Key Considerations when Seeking Contingent Labor Management Advice

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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 painfully apparent, companies often reach out to external parties for advice. But when should managers reach out for external guidance, and if warranted, what is the right way to go about finding the best advice? Contingent workforce management is a unique discipline, and finding consultants with the necessary prerequisite experience and aptitude in the field is difficult.

Optimizing your Contingent Labor Program: Moving beyond Tactical Questions

As the contingent workforce becomes more visible at the executive level, stakeholders at all levels are asking more strategic questions about the program:

  • 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 more basic questions, such as:

  • 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?
  • What is the mix of contract workers, freelancers, and workers fulfilling statement-of-work (SOW) arrangements?
  • Is there a uniform way of assessing supplier performance?

Organizations should readily have answers to all these questions at their fingertips, 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 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 departmental needs and perspectives, while maintaining alignment with corporate objectives.

Assessing Qualifications of a Potential Advisor

A number of organizations claim to be qualified to provide advice on contingent labor engagement practices—ranging from single-person contractors to large multi-national firms, and from consulting generalists to specialists in the contingent labor arena. But beyond the fundamental qualification standards (business degrees, MBAs, professional certifications, etc.), what background should a service provider possess? The right party will have the following attributes:

  • A record of performance in contingent labor management
  • Real client accountabilities
  • Current and relevant experience
  • Real-time visibility to market rates and conditions
  • Substantial data relevant knowledge-based jobs

Specialized Experience Is Paramount

The rapidly evolving contingent labor space uses specialized terminology, concepts, processes, and technology. Consultants who are not in the field every day have trouble keeping up. Companies often pay sizable consulting fees, only to have their current managers and the managed service provider (MSP) spend valuable time training the consultants who are supposed to be helping them.

Many of those offering advice in this area are doing so from 30,000 feet up and 1,000 miles behind. On-the-ground experience with current clients is essential, and cannot be attained by attending or running conferences. Service providers with real and recent experience will have a better appreciation for the organizational impact of proposed changes because they are in constant dialogue with all stakeholders on a daily basis.

This accountability for solving real client problems will help avoid the costly mistakes associated with implementing flawed ideas created in an academic setting. It is important to ask prospective advisors how many programs they are currently managing in today’s rapidly changing business environment. Experience from a few years ago is quickly dated. It is also critical to know if they are connected to the business at the transaction level 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. The recency of the data needs to be measured in days, not quarters or years.

Beware of Quick Fixes

One critical question to ask is whether the chosen advisor will be committed to your long-term success. 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, it is very likely that these quick savings opportunities have already been realized by Procurement, Finance, and/or your existing MSP.

The “quick fix” approach often disrupts business practices, while a holistic methodology can increase effectiveness and simultaneously provide higher residual savings. By partnering with an organization that is vested in its reputation as a leader in the space, it is possible to ensure that any potential long-term ramifications will be sufficiently addressed.

Firms will often recommend the following three strategies. There is nothing groundbreaking or new about these concepts. However, if they are not deployed with understanding and experience in contingent labor management, they will likely fall short of delivering expected results and can have an adverse impact on the company post-engagement.

  1. Bill rate reductions are a common approach for yielding immediate cost savings, but if a company’s MSP is already effectively managing bill rates to market—or is in alignment with a company’s pre-determined sourcing strategy—there will be little or no room to further reduce bill rates without risking downstream impacts to talent acquisition. 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. Flat bill rates represent a “blanket” approach to supplier management, with a flat price for all vendors within a skill category. This includes imposing discount models for volume or tenure that make a contingent labor program less attractive to critical suppliers specializing in niche skill sets or difficult-to-source talent. Once the impact is realized, key managers will win approval to override the recommendations, causing chaos and resentment within the organization. In the end, the number of exceptions granted for legitimate business reasons will leave the company short of expected savings targets, and can harm the credibility of the initiative.
  3. Headcount reductions are perhaps the most common recommendation put forth. While reducing the workforce is often necessary, if it is not done the right way it can create longer-term challenges, such as compliance issues, a drop in team morale, unexpected turnover of critical talent, and the inability to source top talent for future projects.

Firms should especially be 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 energy-sapping debates over cost-savings measurements and fee calculations that, in the end, add no value to the core objectives of the project.

Thinking Ahead

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 contingent labor management. 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 on the SOW population?

Proven Expertise in Contingent Workforce Management

For more than 20 years, PRO Unlimited has been a pioneer in the contingent workforce management industry. PRO Advisory Services provides contingent workforce consulting to companies looking to evaluate their current practices and opportunities. The team draws upon unparalleled experience and thought leadership to help organizations in areas such as:

  • Driving cost savings
  • Measuring and benchmarking supplier performance
  • Recommending operational efficiencies to achieve scalability
  • Leveraging the client’s brand to attract top talent
  • Providing strategic support for workforce planning
  • Instilling confidence and reassuring leadership that the contingent workforce is being managed effectively

If you or a member of your team would benefit from further discussion on how PRO is helping companies implement winning contingent workforce management programs globally, please contact a PRO representative at 800.291.1099 or email at info@prounlimited.com.

 

Disclaimer: The content in this blog post is for informational purposes only and cannot be construed as specific legal advice or as a substitute for legal advice. The blog post reflects the opinion of PRO Unlimited and is not to be construed as legal solutions and positions. Contact an attorney for specific advice and guidance for specific issues or questions.

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  Industry InsightsWorkforce Management
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