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Why In-Country Labor Arbitrage Will Shake Up the Procurement Hiring Market

By May 24, 2020June 1st, 2020No Comments

Earlier in my career, I was heavily involved in outsourcing and offshoring, including leading a procurement shared services center in India and then having outsourcing category responsibility for a large financial services company. 

At the time, I remember reading “The World is Flat” by Tom Freidman. He wrote about the global interconnectedness of systems: how manufacturing and services are deconstructed and carried out with each part of the process performed in the country or region that makes the most economic sense.

His ideas came back to mind this past week when I read a recent Forbes article by Jack Kelly. He writes, “This could be an amazing consequence of the COVID-19 pandemic, companies and workers will both have the choice of hiring or working for a company anywhere.”

I agree wholeheartedly with this idea. By leveraging the best talent worldwide, regardless of location, companies will be able to hire onshore or nearshore knowledge workers at a lower cost. Keep in mind that this doesn’t mean moving all roles to the lowest-cost places on earth. For instance, the Outsource to Detroit program encouraged companies to relocate their IT operations to Detroit rather than offshoring them. The advantage of today’s circumstances and connectivity levels even alleviate the need for investments in physical infrastructure.

This type of approach will have a profound impact on procurement, even putting aside the social implications and challenges. For instance, if we look at U.S. Bureau of Labor Statistics data for May 2019, we see an almost 38% difference from the State with the highest salary for a Purchasing Manager (Colorado) and the lowest (Louisiana). 

If we extend our search to Europe and Asia Pacific, we see similar regional differences. 

In the UK, CIPS finds that procurement professionals in Yorkshire (where I am from) command salaries 35% below those seen in London, and Wales is 41% lower than London.  As we start to think globally, other factors become valuable as well. For instance, the UK offers a single time zone and relatively short traveling times between regions. This makes it easier and more cost-effective to bring a distributed team together on a semi-regular basis.

In Australia, we mark even bigger differences. Procurement managers in New South Wales earn 40% more than those working in Western Australia.

These are just a couple of examples, but the net result is that if relocation barriers are being eliminated for the most talented professionals, procurement leaders can build stronger, more cost-efficient teams.

But no realistic approach is ever all good news. Employee loyalty may be in jeopardy unless they are (and feel) highly engaged and rewarded. For many employees, being personally connected to enterprise culture, liking and respecting their boss, and having ‘friends’ at work is a strong tie. Without face to face interactions, those ties may end up hanging by a thread. Another risk is that the talent market will become more like a transactional sporting transfer system than ever before, with employees considering themselves permanent free agents jumping from role to role. 

So how do we #TakeAction with this information? 

For procurement leaders with a strong personal or company brand…

Congratulations! You can have the pick of the talent market. Continue to grow the role of procurement and develop your people. Invest in career planning and provide special projects, job rotations, etc, to keep your A-team engaged.

For procurement leaders without a strong personal or company brand…

I’m going to be honest, the changes discussed above will make already challenging things harder. Your best talent is no longer restrained by the jobs that are available in their local market. Work to develop a personal brand – and a highly visible brand for your procurement organization – to increase your appeal rather than being ‘just another team struggling to align with the business.’

For procurement professionals…

Keep in mind that this is unlikely to play out overnight. 

  • If you are in a high salary market, you need to understand your value proposition and seek opportunities to creatively drive value for the business. (If you are an independent consultant, that applies to the value you drive for clients.) Your value proposition should be so compelling that your current and future employers see you as a stand-out talent, easily justifying the decision to pay you at a higher rate.
  • If you are in a lower cost salary market, start broadening your horizons. Your career aspirations may have been constrained by your inability to relocate, especially if you are in a location that is dominated by a single industry (e.g. an automotive purchasing professional in Detroit). If you have harbored dreams of moving into a different industry, focus on developing the transferable soft skills that will help you transition into a new industry without missing a beat.


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