Managing contingent workforce is a full-time global job as companies compete for on-demand talent in a tight labor pool. New software is making it easier to manage the process

CONTINGENT workers, also known as temps, part-time and contract workers, have long been a staple of the global labor force, providing a flexible and cost-effective means of smoothing out fluctuations in demand and production. But the process of managing contingent workers has been something of a black box, with little or no visibility to senior management. Small wonder that companies are clamoring for ways to reduce the costs and improve the efficiency of their contingent workers.

Beset by a lack of uniform hiring processes and procedures, minimal controls and high administrative costs, companies have found themselves in a quandary in managing contingent workers. And now that the contingent workforce has gone global, the level of complexity has ratcheted up, with a patchwork of labor laws, wage rates and cultural differences thrown into the mix.

In response to the opportunities and challenges, companies are investing in processes and technology to meet demands for greater visibility into their contingent workforce. They’re setting up master contracts with staffing-services companies to handle requisitions for every kind of worker, from unskilled to the most technically talented. They’re also implementing supply chain software to put in place the same controls over contingent-worker procurement as they have for indirect goods and services. Companies face cultural, organizational and technological challenges. They’re being challenged to bring consistent process, technology and program governance to a function that’s historically been decentralized. “They need to provide some level of autonomy and flexibility to business units, while allowing the process to be managed centrally,” says Douglas Klemp, VP, Strategic Solutions, Manpower, a staffing firm. “It’s a big leap to go from hundreds of suppliers to a single managed services provider.”

Access to talent is the headline concern, but it is one of many drivers. Reducing the time for candidate-sourcing and filling requisitions was cited as a challenge by nearly half (48%) of participants in an Aug. ‘06 study by Aberdeen Group. Other challenges were improving collaboration (48%), greater visibility into rates and processing costs (40%), compliance and verifying qualifications (36%) and reducing runaway spending (33%).

It’s easy to see why adding governance to the contingent-labor sourcing process will lead to higher quality and cost-saving improvements. Poor order-to-fill ratios have made companies question whether their existing sourcing model can meet the projected increase in contingentworker usage or its specialized needs. As a result, companies are expending more resources on contingent-workforce activities, including consolidating decision-making authority. The acquisition and use of these resources is being elevated to new levels of visibility as they become more important to profitability. “Those responsible for contingent workforce program management require better tools and more sophisticated support as they’re asked to meet a higher set of expectations,” says Ron Mester, CEO, Staffing Industry Analysts.

Rationalizing Suppliers

With more than one thousand temporary employees supporting its $10 billion manufacturing business, temporary workers are an integral element of American Standard’s business. Yet, the company had no centralized contract compliance and lacked consistent supply-chain strategies. “We needed centralized performance management, centralized billing and reporting and drug screening,” says Tom Barrett, Director, Global Strategic Sourcing, American Standard. “We needed to impose supply-chain disciplines on our hiring process, just as we had done for indirect commodities.” The company identified about 140 contractors used in its manufacturing sites and sales offices. It rationalized this contingent-workforce supplier base down to a single Vendor Management Systems (VMS) solution, SelectRemedy. The program achieved 97% user compliance, $6.9 million in savings and a 20% reduction in pre-placement screening costs. The need for a supply chain management approach is a direct result of the shrinking labor supply, both domestically and overseas, which in turn is increasing the reliance on contingent workers.

More than two-thirds of respondents in the Aberdeen Group’s study said they plan to increase their contingent workforces, with 14% saying they plan for growth to be greater than 10% in the next 12 months. More than half (58%) of these workers possess technical skills, led by IT. In addition, 78% of respondents said that a portion of these temporary workers end-up being hired as full-time employees, with 10% saying that one-quarter of temporary workers get hired permanently.

“There’s been a change in attitude toward temps and contractors; where they used to be thought of as fill-ins; they are now viewed as a strategic part of the overall workforce,” says Ginny Gomez, VP, Product Management, Peopleclick, a staffing-software provider.

