U.S. companies continue to focus strategic in-house resources on value-adding and competitive advantage activities and outsource more and more services such as supply chain and payroll. In fact, experts estimate American companies spend nearly $2 billion on outsourced services. With competition as fierce as ever, firms must institute tight controls to ensure they get their money’s worth from managed service providers (MSPs) and other vendors.
Companies need to implement workflows and policies to ensure contingent workforce engagements and payments run through established, formal protocols to eliminate off-contract and other rogue spending. Rogue, or maverick, hiring of contingent workers not only drives up labor costs, it also undermines management’s ability to negotiate contracts, wastes time on account reconciliation, and increases transaction costs.
This is especially true in the case of contingent workforce management. Controlling spend on consultants, freelancers, and other agile workers can influence performance throughout the organization, from budgeting and planning to risk management and quality control. In fact, the bottom line expense for external workers is less important than how, with whom, and by whom those payables are made.
Here’s how to control maverick spend on contingent workers in order to maximize the return on investment in your workforce management program:
- Assess the situation – All workforce needs are not alike. You first need to understand how, when, and where your company uses each type of labor available to it – full-time employees, statement of work consultants, freelancers, agency temps, etc.– before you can analyze where room for improvement lies. Research contingent labor usage by department, task, frequency, cost, and other metrics.
- Benchmark and Analyze - Analytical software can be invaluable in establishing optimal divisions of labor and setting up reporting that will spotlight anomalies in results as compared to forecasts and benchmarks you established in step 1. When costs in any of these areas exceed optimal levels, you can drill down to see how much of the anomaly can be attributed to rogue spend. From there, additional training, resource allocation adjustments, and other measures can be adopted to eliminate rogue spending in the future.
- Communicate often and openly – Simply explaining to managers who use contingent labor the firm’s position on hiring procedures and the reasoning behind the strategy can go a long way toward compliance. The tactic works even better if you consider the hiring party’s needs and implement their suggestions to make onboarding temporary workers faster, more agile, and more responsive to their KPIs.
- Centralize approvals – Whether it’s finance, HR, or some other department, give final approval authority to a single point of contact, and insist all contingent work be authorized, carried out, and approved for payment by a centralized authority. Limit the people who can issue purchase orders and hold P-cards. Consolidating approvals has the added benefit of creating specialists in labor issues. With all options at its disposal, the controlling authority can suggest the best method for meeting departmental needs without resorting to maverick spending to expedite manpower challenges.
- Implement risk warnings – Vendor management systems (VMS) and other technologies can be configured to warn users when it appears budgets are approaching their limits, business rules are being subverted by the use of off-contract hiring, or worker misclassification. Automation can track company policies that govern diversity, help match invoices to purchase orders, and ensure adherence to contracted rates and volume.
Controlling maverick spend in workforce management comes down to processes, oversight and compliance. Decentralized employees cannot be permitted to select the sources of labor on a case-by-case, transactional basis. If they are allowed to ignore negotiated contracts and other controls, they can introduce not only higher and uncontrolled costs but also lower service quality. Maverick spending deprives the organization of the opportunity to collect and scrutinize data regarding labor providers. This information – fulfillment percentages, worker quality, and other performance metrics – could provide insights into which vendors to trust and which relationships to expand. Strong control of maverick spend also allows management and oversight functions to concentrate on quality improvement and cost control rather than tracking down missing invoices, time sheets, and purchase orders.
Controlling rogue spend is a critical component to a comprehensive workforce management program. It is a prerequisite to expanding your contingent worker management operations in order to take advantage of the flexibility and complementary skills procurement agile workers bring.
Companies that are not confident in their ability to maintain control of maverick spend should look for an MSP that not only brings experience and expertise to external workforce management, but also fits the firm’s approach to total workforce solution. Metasys Technologies offers a range of services that deliver insights and solutions to organizations’ entire labor procurement and implementation processes. We can develop a customized managed service offering to help you through the entire procurement-to-pay regimen with a powerful platform, robust VMS technology, and the most knowledgeable experts in the industry.
Contact us today to take your talent strategy to the highest level.