This article was originally published in June 2019 by Spend Matters. It has been republished with permission.
Spend Matters and parent company Azul Partners make up the largest and most influential media and knowledge source in the procurement sector—and together have the largest and broadest range of practitioners and advisors consuming their content than any other analyst, blog, media, or subscription service.
It’s becoming an everyday occurrence: Businesses are hiring more and more freelancers, contractors, and temporary staff—but they’re struggling to manage the process.
Contingent labor experts talk about how in today’s workforce, there are companies that engage as many as 50% of their workers from non-employee sources.
So how do HR and procurement teams determine the best way to locate and manage those workers while keeping a focus on what matters to the company: Visibility, cost control, compliance, and productivity?
The Changing Tides of Contingent Workforce Program Management
Some companies still rely on more traditional external workforce management programs, but the tide is changing. Companies using a managed service provider (MSP) often benefit from the provider’s expertise and broad supplier networks, but there can be difficulties with employee buy-in, staffing supplier relationships, and costs.
A 2016 Staffing Industry Analysts report showed that 33% of global companies are managing their contingent worker programs internally, and that number is growing. Companies are making that decision because they need results that they’re not receiving from MSPs.
They need a shift from the tactical toward more strategic support. Specifically, they need decision support built on data analysis that includes forecasting—this shift has to come with more sophisticated technology, appropriate suppliers, and dramatic cost savings.
Do you have rogue spend? Read 8 ways to manage and control your contingent labor costs.
Factors to Consider Before Choosing Internal Contingent Program Management
Starting or shifting to an internally managed program is happening, in part, because program leaders need greater visibility of spend and transparency of their procurement processes. But these programs can be complex, so decision-makers must ask the right questions—perhaps the most basic being:
Does our company have dedicated staff ready to assume the responsibilities?
Here are some other important questions to ask:
- Are those staffers trained or is a training program necessary?
- Have workflows been established?
- Is the company prepared to hold the supplier contracts?
- Have compliance issues been addressed?
- Are there global and local components to the program?
- Have costs and controls been addressed?
- Does the company have the appropriate technology, specifically VMS software, in place?
The decision about what technology to use is key for these contingent workforce programs, and it should be selected based on its specific capabilities as they relate to each program. Selecting a VMS provider could be the most important component of what may ultimately become a technology suite.
Related insights: 13 Questions to Ask During Vendor Management Software Demos
As VMS platforms become more advanced, the data they collect, analyze, and export is even more robust. Users are able to—without outside help—create detailed reports that allow them to closely monitor budgets, time-to-fill-metrics, and other vital KPIs. These vendor management systems are also able to integrate with other technologies like hiring clouds, HR systems, procurement tools, and artificial intelligence platforms.
And while internally managed contingent worker programs are popular with mid-market clients whose spend ranges from $5 million to $50 million, larger enterprise clients also are starting to look seriously at this option.
Regardless of the program size, to achieve success, every company needs to have a basic understanding of the contingent labor industry as a whole. And they must also continually consider and evaluate their program objectives.
Another key factor is executive sponsorship. For a contingent workforce program to perform at optimal levels, the entire company needs to be on board. When employees see their leaders supporting the program and sharing the reasoning behind it, acceptance is stronger and more sweeping.
Enlisting Outside Experts in Contingent Labor Management
Once an internally managed contingent labor program is established, there will undoubtedly be bumps along the way.
Companies are finding that they can solve these matters by integrating specific experts, thereby creating their own individualized contingent program management ecosystems. The reliance on having everything provided by a traditional MSP or staffing company is no longer the only choice.
By choosing their own team of experts, leaders retain control over their contingent workforce programs, ensuring the business culture and company goals remain in focus, calling on trusted partners like their VMS provider.
Some technology providers are now offering cafeteria-style support options so program managers can select only what they need, when they need it.
Contingent workforce consultants can advise HR and procurement leaders on all manner of topics, from the basic to the highly specialized. And the need for consultants may ebb and flow as the program evolves.
Common areas of support include invoicing, optimization of the supplier base, establishing SLAs and KPIs, educating program managers on supplier relationship management, and establishing program metrics and goals. True consultant partners will add value to the contingent labor program.
Will In-House Contingent Workforce Management Work for You?
Internally managed programs for contingent workers are proving to be the right choice for many companies. They offer opportunities to maintain a focus on business goals and corporate culture, to establish more strategic collaborations and long-range planning, and to target a company’s needs more precisely.
The key is finding the right partners to support your contingent worker program and remaining prepared to make changes as the program evolves.