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Making an Informed Decision about Contingent Workforce Management Advice
Non-employee talent is getting more and more attention in the executive suite, as contractors, freelancers, and other knowledge-based contingent workers become increasingly important in achieving company goals. However, when management attempts to align its current contingent labor management program with corporate objectives, many companies ﬁnd they are unable to answer the most basic questions about the effectiveness of their current practices.
Once this disconnect becomes apparent, companies often reach out to external parties for advice. Contingent workforce management is a unique discipline that encompasses interdisciplinary areas of expertise such as Vendor Management, Talent Acquisition, Human Resources Operations, Employment Law, and Employment Tax. As the contingent workforce becomes more visible at the executive level and represents a larger percentage of the organization’s overall workforce, stakeholders are asking more strategic questions about their current program including:
- Are we missing out on cost savings opportunities?
- Are we losing the war for talent by failing to adjust for recent market shifts?
- Does the program minimize risk exposure to the organization?
- How does our contingent labor strategy align with corporate goals?
But when business leaders start asking these questions, they often find that they do not have clear visibility into a number of basic questions:
- How many non-employee workers do we have?
- Where are these workers?
- How much are we spending on non-employee labor?
- Are effective processes in place to ensure quality talent at competitive prices?
- Are we certain that we are compliant with the applicable state, federal, and country laws?
- What is the mix of our workforce: temporary agency workers, independent contractors or freelancers, professional services, strategic partners, and outsourced vendors?
- Do we possess common internal definitions for the various engagement types we deploy?
- Is there a uniform way of assessing supplier performance? Do we have an optimized supply base by commodity and location?
Organizations should readily have answers to these questions, and those who do not may beneﬁt from external advice. But how should an advisor be chosen? The questions themselves demonstrate the need for an all-inclusive approach to providing recommendations. An external advisor should be able to address how an organization can produce these answers on a recurring basis, as well as address how the program can serve multiple functional needs and perspectives while maintaining alignment with overarching corporate objectives.
A number of organizations claim to be qualiﬁed to provide advice on contingent labor engagement practices—ranging from single-person contractors to large multinational ﬁrms, and from consulting generalists to specialists in the contingent labor arena. However, beyond the fundamental qualiﬁcation standards, what background should a service provider possess? The right party will have the following attributes:
- A record of performance in contingent labor management and proven expertise in all relevant disciplines (Vendor Management, Talent Acquisition, Human Resources, Legal, etc.)
- Current and relevant experience with clients of similar industries, cultures, and size
- A proven track record of driving progressive solutions
- Real-time visibility to market trends, market rates, and the availability of talent
- A proven methodology and track record of nuanced solutions by engagement type
- Access to a Vendor Management System (VMS) for end-to-end process automation, tracking, and reporting
The rapidly evolving contingent labor space uses specialized terminology, concepts, processes, and technology. The contingent workforce is ever-evolving and represents a growing part of the workforce. Consultants who are not in the ﬁeld every day have trouble keeping up. Service providers with recent experience will have a better appreciation for the organizational impact of proposed changes because they are in constant dialogue with stakeholders on a daily basis.
The best advisors will have proven methods for providing market rate business intelligence on relevant skill sets and experience. These methods will utilize data that aligns with the kind of knowledge-based talent that is critical to an organization.
It is important to ask prospective advisors how many programs they are currently managing in today’s rapidly changing business environment. Experience becomes dated in just a few years. It is also critical to know if they are connected to the business at the transaction level on a daily basis, and if they have a proven record of successfully implementing solutions that are widely embraced and utilized. Any solution must be practical, and one that business users actually endorse.
When it comes to the contingent workforce, promises of massive cost savings up front should be regarded with healthy skepticism. While immediate cost savings achievement is entirely possible, especially with ﬁrst generation programs where rogue spend is prevalent, it is very likely that these quick savings opportunities have already been realized by Procurement, Finance, and/or your existing Managed Services Provider (MSP).
By partnering with an organization that is vested in its reputation as a leader in the space, with proven success of reigning in rogue managers and increasing program adoption, it is possible to ensure that costs will come down without compromising candidate quality.
Firms will often recommend the following three strategies. If they are not deployed with understanding and experience in contingent labor management, they will likely fall short of delivering the expected results and can have an adverse impact on the company post-engagement.
1. Bill rate reductions are a common approach for immediate cost savings. However, very few consulting ﬁrms have access to extensive real-time data in the relevant skill sets of knowledge-based workers to make this determination. Visibility to this kind of data is necessary to determine gaps and opportunities in bill rates and supplier pricing in order to assess potential savings with an appropriate degree of conﬁdence.
2. A focus limited to temps and contractors is often the scope of the project, simply because this population is most easily defined and identified. However, this segment of the contingent workforce usually represents a fraction of the overall contingent spend, and it is the higher dollar professional services contracts that offer far greater opportunities for cost savings. Most consultants lack real experience in identifying and successfully managing independent contractors/freelancers and other professional services vendor engagements. A successful program will include a strategy to analyze these engagement types, quantify risk and cost savings opportunities, and a tangible plan to bring these under program management.
3. A firm rate card approach to bill rate rationalization is often a common approach to supplier management, with a ﬂat price for all vendors within a skill category. This rationale often makes a contingent labor program less attractive to critical suppliers specializing in niche skill sets or difﬁcult-to-source talent. In order to maintain supplier engagement and to prevent hiring manager program circumvention, a more dynamic approach is recommended. While market rates can and should be used as a guideline, subjecting each engagement to a competitive bid allows the market to drive both pay and bill rates without compromising on candidate quality.
Firms should be especially wary of consultants who structure their fees as a percentage of identiﬁed cost savings. This approach incentivizes short-term thinking, poorly planned quick ﬁxes, and results in energy-sapping debates over cost-savings measurements and fee calculations that, in the end, add no value to the core objectives of the project.
Combining the beneﬁts of immediate savings with a realistic understanding of contingent workforce management can provide an abundance of opportunities for ongoing cost savings and better workforce planning. A well-managed program enables the program owner to serve as a trusted leader and partner for all stakeholders in the organization. It also enables a shift in focus toward next-level questions such as:
- How can predictive analytics help us with workforce planning?
- Where should we source talent to take advantage of favorable market conditions for unique skills?
- How can we structure our policies to ensure the beneﬁts of maximum program adoption?
- How can our MSP help us drive cost savings with the professional services engagements?