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Controlling Contingent Workforce Spend

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If yours is like many forward-thinking organizations, you have joined the contingent workforce revolution. Company leadership is convinced the flexibility, scalability, and savings non-traditional workers deliver will make the firm more efficient and productive. Procurement and Human Resources have worked out a way to collaborate and manage independent contractors, statement of work providers, freelancers, and other consultants to your best advantage. And you have positioned your company brand to attract the most talented workers available.

These are necessary steps for success in sourcing, developing, managing, and paying for external workers. But they represent only the preliminary, bird’s-eye concept for managing outside talent. The next step is critical – changing company workflow, implementing controls, and ensuring hiring managers’ adherence to policies and procedures designed to capture all the advantages a contingent workforce can provide. Managing this change from using strictly full-time employees and bringing as much labor spend under direct management as possible likely will determine your program’s level of success. Ensuring regulatory compliance and continuous improvement will hinge on how well you communicate expectations and enforce standards and document results throughout the firm.

Improperly managing external talent spend invites off-contract worker procurement, rogue hiring, and other costly practices that reduce productivity, cut into profits, and expose the firm to greater risk. The opportunity for maverick labor purchases is increasing, as companies and departments undertake projects that require rare talents often not found within the organization. As a result of this skyrocketing demand for external technical, communications, and other specialized skills, managers may be tempted to “go rogue.” From their point of view, they need to act quickly to win talent for a looming project before the freelancer or consultant can be scooped up by a competitor. They resort to online marketplaces or unapproved vendors to supplement in-house talent and fill gaps in their project teams.

Unfortunately, hiring managers engaging suppliers outside negotiated contracts causes a range of problems. As mentioned earlier, the company risks running afoul of government financial and labor regulations. Workers hired outside a formal contract easily can be misclassified, exposing the company to tax implications and fines. These workers often undergo less stringent screening processes, as well. This increases the risk of bad-faith actors stealing data or sabotaging operations. Going outside the prescribed process for hiring talent also jeopardizes project and product quality. It often bypasses selection criteria carefully developed to facilitate data-based hiring decisions. Finally, these rogue hires often are made without input from accounting analysts and HR and Procurement benchmarks that could shed light on acceptable hourly or per-project rates. This undermines the cost savings contingent workforce management can offer.

To avoid these problems, build a comprehensive, integrated plan for managing workforce spend. By eliminating ad-hoc, fragmented oversight responsibilities and policymaking, your company can optimize workforce programming into an organized system. Here’s how:

Centralize

Decide who will be in charge of the contingent workforce – HR, Procurement, or an interdepartmental team are the obvious choices – and give them full authority over all aspects of the program. Centralizing control avoids ambiguity as to work rules, eliminates redundant efforts, and removes doubt about where managers should go for guidance. Centralized management can oversee contracted managed service providers and monitor the onboarding process to ensure compliance, metrics, and standardization. With everything in one place, the central command can keep tabs on all ongoing and upcoming projects from beginning to end.

Budget

Collecting data and incorporating a vendor management system will help with forecasting and budgeting for contingent workforce spend. It may take several years and multiple iterations to develop a full budgetary process, but you can start with an interim budget that expands or adjusts as needed. These interim steps can inform future budgets while also highlighting demand shifts and talent-need trends and building cost benchmarks by labor type, vendor, location, skillsets, and more. They also help determine bill rates and optimal contract duration for each project type. This will allow you to “pencil in” a cost for each project even before it starts.

Visualize

Collecting and categorizing data paves the way for more analytical non-financial decisions. As you continue to expand your use of contingent labor, you will compile data points on each individual worker’s performance, strengths, and pay rates. You can also gather actionable data on vendor performance, fill rates, time to fill, costs, and more. Your data will point out which types of contingent workers perform best in particular roles. You will see which vendors consistently supply workers whose skills are commensurate with job descriptions. And you can readily set up milestones for recurring long-term projects to measure progress – and take corrective action if milestones go unmet. These data insights will make projects more efficient and hiring managers more confident. They will be less likely to hire outside the workforce management program once they see the quality and added value they receive by operating through established channels.

Specify

Workflow should dictate that hiring managers communicate a detailed list of skills required for each role they need filled. Delivering the requirements in writing on a standardized form works best for recordkeeping and tracking purposes. From there, the external workforce management team should be responsible for working with vendors or using internal sources for compiling a list of suitable candidates. The team then can work with the requisitioner to interview and score candidate applications. Involving the central administrators in this process has the added benefit of keeping them familiar with strong candidates. In consulting with team leaders, they may even decide that hiring top consultants into full-time roles would benefit all parties.

Metasys can tailor workforce management services to fit your needs. We have built numerous modules that can address any or all of your contingent talent needs. From full, comprehensive managed services to specific support for your in-house program, Metasys offers several advantages:

  • Fast worker procurement at lower cost
  • Access to diverse talent from a broad range of vendors
  • Talent data collection and insights
  • Compliance risk assessment and mitigation. And more!

Contact our experts to learn how our confluence of human creativity and technological innovations can build a comprehensive talent management program customized to your needs.

Metasys

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