined the state of the job market in detail, the Chartered Institute of Personnel and Development predicted an “avalanche of redundancies” was in store.
That edition of the quarterly Labour Market Outlook, produced with KPMG in August 2008, reported 27 per cent of employers were planning to make redundancies in the next three months.
So with the UK economy out of recession and into recovery what is the situation now? The most recent Outlook, published last month, found the figure for planned redundancies is now 32 per cent, a rise of 3 per cent compared with spring this year. This was attributed to expected public sector job losses that could affect up to 600,000 people.
A similar report by the Recruitment and Employment Confederation also makes worrying reading. Growth in staff has slowed to its lowest point in eight months.
With all this gloomy news, do buyers have any reason to be cheerful? Well, actually, they might.
What is the market situation?
The majority of purchasing recruitment consultants tell SM the situation is much improved.
“The permanent market is looking relatively good compared with 12 months ago – it is definitely moving in the right direction,” says Lucy Harding, director of recruitment
at Purcon.
“Last year we were about 30 per cent down in terms of numbers of roles,” adds Christina Langley, managing director at Langley Search & Selection. She thinks the situation is better now than it has been for the past two years. “It’s just about back to 2008 levels, particularly on the permanent side,” she says.
“While the coalition government has brought with it a level of uncertainty in the outlook for public sector recruitment, activity in the private sector has increased steadily over the past quarter,” says Gail Pyrah, director at procurement recruitment company CIPS GPA.
“The volume of vacancies overall is good,” reports Pat Law, managing director at Hays Procurement. “Compared with last year there has been a shift in the emphasis from public service to commercial opportunities. Every sector is still recruiting, but perhaps not in the same volume we’ve been used to.”
But, warns Stephen Fletcher, director at PSD Group, caution should be exercised. “While there are more potential roles around clients are dipping their toe in the market without jumping in completely. Activity is higher, but it is not leading to tangible placements.”
The withdrawal of advertising spend may also have made the situation appear worse than the reality. “Companies are not using traditional adverts, they are posting vacancies online, on their own websites or through job boards,” says John Okusi, director at Richard Bailey Associates.
Buyers themselves are less certain about market prospects. Although a fifth of 273 respondents to a survey by CIPS GPA believe hiring levels will increase, almost a quarter think the opposite. But recruiters do report the appetite for job moves among candidates is beginning to return.
Those companies returning to the market are taking greater care when selecting employees. Authorisation to recruit is slower and more bureaucratic and firms are being more rigid about what they are looking for. “Where historically organisations may have accepted a 70 per cent skills match, they are now looking for 80 to 100 per cent,” says Maria Bradley, head of the supply chain and procurement practice at Odgers Select.
And this can cause difficulties in finding the right people. “We were looking for a software category manager and they are not going to flex on that – they are not going to take somebody at a general level of IT,” says Law.
“Our advice to hirers is to focus more on overall talent, rather than specific expertise if they want to obtain best value,” says Mark Badley, managing director of Ronin.
Who is looking for staff?
The majority of consultants cite financial services as one area that is picking up its recruitment again. With the sector among the first to enter the recession, it is now hiring once more. Professional services firms, FMCG and pharmaceuticals companies are also highlighted as sectors that are returning to the market, but it is very dependent on the company in each area.
A director of sourcing and contracting at a pharmaceutical manufacturer says that while they are able to replace employees who naturally leave the group, the business case for new recruitment has to be almost impossibly strong.
The retail sector also provides an interesting diversity. Roles in direct procurement have been badly affected by the economy, with shops reducing product and stock, and their need for buyers. But many recruiters report an upturn in goods not for resale procurement jobs as retailers try to offset lower sales through improved cost control.
According to Russell Soan, operations manager for procurement at Barclay Meade, automotive was quiet for a good year or so, “but projects are being released again and companies are buying again”.
“A lot of manufacturing is coming back to the UK,” he says. “The cost savings expected from moving abroad have not materialised, so companies are now looking locally.”
But the news that companies are recruiting again is tempered by the fact that this is not the case across all levels of the procurement profession.
“We are still not seeing the number of senior level roles that we did a few years ago,” says Fletcher.
“I think we have seen activity in one-off ‘head of’ roles, but they are not paying nearly as much – in the £80,00 to £90,000 range, rather than the £110,000 to £120,000 bracket,” he says.
Langley concurs. “The volume has come back in the middle market between £50,000 and £80,000,” she says. “There are still fewer senior roles and there are a number of senior people out there at the moment still looking who two years ago would have been placed.”
