Even in today’s job market, there is a shortage of workers with critical skill sets. This has resulted in a steady, year-over-year growth in the size and cost of the contingent workforce.
As the baby boomer generation is starting to retire, companies are bridging the critical skills gap with more contingent workforce. Clients regularly report that the contingent workforce is increasingly being used for strategic reasons, such as supplementing internal talent capabilities as well as for operational reasons such as increasing the flexibility and responsiveness of the workforce.
Some large companies estimate that up to 30 percent of their procurement spend goes toward contingent workers. In past roles, I know that apart from real estate, contingent workforce was the highest category of spend across the entire organisation.Self-sourcing #Contingentworkers - disruptive or just a different approach? Click To Tweet
As the industry continues to mature, and as this category of talent becomes even more critical to a company’s success or failure, there has been a lot of discussion, articles, webinars, etc. on what the future of the industry is going to look like.
What are the disruptive technologies or changes that are going to drive the next transformation of contingent staffing? Will it be AI or Machine Learning? Will it be continued consolidation in the MSP/VMS space? Will it be a further societal and economic acceptance of the “Gig Economy”? What about FMS and those tools? Political and regulatory pressures? There is a lot of turmoil brewing for this industry, and a lot of topics that I am certain keep executives and managers in all aspects of this supply chain up at night.
One of the topics that has been floating around recently in some contingent staffing programmess is Direct or Self-Sourcing. I have seen some papers written and presentations made about how this is “cutting edge” and “disruptive” and frankly I disagree with putting that label on something that is the basis of this industry in general, and I would say that it is anything BUT cutting edge.
Programmes that rely 100 percent on staffing vendors (as the one I ran for 7+ years) obviously utilise a strong partner base to fulfil their demands. But even the majority of these programs have payroll or employer-of record vendors, for any contractors or temporary employees that come to them outside of the normal supplier channel (if they do not hire contingent labour directly).
For the programme I managed, this was a full 20 percent of our contingent workforce (hundreds and even thousands of contingent workers) meaning that we were able to direct or self source contract labour on a large scale WITHOUT trying and this contingent workforce came via referrals, references, etc.
At the root of this, direct sourcing for contingent labour is just doing what your suppliers do for you today. According to Staffing Industry Analysts (SIA), there are over 19,000 staffing companies in the US alone. (you and I can easily debate the validity of many of these “firms”). That means there are 19,000 individuals who have seen that staffing contingent labour, at the core, is not a difficult process or business. It’s difficult to do it well and to do it in large volumes consistently (also per SIA, only 140 have revenue over 100M in a year). I would argue that there is enough knowledge and subject matter expertise available in the market that ANY company that decided they wanted to do self sourcing for contingent labour could create a function and process internally that can provide that classification of worker for their company.
Several years ago, as we evaluated and reviewed year end performance for recruiting related to full-time employee acquisition, we looked at the amount of fees being paid to executive and full time search firms. The number was entirely too high when compared to the overall percentage of hires made during the time period (over 20 percent of hires were from 3rd party). An organisation-wide directive was made and a target given to reduce that number to less than 10 percent.
As with any change, you cannot just dictate an objective and consequently NOT change a process or commit to an investment to support that objective and then plan to meet the objective just because you want to. The planned savings for the fiscal year was redirected to training, tools and an increase of the internal team to compensate for the work that had been previously done by 3rd party suppliers. In the first year, the percentage of hires from these sources dropped to below 10 percent, and even with the investments made there was still a net cost savings.There is enough knowledge and subject matter expertise available to do self sourcing of… Click To Tweet
Was this a disruptive approach to hiring? No, it wasn’t, it was just a different approach, a change in how hiring was approached and managed and where the organisation chose to spend its money to achieve the objectives. The same principal applies to contingent labour. If you feel that your organisation has the ability, the expertise (or can acquire the expertise) and the desire to take on this function internally, then it’s not rocket science – any company with the right motivation, the right team and the right expectation can accomplish this objective.
That being said, there are inherent advantages to utilising a staffing supplier. Risks in contractor management and engagement, compliance with labour laws, the ability to set effective and accepted standards of performance are just a few of the areas that are beyond supplying warm bodies in seats. You expect your suppliers to be able to mitigate risk for your organisation, and with any type of employment there is inherent risk. It would be a large undertaking and require a commitment from a company choosing to do this, and only by having that commitment along with valid business reasons that provide value to the organisation would it be successful.
Direct sourcing. Is it different? Yes. Is it disruptive? Not even close.
Image: From source
This article first appeared on LinkedIn on February 16th, 2017.
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