3M looks to a VMS to transform its temporary workforce program
By Subadhra R. Sriram
The company is best known for its inventive products. Post-it and Scotch brands are just a few of its prominent trademarks. However, 3M, the $24 billion St. Paul-MN based technology corporation, has a finger in many pies, including segments like healthcare, display and graphics, and industrial and transportation sectors. With innovation as its mantra, the company prides itself on providing practical and ingenious solutions to everyday problems.
The ongoing emphasis at 3M is on quality, but there can be no quality products without quality people. And that’s where 3M’s workforce comes in. The conglomerate in the United States relies on its 34,000 traditional employees and around several thousand temporary workers to do their bit to keep it ahead of its competition.
As a result, it is important that the company knows who its contingents are. “We wanted greater visibility into our non-3M workforce, says Tara Lemke Ebenhoch, the company’s workforce planning manager. Besides, at different points in time, senior executives wanted more details about the temp population than Ebenhoch and her group were able to provide.
The Problem
The workforce planning squad, a part of 3M’s human resources group, took charge. Its first step was to put together an HR-led team representing departments like sourcing, finance and IT. This team supports the contingent workforce program but its members do not report to workforce planning. They take questions from various quarters and provide answers.
The team began by interviewing 3M’s internal stakeholders to find out their pain points with regard to using contingent workers. The information technology, manufacturing, engineering and marketing groups were surveyed using a Six Sigma methodology called Voice of Customer. In the process, the team learned that the departments being interviewed could not describe their temporary workers or what they were working on.
“Hiring managers also did not know who the qualified suppliers for various labor segments were,” says Ebenhoch. To top it all off, there was no formal contingent spending approval process, which meant that there was no consistency across groups. The company was using hundreds of staffing suppliers, many of which offered the same services. As usually happens in decentralized operations, business unit managers were making their own hiring decisions based on limited information and focused on their own department’s immediate or midterm needs. Bill rates varied for the same skill sets.
The workforce planning team then researched how other companies, such as Johnson & Johnson and Medtronic, handled their contingent workforces. They also looked at Dun & Bradstreet for benchmarking intelligence. The process helped them collect data on industry best practices and norms. Finally, in 2007, the workforce planning team concluded that a vendor management system (VMS) was what it needed to manage its contingent workforce, with spending upwards of $200 million.
State of Affairs
Currently in the United States, 3M has a preferred vendor on premise for its manufacturing, administrative and clerical skills sets. However, managers who require workers with different skill sets contact either the human resource management or sourcing team to identify a supplier (in 3M’s preferred relationship network) that can provide the appropriate temp.
At that point the manager is given the supplier’s contact information and initiates a relationship. If there is no appropriate supplier, then the sourcing unit works to identify several, negotiate rates and draft contracts. But ultimately, it is the hiring manager who selects the supplier. HR only gets involved when there is a service issue with the supplier or a contingent worker.
As a result of this, the product company is besieged by thousands of suppliers. The expectation is that once the VMS is fully implemented (in early 2009) and a spotlight is on bill rates, suppliers will be trimmed, leaving the company with upwards of 300 vendors.
The Solution
Traditionally, tools like a VMS enable corporations to save 5 percent to 20 percent on contingent acquisition and better manage their varied types of workers and locations. In addition, such a system has all the benefits of a paperless process. Everything is automated, enabling managers and executives to know who their contingent workers are at the push of a button.
A business case was presented to executives, including the chief information officer, chief financial officer and the HR vice president. The team demonstrated how the VMS would help the consumer products giant stay compliant. It also established that implementing a VMS would provide visibility into the workforce. Senior executives were taken in by the idea that all workers could be tracked by the system.
Unusually, cost savings was the lowest concern on 3M’s list. In fact, internal stakeholders are skeptical about whether the VMS will yield any savings, but the workforce planning team is confident that it will. The team has yet to quantify the savings potential, though IQNavigator (IQN), its VMS of choice, reports that savings will be from 6 percent to 12 percent, depending on the skill set. Regardless of savings, the 3M management team bought into the idea of a VMS right away.
Course of Action
The next steps involved putting out a request for proposal. “We got a feel for the strong players in the VMS space from attending the Contingent Workforce Strategies Summit,” says Ebenhoch. The conference is held by Staffing Industry Analysts, the publisher of this magazine. Eight vendors responded to the RFP.
At the start, 3M was unsure of how to proceed. The company was uncertain whether it wanted just a technology source or a model that decoupled the VMS from a managed service provider (MSP). One school of thought was to go with both an MSP and a VMS because of the momentum built around the business case coupled with executive buy-in and support from various in-house units.
But eventually, in June 2008, 3M decided to implement a VMS, IQNavigator, and manage the contingent workforce program in-house. “We chose them because they offer a technology package that caters to a very diverse spend and varied service categories, which are what 3M has,” says Ebenhoch. Another benefit was IQN’s large global footprint. 3M hopes that down the road all its contingent workers worldwide will be administered by one tool.
The technology giant regards its contingents as a feeder pool for their employee population. 3M’s contingent worker objective is to get good quality temporary workers at the right price. Currently the conglomerate converts around 10 percent of its temp workforce to traditional employee status. But there are also those temps that fill specialized, strategic needs on a project basis and still others that supplement 3M’s workforce as and when required.
The company’s manufacturing units use the most number of temporary workers in the United States, followed by IT, but 3M also has a large international presence. Internationally, units in China, India, Brazil, and Italy are the top users of contingents. “We hope to have a first deployment globally by the end of 2009,” says Ebenhoch. “We are looking at a variety of countries where we can take the tool.”