The question remains how proposed cuts and efficiency savings will affect jobs in the public sector.
“I think the public sector is going to be dire with what is going on,” says Langley.
“We have seen a flood of CVs coming out of the public sector. I think lots of people are feeling very uncomfortable.”
“There is a lot of fear in the public sector,” says Soan. “A few projects are on hold, but we haven’t seen a downturn because procurement can offer cost-savings.”
Andrew Daley, director at Edbury Daley, highlights the problems for interim staff. “The public sector has used a lot of very experienced contractors, and those guys have been paid very well, but the budgets are drying up now.”
Daley predicts that these interims, unable to achieve equivalent rates in the private sector, will attempt to find permanent roles.
Public sector buyers polled by SM report that recruitment restrictions are only just coming into place. And there is a sense that the real impact on jobs will not be felt until the details of the Comprehensive Spending Review are published at the end of October.
What are employers looking for?
The recession changed the focus of a lot of businesses, so has that impacted on the kinds of people and skills recruiters are seeking?
“There has been a shift to what I would call the ‘deal shapers’,” says Bradley. “The move has been to how you manage the supplier relationship. And it is capturing that ongoing value and avoiding leakage and creepage so the price does not go up and you are not exposed to liability.”
This increased emphasis on driving relationships and influence with internal stakeholders and the long-term value extracted from it is an opportunity for buyers, but will put pressure on the market.
“By next year you will see a real shortage of SRM people and salary inflation because of that,” says Daley. “SRM specialists will be in real demand and people with broader procurement roles in an SRM context will start to get calls about going to full-time SRM roles. But there is a finite pool of people that will only go so far.”
During the boom years of high demand category specialists in areas such as IT, marketing and HR were able to charge a premium for their services. But many of these functions have had their budgets cut in the recession, so does demand for these experts still exist?
Saffa Ayub, director at Bramwith Consulting, says it has actually increased. “Because firms are cutting spend we are seeing big growth in facilities management, marketing and HR in areas such as learning and development.”
Law says this should prompt organisations to examine the sort of candidates they are looking for. “Some more forward-thinking firms are taking people with category management skills then giving someone specific skills beyond that in software or FM, for example,” he says. “These organisations are getting the best category management people, not necessarily a pigeonholed individual who had worked in that category.”
“What’s required is not just technical procurement skills, but the ability to develop into a trusted adviser for the organisation – a high level of procurement skills combined with a broad commercial understanding and the ability to engage with a stakeholder at a business level,” says Harding.
“Questions are being asked about looking outside of procurement into other commercial arenas with subject matter knowledge in this quest for ‘sales minded’ procurement people,” says Chris Arnold, senior consultant at Proco Global.
And, of course, it is not only skills that can seal an appointment. “It is a lot more down to personality now than it ever used to be,” says Fletcher.
The companies
The Co-operative Group has recently been recruiting as a result of investment in procurement.
“We have had a really good response, with candidates displaying a diverse range of skills and experience,” says Laura Dachraoui, senior resource administrator. “Individuals who have a combination of skills are the most attractive to us – project management, relationship management, good understanding of business and business processes. When you combine these skills with core procurement skills you get individuals who integrate well into the business and help to deliver long‑term strategic value to the organisation.”
The group also reports success in developing talented people from other parts of the business. “As long as you have the right balance of procurement experience in the team to support their development, the whole team benefits from these people’s experience,” says Dachraoui.
Peter Rushton, CEO at Optimum Business Solutions, has also been recruiting over the past 18 months. He says that while skills such as SRM are important, the basics should not be missed. “People with CIPS qualifications usually demonstrated all the basic competencies, which is helpful because you can talk about the basics of contracting and negotiation that are sometimes overlooked. We are looking for soft skills, but you do need those basics.”
He also believes some firms may be ignoring a valuable talent source. The older, more experienced staff he recently recruited said they were unable to get interviews and felt they were passed over because of their age.
But for many firms recruitment is now a compromise. Tim Weston, interim procurement partner at the Royal Borough of Windsor and Maidenhead, says he has been given the go-ahead to start filling vacancies, but only if each one is paid for by efficiencies created by the current team.
What is the effect on pay and benefits?
The imbalance in demand and supply over the past few years caused purchasing salaries to rise dramatically. Even when the country was in the grip of recession, buyers saw an average pay increase of 2.5 per cent, according to the latest CIPS/Croner Reward Salary Survey. And buyers seem confident of future rises, with nearly a quarter of those surveyed by CIPS GPA expecting a pay rise in the next 12 months.