Nike offers insight into the bold approach being taken to contingent-workforce management. The company employs thousands of contingent workers at its manufacturing and distribution facilities located around the world. The bulk of them are classified as light industrial workers, but there is also significant numbers of higher-skilled workers in fields such as IT, creative design and finance. The company’s temporary-staffing practices, however, had a number of shortfalls, including disparate vendors fulfilling Nike’s contingent-workforce requirements, lack of clear definitions or process to guide the acquisition of various contingent categories, multiple technology platforms to capture requests and report activity, varying execution of compliance processes and lack of formal demand management and competitive bidding process.

Following an in-depth analysis of its business practices, the company concluded that substantial benefits could be derived by applying supply chain principles to its large contingent workforce. Rather than leave its workforce policies decentralized, it chose to develop an integrated plan for managing its global workforce. “We identified a best practice, which entails using a managed services provider and a platform that provides visibility, ease of use and strong metrics,” says Dan Hanyzewski, Director, Global Staffing, Nike. Nike contracted this year with Kelly Services to provide a managed staffing-services program for its U.S.-based operations, with global implementation to be phased in over the next two years. In addition, Kelly is managing staffing of IT contractors, consultants and other professional-services positions through a vendor neutral/competitive bid model. Nike will use IQNavigator, a services-procurement software platform, to optimize spend, demand and supplier management. The setup with Kelly enables Nike to bid for such resources in a volatile and tight labor market. “The benefits for Nike include consistent hiring processes, improved governance, global reporting and visibility, ease of use and improved workforce planning,” he adds.

Navigating Vendor-management Systems

Peopleclick and IQNavigator make software known as VMS, which automate, track and report on data and processes throughout the contingent-staffing lifecycle. More than 25% of companies surveyed by Staffing Industry Analysts reported VMS usage in 2006. Of those companies that did not report current VMS usage, 26% say they will start using VMS in the next two years, bringing total VMS penetration to more than 50%.

A VMS allows staffing managers to create job requirements and project-based, or fixed-bid, requirements, set rates for job requirements and track contractual and logistical details of staffing or projects. With a VMS-driven competitive sourcing model, companies can centralize agency rate and performance data and scale to address variable workloads. That can lead to dramatic organizational improvements. Armed with data, companies updated policies and business rules to reflect changes in company goals, the legal landscape, and technology. Roles and responsibilities of managers are re-structured, information systems are configured and qualified agencies are contracted to address the projected contingent-worker usage. By deploying a VMS, companies can swing out-of-control spending and process inefficiency over to fully automated procurement and time-reporting processes. The entire contingent-resource lifecycle is automated through requisition distribution, job and project refinement, candidate/bid submission, selection, contract negotiation and time tracking. VMS also provide a controlled environment (where pre-qualified suppliers compete directly for requisitions) and the ability to create and manage supplier marketplaces, as well as measure supplier performance, facilitating dynamic low-cost sourcing and ongoing supplier-performance improvement for a highly optimized-supply base. Contingent-workforce services often involve onsite supplier personnel, who may be subject to background checks, certifications and other security checks as a prerequisite to site access. VMS allow companies to control on-boarding and off-boarding processes, supporting security, compliance and co-employment requirements. They come equipped with bells and whistles that turn hiring from a haphazard set of loosely-defined policies into a rules-driven, enterprise system that helps companies comply with reporting and compliance requirements. User roles can be defined with varying degrees of spending authority and access, which supports compliance with the U.S. Sarbanes- Oxley (SOX) and similar laws. Adhoc reporting tools provide insight into the staffing and services-procurement process, enabling companies to tweak them where needed.

Visibility and Control

CUNA Mutual, a financial-services provider, in 2006 implemented IQNavigator to manage the sourcing, procuring, tracking and payment of its temporary labor, IT services and projectsbased professional consulting. The system supports the organization’s ability to source, manage and track delivery and pay by milestones, per-unit deliverables, time or any combination, multiple sourcing methods.