There will be a central contingent workforce office in the United States headed by the workforce planning team. But each country’s local resources and experts would help run the program but not necessarily report back to the central office. “3M is extremely decentralized in terms of its management philosophy,” says Ebenhoch. “So we would have the same platform [IQN] that enables the analysis and compliance, with each unit abroad administering its program and maintaining a link with the central office,” she adds.
The Tool
“We are going to give them the ability to view the suppliers they are using and the net average unit cost,” says Brian Owens, IQN’s senior vice president of industry solutions. IQN’s benchmarking and analytics will reveal the variance in rate structure for similar types of resources throughout the enterprise.
To keep suppliers and internal users abreast of impending changes, IQN has a very formal change management process in place. First, all the suppliers are brought in and notified of what’s going on with the program. They are trained on the system extensively. The same procedure is repeated with 3M’s internal stakeholders. Hiring managers can participate in training sessions with an instructor or do Web sessions. The opportunity to come and take refresher courses is also available to any 3M employee, contractor or supplier.
The first phase of implementation is occurring in the HR and IT departments. As part of the implementation process, each business unit will be trained on using the VMS. Managers also will be educated on the suppliers that are qualified to provide required workers. In addition, they will learn about new controls in place to add or remove suppliers. The workforce planning team is meeting managers to demonstrate the tool, and to talk though the process. In fact, hiring managers are even asked to participate in testing of the VMS to ensure direct involvement.
Further, the workforce planning team, which owns the program, is preparing company-wide emails talking about VMS implementation timelines and what to get ready for. These emails are then sent by the executive sponsors of the contingent workforce program. “It looks like the email is coming from our two executive sponsors and this obviously gets the right kind of visibility,” Ebenhoch says.
Once the program is under way, 3M’s objective is to evaluate its supplier base, and then use the VMS’ reporting ability to analyze its rate structure across all the skill sets it uses. Comparing market price intelligence is next. “Ultimately it all comes down to whether 3M is competitive,” says Owens. “Are we at market and how do we know, and that’s a big part of why they use us,” he adds.
Strategic Outlook
3M hopes that the VMS will enable it to use its contingent labor force more deliberately. The manufacturing company’s size and the scope of its products are so diverse, ranging from post-it notes to sophisticated reflective technology, that the company needs a wide range of temps to satisfy its needs. The contingent workforce program needs to be organized in a way to accommodate all the differences yet have a single unified process in view.
IQN for its part is providing a single platform for all the company’s non-employees. This includes temporary workers, outsourced personnel or those who are part of a service contract, supplier representatives and even visitors who have unescorted badge access. The tool will track all these groups. Managers supervising temps can not only track which contingent is working on what task, but which suppliers are performing.
The plan is that IQN will complete its implementation by the first quarter of 2009. 3M anticipates that the VMS will level the playing field for its suppliers in terms of price, expectations and process flow. This in turn will enable suppliers to provide the right contingents at the right price when the company needs them. There can be no invention or growth without quality people. Just-in-time labor is what gives many companies the competitive edge. And 3M is no exception to that rule.
A Supplier’s Stance
Volt on 3M
It’s been a long and fruitful affiliation. Volt Workforce Solutions has been providing temporary workers to 3M for more than 20 years. In 2001, Volt became the company’s master supplier, providing manufacturing and administrative contingents in the United States. The vendor also fills accounting, call center, engineering, IT and scientific staffing positions across the country and in Europe.
So will the VMS alter the Volt-3M relationship? “The system will change,” says Rick Moore, Volt’s senior vice president. But little else will. Earlier, Volt used its own technology to manage the 3M account. “But now we will still continue to manage 3M’s workflow. Volt will just be using someone else’s tool and that’s fairly common within the industry,” says Moore. The VMS can work in a supplier’s favor. The tool can eliminate the need to wander the hallways and make constant contact with hiring managers.
IQNavigator’s Brian Owens agrees. “The VMS dramatically enhances the ability for the supplier to be effective in terms of how efficiently he communicates with the client,” says Owens. For example, suppliers know much more quickly when an opportunity is available. And if they submit a candidate against an opportunity, they know just as swiftly if the person has been accepted, declined or is in some sort of holding pattern based on further review.
Previously, the conglomerate assessed its master supplier quarterly, looking very carefully at metrics like time to fill, turnover and attrition rates. In addition, Volt had service-level agreements and ongoing targets that it had to meet with the openings it filled.
One of the challenges of working with 3M is the diversity of its skill sets. Volt has to provide a range of expertise in different industries from manufacturing to healthcare. The varieties of candidates notwithstanding, suppliers also have to contend with short lead times. “Our industry as a whole suffers from the fact that our clients don’t often give us the lead times effective to finding the best talent,” says Moore. 3M is no different.
But what works in its favor is that 3M, like Volt, follows the Six Sigma methodology. The tech giant is supportive and lets Volt refine its program on an incremental basis. For its part, Volt communicates with its suppliers’ base in various ways including, emails and supplier forums. Quarterly reviews are also undertaken where staffing agencies can discuss their metrics and how they are performing.
Going forward, Volt anticipates little problem with the VMS implementation. “We work with IQN on a lot of other accounts, so we are very familiar with their system,” says Moore.
Program Pointers
3M’s Ebenhoch recommends that the executives whose units use the highest volume of contingents be brought on board up front. Once these supervisors understand the benefits of an organized and formal contingent workforce program, they spread the word. Another suggestion is to involve the IT division early in the process, as most times they tend to be the greatest users of contingents. In addition, the IT unit can assist in designing the program and deal with other technical details.