A couple of weeks ago I hosted a roundtable on Managing Contingent/Temporary Labor at the ISM Services Group conference in Phoenix, which focuses on different aspects of sourcing and managing procured services.
The roundtable topic was “Challenges and Successes in Managing Contingent/Temporary Labor”, and seemed to be one of the most popular topics, probably due to the inherent challenges in this services spend category. Here are the top challenges and successes that came from the roundtable of procurement professionals:
Achieving visibility: How many contingent/temporary workers, where they are, what they’re doing, and tracking all the required compliance-related data.
Managing ramp-up and ramp-downs in demand: Having a fast & effective process (balancing speed vs. quality), contracting optimally (contracting for services or people?)
Measuring and Managing the process: Gathering metrics across the enterprise (all locations), achieving consistent contract terms with suppliers, getting consistently good rates.
Determining the best owner: HR, Procurement, or both?
Improving results for end-users: Overcoming long fill times, little reporting, and complaints from end-users.
Centralizing buying and rationalizing the supply base: Streamlined management, gained visibility into consistent metrics, and negotiated better rates.
Utilizing standard contracts: After a “rush-effort” to quickly bring on thousands of workers in a cleanup effort, went back and revamped all supplier agreements over six months, and gained savings from consistent expense-reimbursement policies.
Negotiating contracts for service levels: Addressed issues of fill-times and end-user satisfaction, and gained onsite support from top-tier suppliers.
Co-ownership by HR and Procurement for program: With leadership support, gained ability to impose a new process and vendor marketplace.
Negotiating rate ranges by different methods depending on the type of work: Negotiate markup, bill rate, and/or pay rates.
One common thread in the conversation was the need (fortunately filled by VMS/Services Procurement solutions) for a new system of record that provided visibility and control into a revamped process for managing the various types of contingent labor, anywhere around the world.
Fortune magazine today published an article about the new “Permanent Temporary” worker. What is most interesting to me (based on not only this article but a discussion I attended a few weeks back at the SIA Executive Forum in Miami) is that there are two very different camps. The first camp consists of a growing number of 1099 or “independent contractors” who want to work for themselves (even in a climate where the government is passing record amounts of legislation to recover tax dollars). The second camp is made up of “involuntary temps;” people who would prefer permanent employment but are unable to make the transition from temporary to permanent. According to this report, 8 million people are in the involuntary temp category (based on assumptions that most of the part-time population in the US are contingent workers). Very different situations, both part of the same growing trend….
So is this a good thing? I think so. Though the benefits issue (or lack of benefits for temporary workers) is problematic, there seems to be more positive than negative impacts of this trend. Pay rates of “non regular” are increasing (per the IQNdex released by us last month), so much so that they are rivaling that of their “regular” counterparts. Hiring temporary workers can be mutually beneficial. Temporary assignments make it is easier for people to quickly gain new opportunities, experiences and skills, while employers find the flexibility valuable in today’s (still) potentially volatile economy.
Additionally, VMS tools like IQNavigator enable companies to source, track and manage this population like never before.
Aberdeen Group just released their Contingent Labor Management Report, which IQNavigator sponsored. A couple of interesting takeaways from the report are as follows:
55% said contingent workforce was of “high value.” While the importance of specific skills to the overall economy increases, so does the popularity of contract work.
“Utilize a VMS” is one of the recommendations for the laggards. Technology is a must to gain the benefits while sourcing the right prospects for temporary projects.
Aberdeen includes Statement of Work (SOW) engagements and services as part of a “contingent workforce.” Contingent spend often represents just a small part of an organization’s overall services procurement-spending footprint, while the other more complex services (including SOW) can represent 5 to 10 times more overall spend.
Spend Matters research suggests that, depending on the industry, a typical organization spends between 15% and 70% of its overall external purchases on services spending categories. IQNavigator has seen its client base accelerating expansion into these broader categories. We have also seen several new clients on-board these categories first due to the sheer savings opportunity and the visibility gained from “system enabling” them. Complex categories are now considered standard fare in today’s best practice oriented programs.
I interviewed a candidate last week who told me a story of how he started contracting a few years ago: His company had a layoff effective on a Friday, and the next Monday he got a call that he would be brought on board as a contractor, indefinitely. He stayed there as a contractor over two more years.
This is an all-too-common practice to “hide headcount” – reduce employees but bring the same people back as contractors. This can be reduced (or at least made more visible) by implementing a VMS, which enforces approvals and shows all contractors, rates and spend.
However, hiring managers can then switch their contractor positions to “statement of work” (SOW) spending, which often can’t be tracked by first-generation VMS systems. So the headcount hiding continues.
Many IQNavigator clients have now implemented SOW spending, so that almost half of IQNavigator’s managed spend is now SOW-based, and rising.
Managing both hourly and SOW spend with your VMS provides control, compliance and visibility over all forms of services spending, and helps ensure that all headcount are approved, visible, and are working on budgeted and prioritized projects.