“The system has enabled the company to achieve full visibility and control over its services spending, which has traditionally been a difficult business area to manage,” says Kaaren Neuendorf, Business Services Portfolio Manager, CUNA Mutual. In addition to temporary labor services, the company is using IQNavigator to gain control of onsite outsourced services and management consulting, and is considering expanding its use of IQNavigator to event planning, marketing and security services and facilities management. The quick integration with existing systems greatly improved the process efficiencies and adoption of the program. The system links with CUNA’s internal systems to streamline the source-to-procure-to-pay processes for services. It supports approval hierarchies and rules, based on job type and spending limits, by connecting to the company’s HR system. It sends messages to CUNA’s onboarding system when a contractor and consultant changes in status, providing coordinated building security and additional process efficiencies.

Companies have found that by deploying VMS, they can fundamentally transform contingentworkforce programs and foster continuous improvement. A VMS-supported competitive sourcing model can deliver year-over-year cost savings and improved candidate quality. Centralized data enables buyers to establish new sourcing strategies that once proved difficult to calculate and enforce. Getting buy-in from stakeholders has proven to be the biggest challenge in implementing a VMS-based staffing system. Procuring contingent-workforce employees are often the responsibility of purchasing or procurement departments versus human-resource organizations, who are primarily responsible for permanent employees. “Contractors have traditionally been seen as a commodity, not unlike pencils or laptops — costs to be driven down,” says John Silver, Executive VP, ProVision Technologies. IRS rules and potential worker lawsuits around the distinction between contract and regular employees add complexity to a company’s sourcing and acquisition initiatives regarding their workforce.

A United Front

In the Aberdeen Group’s study, respondents said that responsibility for managing contingentlabor programs is divided among four main groups: HR (29%), business units (20%), procurement (19%) and finance (17%). With no one department taking the lead, procurement is saddled with inconsistent costs and inefficiencies.

Overcoming such parochialism can be difficult. Not every manager is comfortable with technology, let alone VMS systems, and may insist on changes to make it more user-friendly. Hiring managers may become disenchanted over their perceived loss of control. Staffing contractors can be resistant to change. Communication and formal feedback mechanisms are vital to continuously exceed the expectations of a broad spectrum of stakeholders. “Coordinating and shepherding stakeholders through any mode of change, whether transformation or continuous improvement is critical, and well-done orchestration will make virtually any contingent workforce program substantially better,” says Staffing Industry’ Mester.

Different stakeholders have different needs. Some hiring managers feel that on-boarding cycle times are most important because they depend on contingent employees to fill out business operations during peaks and surges in demand. Others feel that price is most important because they feel P&L pressures from program and department budget managers. Legal is concerned with co-employment issues and SOX compliance. HR demands greater visibility into the hiring process.

“Companies can take proactive steps to build organizational buy-in,” Mester says, “such as quarterly business reviews with primary program partners to go over metrics for each of the key ROI drivers identified during transformation.” Semi-annual user satisfaction surveys help illustrate which program tweaks are being well-received and what internal customers think will make the program run even better. Using such formal communications channels enables the people in charge of the contingentworkforce program to quickly address concerns and adopt fresh ideas efficiently and openly.

With evidence of a process that can promptly alleviate their concerns, hiring managers and vendors alike became more accepting of the new system.

Whether companies choose to outsource their contingent staffing completely to some managed services provider in-house, they need to do so without disenfranchising the end users — those actually using the workers. “[managed services providers] can take over many functions, but companies still need to engage end users to prevent runaway spending and non compliance,” says Manpower’s Klemp.

NEXT

STEPS

• Deploy a VMS for requisition entry and approval, order fulfillment, on-boarding and off-boarding activities and time entry and approval
• Understand and be sensitive to cultural differences when implementing a global contingent-worker hiring program
• Develop standard job descriptions across all geographic areas to ensure your ability to match the right skill set with the right job and limit the potential for over-hiring. Develop standard job descriptions across all geographic areas to ensure your ability to match the right skill set with the right job and limit the potential for over-hiring.