Companies may well have thought that with a glut of candidates on the market they could pick up good people at a lower rate, but the reality was that salaries didn’t really fall, they just levelled off.
“Two or three years ago salary inflation in procurement was getting a little bit out of hand,” says Daley. “If companies were desperate to hire somebody two years ago they would have had no problem signing off an extra £5,000. I have a client at the moment who has a band of £40,000 to £60,000, but politically they are not allowed to go above £50,000. The inflation is not there because people aren’t offering more to move and it has just kept a lid on the salary increases.”
Bradley agrees the recession has helped to rebalance remuneration from a time when buyers were asking for up to 20 per cent increases to move roles. “We are starting to see salaries move again because talent in procurement is always tight, and if you look at all the people starting to hire again – the banks and the consultancies – they are always competing for the top tier and that will drive salaries up and there is a trickle down effect to the rest of the market.”
The prevailing opinion is that salaries will begin to rise again, but the boom days are over. “I don’t think they will go ridiculously high again,” says Ayub. “I think they will increase, but I think they will reach a level.”
Interims have seen their rates drop significantly during the downturn. Pre-recession interim managers could demand between £600 and £800 a day. With additional candidates on the market, companies driving down rates and a reduction in the amount of interim work available, rates have fallen to an average of £300 to £400 a day.
This will be particularly bad news for interims leaving the public sector, who have not experienced the rate squeeze seen in the private sector.
“I came across a guy who had been somewhere for 10 years,” reports Langley. “If they were in place before the recession they will have been on high rates. Now they are all coming out expecting to get £600 to £800 a day and they are not going to get that. I think it is going to deflate the interim rates somewhat again.”
But, she also says she has begun to see bonuses paid to those who had to miss out a year ago.
So what does the future hold?
Most recruiters are cautiously optimistic – no rapid explosion in roles and salaries, but a gradual increase in both. This is dependent on both the economic recovery and demand for good buyers starting to outstrip supply again.
“The next year is going to be interesting, I don’t think we are out of this yet,” says Fletcher. “I’m certainly expecting it to be bumpy until next summer and when we emerge from that we will probably see things returning to sensible levels of activity by the end of 2011 and the start of 2012.”
Case study - Interims
While recruiters report that the previously buoyant market for procurement interims has been badly affected by the recession, prospects for the future remain unclear. Some believe both public and private organisations will continue to reduce the number of temporary workers and to cut roles.
But, as a survey from recruiter Hays suggests, the greatest motivation for using interim workers for 30 per cent of private sector firms is to avoid making permanent appointments. And public sector organisations may want to bring in more interims to drive through transformation and cost-cutting programmes.
Jane Whiteman-Turl, an experienced procurement interim, has been affected by the recession. Describing the current market as “dead”, she says agencies even encouraged her to look for a permanent role.
She urges buyers considering interim work to question whether it is a career choice or a temporary measure.
Interim working may also require a change in attitude and a new level of toughness. “As an interim you are sometimes brought in to be the henchman – to reorganise and to reduce the number of people in a department or refocus them,” says Whiteman-Turl. “When you come in as an interim you are not their mate and they need to understand that quickly. It sounds appalling, but it works well for both you and the organisation if it needs to make wholesale changes.”
More info - International purchasing roles
The market for international roles in the profession remains reasonably strong.
“Supply chain has always been global and senior roles have always been international,” says Maria Bradley, head of the supply chain and procurement practice at Odgers Select.
International roles are also being driven by a number of organisations relocating procurement operations to tax‑efficient countries such as Switzerland and Luxembourg.
Gavin Bell, director of Australian recruitment firm Jigsaw Search, has seen a large increase in enquiries from the UK about relocation to Australia, which is largely unaffected by the financial crisis. New Zealand is also trying to attract UK buyers, offering preferential immigration status to those holding MCIPS to help push through procurement reforms, particularly in the public sector.
Consultants also report a recent rise in opportunities in South Africa.
Case study – View from a jobseeker
Even in improved conditions finding the right role remains difficult, as one jobseeker outlines:
“I was made redundant at the end of March and since then I have been frustrated by the role agencies are playing in the job market.
“I saw a job advertised by a large nationwide company and I called to enquire about it with their HR department, but they informed me they ‘don’t deal with recruitment’.
“Having discovered the position was being filled by an agency, all my attempts to find out if my application had been forwarded were fruitless, until I was e-mailed a copy of the job description, which I had already seen.
“Job hunting is extremely difficult and agencies hold all the aces in terms of their knowledge of a position and the number of available candidates. All I want is to be treated fairly, communicated with correctly and given a fair chance. Is this too much to ask?”
