CONTINGENT workers, also known as temps, part-time and contract workers, have long been a staple of the global labor force, providing a flexible and cost-effective means of smoothing out fluctuations in demand and production. But the process of managing contingent workers has been something of a black box, with little or no visibility to senior management. Small wonder that companies are clamoring for ways to reduce the costs and improve the efficiency of their contingent workers.
Beset by a lack of uniform hiring processes and procedures, minimal controls and high administrative costs, companies have found themselves in a quandary in managing contingent workers. And now that the contingent workforce has gone global, the level of complexity has ratcheted up, with a patchwork of labor laws, wage rates and cultural differences thrown into the mix.
In response to the opportunities and challenges, companies are investing in processes and technology to meet demands for greater visibility into their contingent workforce. They’re setting up master contracts with staffing-services companies to handle requisitions for every kind of worker, from unskilled to the most technically talented. They’re also implementing supply chain software to put in place the same controls over contingent-worker procurement as they have for indirect goods and services. Companies face cultural, organizational and technological challenges. They’re being challenged to bring consistent process, technology and program governance to a function that’s historically been decentralized. “They need to provide some level of autonomy and flexibility to business units, while allowing the process to be managed centrally,” says Douglas Klemp, VP, Strategic Solutions, Manpower, a staffing firm. “It’s a big leap to go from hundreds of suppliers to a single managed services provider.”
Access to talent is the headline concern, but it is one of many drivers. Reducing the time for candidate-sourcing and filling requisitions was cited as a challenge by nearly half (48%) of participants in an Aug. ‘06 study by Aberdeen Group. Other challenges were improving collaboration (48%), greater visibility into rates and processing costs (40%), compliance and verifying qualifications (36%) and reducing runaway spending (33%).
It’s easy to see why adding governance to the contingent-labor sourcing process will lead to higher quality and cost-saving improvements. Poor order-to-fill ratios have made companies question whether their existing sourcing model can meet the projected increase in contingent-worker usage or its specialized needs. As a result, companies are expending more resources on contingent-workforce activities, including consolidating decision-making authority. The acquisition and use of these resources is being elevated to new levels of visibility as they become more important to profitability. “Those responsible for contingent workforce program management require better tools and more sophisticated support as they’re asked to meet a higher set of expectations,” says Ron Mester, CEO, Staffing Industry Analysts.
Rationalizing Suppliers
With more than one thousand temporary employees supporting its $10 billion manufacturing business, temporary workers are an integral element of American Standard’s business. Yet, the company had no centralized contract compliance and lacked consistent supply-chain strategies. “We needed centralized performance management, centralized billing and reporting and drug screening,” says Tom Barrett, Director, Global Strategic Sourcing, American Standard. “We needed to impose supply-chain disciplines on our hiring process, just as we had done for indirect commodities.” The company identified about 140 contractors used in its manufacturing sites and sales offices. It rationalized this contingent-workforce supplier base down to a single Vendor Management Systems (VMS) solution, SelectRemedy. The program achieved 97% user compliance, $6.9 million in savings and a 20% reduction in pre-placement screening costs. The need for a supply chain management approach is a direct result of the shrinking labor supply, both domestically and overseas, which in turn is increasing the reliance on contingent workers.
More than two-thirds of respondents in the Aberdeen Group’s study said they plan to increase their contingent workforces, with 14% saying they plan for growth to be greater than 10% in the next 12 months. More than half (58%) of these workers possess technical skills, led by IT. In addition, 78% of respondents said that a portion of these temporary workers end-up being hired as full-time employees, with 10% saying that one-quarter of temporary workers get hired permanently.
“There’s been a change in attitude toward temps and contractors; where they used to be thought of as fill-ins; they are now viewed as a strategic part of the overall workforce,” says Ginny Gomez, VP, Product Management, Peopleclick, a staffing-software provider.
Nike offers insight into the bold approach being taken to contingent-workforce management. The company employs thousands of contingent workers at its manufacturing and distribution facilities located around the world. The bulk of them are classified as light industrial workers, but there is also significant numbers of higher-skilled workers in fields such as IT, creative design and finance. The company’s temporary-staffing practices, however, had a number of shortfalls, including disparate vendors fulfilling Nike’s contingent-workforce requirements, lack of clear definitions or process to guide the acquisition of various contingent categories, multiple technology platforms to capture requests and report activity, varying execution of compliance processes and lack of formal demand management and competitive bidding process.
Following an in-depth analysis of its business practices, the company concluded that substantial benefits could be derived by applying supply chain principles to its large contingent workforce. Rather than leave its workforce policies decentralized, it chose to develop an integrated plan for managing its global workforce. “We identified a best practice, which entails using a managed services provider and a platform that provides visibility, ease of use and strong metrics,” says Dan Hanyzewski, Director, Global Staffing, Nike. Nike contracted this year with Kelly Services to provide a managed staffing-services program for its U.S.-based operations, with global implementation to be phased in over the next two years. In addition, Kelly is managing staffing of IT contractors, consultants and other professional-services positions through a vendor neutral/competitive bid model. Nike will use IQNavigator, a services-procurement software platform, to optimize spend, demand and supplier management. The setup with Kelly enables Nike to bid for such resources in a volatile and tight labor market. “The benefits for Nike include consistent hiring processes, improved governance, global reporting and visibility, ease of use and improved workforce planning,” he adds.
