Article contributed by Jennifer Whiting, TAPFIN Process Solutions, June 2010
In recent years, organizations have seen a shift in the make-up of their total workforce as the traditional reliance on full-time employees has evolved into organizations leveraging a combination of permanent, temporary, and project-based resources. This trend toward a hybrid employment model will only continue to grow, with contract labor expected to rise to as much as 30-50 percent of the entire U.S. workforce in 2010, according to law firm Littler Mendelson. While these types of non-permanent resources may have been used to some degree in the past, they now play a more strategic role, with skill sets that are frequently of a higher level and more professional than before, and that are often outside the organization’s core competency. These workers are more integral to the company than before, and must now be viewed as part of the overall workforce portfolio.
Integrated Resource Fulfillment
With these economic and demographic trends at play, the challenge remains for companies to fully and accurately evaluate their current base of resources in order to determine the optimal mix to help achieve ongoing business goals. The ideal strategy for companies should be to follow an integrated resource fulfillment approach. In doing this, the entire range of resources is viewed in a holistic manner, which allows for scalability as business needs fluctuate and the use of various types of resources based on who can best perform the necessary work. A simple way to start on this path is by considering questions such as the following:
- How do you currently track contingent labor? Through accounts payable? Manually?
- What departments, other than human resources, are involved in sourcing non-permanent resources?
- Do you know if you are securing the best rates possible?
- How does your organization track costs related to statement-of-work (SOW) and other project- related services? Is there any accountability regarding the associated deliverables?
- Are there standardized processes and parameters in place to control and track all categories of labor?
- Do you have an effective administrative method to enforce penalties for delivery failure (missed service level agreements, late deliverables, etc.)?
- What is the proper mix of contract to full-time hires for our company?
- When should we outsource versus hire internally?
- When it is best for us to hire contractors versus engage a turnkey project/solution provider?
- What are the fully-loaded costs associated with contract labor? Project services? How do those compare to the cost of a full-time resource?
The initial phase toward resource optimization focuses on increasing visibility into the current workforce spend. By identifying the breakdown of labor spend and particular issues that need to be addressed (such as maverick spend by hiring managers or inconsistent labor rates), the framework emerges for how best to improve processes and maximize contingent labor costs. This phase should include the implementation of tracking tools and the establishment of standardized and automated processes, resulting in almost immediate cost savings and a clearer sense of what types of labor are most cost-effective for the organization.
Moving beyond this evaluation and introduction of initial systems for labor management improvement, the next step is to create tighter approval flows and control around the use of various labor types. With different departments sourcing contingent labor and project-based resources, there needs to be a centralization whereby all labor spend is approved through the same channel and procured through the same processes. The goal is to ensure that each labor request is approved as appropriate and that the only workers hired are from authorized vendors at pre-determined rates. Other guidelines related to areas such as compliance and performance management are also established to provide greater control. With these improvements, organizations see even greater cost savings, improved efficiencies as a result of clear-cut procedures, and the ability to start using tracked data to analyze labor spend in a more strategic manner.
The final phase is the achievement of optimal workforce procedures through the use of company intelligence to make the very best decisions regarding what types of labor best support the business. The sourcing process is continually being improved to maximize spend and efficiencies. This results in a more proactive approach to the workforce, where needs are identified and anticipated so they can be fulfilled by the most appropriate resource – be it full-time, temporary or project-based. The performance of vendors and contractors is also improved as tighter performance management ensures that work is completed satisfactorily and at agreed-to prices. This state of total workforce visibility, management, and optimization enterprise-wide and across all labor categories achieves integrated resource fulfillment.
Current economic conditions, employment trends, and other demographic factors are colliding to present a prime opportunity for organizations to fully evaluate their overall workforce and steer their current labor fulfillment practices toward a more integrated approach that will provide greater efficiencies, improved results from both permanent and temporary resources, and significant cost savings.