Contingent Workforce Solutions RFP - Article 5: How Short Term Strategies Can Derail Long Term Success

So, you are sourcing a talent solution for your company, whose reliance on third party labor continues to evolve, and the company recognizes the need for a better way of managing it all. It could be VMS technology, with the vision being a self-managed program that leverages process automation. Or perhaps it is a full service MSP solution powered by VMS technology. Payrolling and IC Compliance services or Direct Sourcing could be in play as well. It has been an arduous process with lots of stakeholders, and lots of questions posed and answered. Finally, the scorecarding is done and you are ready to make the award and start implementation!

But wait!  Something lurks in the shadows of this critical and impactful decision. After all, we are talking about an impact on:

·         Millions of budget dollars spent with third party suppliers, many of whom MUST be retained going forward. 

·         Technology optimization and integrations that must go right the first time. 

·         The support model itself for the stakeholder community – Hiring Managers, Sponsors, Suppliers, Contingent Workers.  What will it look like?  What role does AI play versus dedicated human resources?  Where is it supported from? Are language barriers a risk to a positive user experience?

Ah, that phrase.  That all-important phrase . . .

Positive User Experience!!! Above all else, this is what we must strive for if we want to achieve long-term success and maximize the value propositions with our solution!  These include:

·         Cost Savings

·         Automation of inefficient manual processes

·         Better visibility to spend, utilization, and performance (both of suppliers and the program itself)

·         Compliance to internal policies, legal and industry regulations

·         Quality of personnel and suppliers

Yes, there are more we can list, but this usually covers the key values that organizations are seeking to achieve.  So why is a positive user experience so important?  To put it simply, if you build your program based on decisions geared toward these value propositions, but neglect that positive user experience, then all the leg work you have done upfront will be wasted time and energy.  If people don’t feel good about using your solution, they will discover an alternative way of doing things to get around it, leading to the most dreaded two words in the business – MAVERICK SPEND!  This critical condition manifests as hiring managers and suppliers operating outside of your solution in order to do whatever it takes to get the job done. The side effects of this condition are numerous and serious. Cost savings goals are at risk.  Processes are no longer consistent or trackable. There is a lack of visibility because managers and suppliers are working outside the system of record that is supposed to give you metrics on all the activities flowing through the VMS.  Compliance is at risk because there is a lack of rigor provided by the technology itself. 

Yet, many clients undervalue or even forget the criticality of the end user experience by making decisions that sound good in the short run, but jeopardize long term success of the solution within the talent ecosystem.

So what are the more common and crippling mistakes I have seen?

1. Under-estimating the experience needed in a Program Manager:  If you are standing up a contingent workforce program for the first time, take a hard look at the complexity of your program and make sure that the person you hire to be the Program Manager – or the MSP who will manage it – has expertise that goes beyond basic recruiting and staffing.  While there is a place for such talent within the program, the lead person needs to be well versed in not only staffing and recruiting, but vendor relations, management of team members and partners, and compliance.  And that doesn’t even include who is going to track co-employment related legislation, market intelligence, and technology innovation! An established MSP will have resources who can bring this expertise to the table in support of their assigned Program Manager if they are light in certain areas, allowing them to develop over the course of the first 6-12 months.  If you are planning on self-managing, you want to have someone on your team who brings this to the table, so it’s important to get it right the first time.  After all, a candidate who is limited on their experience won’t know what they won’t know, creating gaps in the management and rigor of the program.  If you face this, engage a consultant who has “been there, done that” to help develop and mentor the Program Manager.

2. Modeling without data. Far too often, firms will have their minds made up about how they wish to engage their supply base without having considered current state information.  Let the data drive your decisions!  You may find that the right supplier engagement model for your organization varies by department or operating unit.  For example, energy and retail organizations commonly deploy a blend of vendor neutral models for shared services corporate functions such as IT, Professional, Engineering skillsets.  However, business operations are frequently driven by field operations such as drilling or distribution facilities based in smaller regions with limited supplier options.  These are often best supported through prime vendor models with a small group of tier 2 firms.  Both supplier engagement models can coexist under the management oversight of a single program office (internally managed or via MSP).  The key is to let the data validate your hunches around supplier engagement.

3. Pursuing cost savings too aggressively at launch. Cost savings – two words that strike fear in the hearts and souls of suppliers everywhere!  Indirect procurement managers are going to be judged typically on the amount of savings they negotiate on their book of business.  Meanwhile, hiring managers are under pressure to stay in or under budget.  Yet there is a flip side to this reality.  That is the fact that work has to get done, and as much as AI impacts our daily lives, there is still a lot of work that has not been replaced by AI and must be done by contingent workers.  So, you need to be prudent on the implementation of cost savings strategies your so as not to alienate your top suppliers.  There are many cost savings levers you can pull, including:

·         Reduction of markups

·         Bill rate cards

·         Volume discounts

·         Tenure discounts

·         Early pay discounts

·         OT and DT premium discounts

·         Discounted rates via pre-screening suppliers used by clients

·         FICA/FUTA/SUTA reductions

·         Reduced rates for self-identified talent or alumni

·         Discounted conversion fees or direct hire fees

·         Performance warranties

·         Performance penalties

·         Limiting invoice dispute periods or submittal timelines

·         Converting incumbent headcount to the MSP’s supplier affiliate at a discounted rate

There are more, but the key thing to remember is that if you want long term program success, you are going to need your suppliers.  The rumor of their demise has been greatly exaggerated. To become a “client of choice”, you need to be respectful and thoughtful on your discounting and savings strategies.  Don’t try to flip every savings switch to the “On” position at implementation.  If you do, your incumbents will look to instill fear in the hiring managers and the next thing you know, you have an internal revolt on your hands.  Then you will be looking for a new supplier relations representative who has to deal with all the contract redlines, and potentially find new agencies to replace those who have respectfully declined to contract with you.  Look at how and why you utilize contingent labor and plan your savings strategy accordingly.

4. Forgetting that the relationships must be collaborative. You may be thinking that once you have established your contingent workforce program that everything will take care of itself.  You would be severely mistaken.  Enterprise clients know their business well – the processes, the products, the culture, and now that you have things automated and someone in charge of running the daily sourcing activity, you are on Easy Street. But when you are dealing with human beings, Easy Street is an intersection you will never cross. But through long-term collaboration within the talent ecosystem, the journey will prove to be far better than before.

Your suppliers and solutions providers know their stuff too.  Suppliers understand the local markets and competitive landscape, transportation options, the demographics.  Solution providers understand best practices, technology configurations and integration capabilities, and localization factors as you cross domestic and international borders.

Establish expectations up front with the ecosystem, not only with performance metrics, but communications and codes of conduct between the parties.  Conduct supplier forums (I recommend at least twice annually) that include both the solutions partners and key hiring managers who can provide visibility to supplier challenges, and preview future hiring needs.  This will allow suppliers to proactively source talent and reduce time to fill, and deployment of pre-vetted talent, and may even spark conversations about solution strategies they have successfully deployed at other organizations which could help your firm.