MSP / Contingent Labor

Seasoned Pro

NGA’S Trey Campbell was there at the birth of modern outsourcing. He’s now helping lead the 3.0 generation. Or is that 4.0?
 

By Dirk Olin 
 
 
Samuel V. “Trey” Campbell became president NorthgateArinso North America in September 2009. He has extensive experience in business process outsourcing (BPO), particularly in the areas of HRO and related technology services

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Getting Aligned

Organizations require an integrated approach to their workforce to meet strategic talent needs.
 

By Russ Banham 
 
 
Today’s workforce could not be imagined just a generation ago. So many different categories define “workers” at present, and so many different configurations of these categories help define organizations, that they would have defied comprehension even 20 years ago.
 
 
With that context, some of the top providers of managed services programs (MSP) and related advisors recently shared their views on trends in workforce solutions. All the respondents agreed that MSP is at an inflection point, one in which experimentation is giving way to more standardized practices. Primary among these is growing interest in an integrated approach to meeting an organization’s talent needs to drive its strategic objectives.
 
 
“To be successful and fully leverage the large talent pool today, organizations must have a more comprehensive understanding of the availability and competition for talent within given sectors, including inside and outside their own companies,” says Teresa Carroll, senior vice president of centers of excellence at Kelly Outsourcing & Consulting Group in Troy, Michigan. “They are looking for solutions that deliver the right talent in the right approach, whether full-time, contingent, project consultants, and so on.”
 
 
This evolution pressures MSP providers to understand gaps between a client’s projected needs and its current supply of talent. Says Carroll, “Companies that clearly understand the talent available in-house, and can gauge the talent available outside the organization, will be better positioned to access and obtain the workforce needed for success.”
 
 
Asked what they considered to be the major trend in MSP, providers and advisors both cited an increase in clients seeking a total workforce management solution. Les Duncan, managing director of Hays Corporate Accounts in London, put it most succinctly: “Due to recent economic uncertainty, the contingent resourcing cycle has been elongated.” This has resulted in a higher percentage of temporary workers and contractors in the workplace. “There is a reliance on contingent staff to not only perform as well as their permanent colleagues, but also in many respects surpass them in terms of expertise,” Duncan adds. “This drive for contingent talent has led to managed service programs being seen as a strategic element within the resourcing process and crucial to a company’s success.”
 
 
Sharing this view is Frederick Winstead, vice president of Allegis Group Services. “Clients today are requiring a total workforce solution to manage all talent associated with their organizations, including their contingent workforce, independent contractors, and permanent hires,” Winstead says. “Combining all labor services into one program offers better visibility into usage and increased reporting and workforce planning capabilities.”
 
 
Hays is increasingly hearing from clients who want technology not only to manage their contingent workers, but also to provide statement of work (SOW) and applicant tracking system (ATS) functionality. Anne Osty, vice president of sales and marketing
Staff Management | SMX , cites the same requests. “Ultimately, our clients want to include all nonemployee worker types in their programs—contingent and SOW consultants as well as outsourced services, which include diverse functions from call center operations and IT help desks to food and lawn care services,” she says. Other clients are integrating deliverable-based services that wouldn’t traditionally fall under an MSP, “but because the supplier management process is similar, such as learning and development, they can obtain the benefits of MSP management,” she adds.
Duncan agrees. “This suggests that the ‘one supplier, one solution’ is the way things are set to go,” he says.
 


Greater Functionality
Teresa Creech, president of managed service programs Randstad Sourceright, also comments on greater functionality as a major trend. “We’ve seen the addition of new work categories, such as SOW, light industrial, and clinical, and the expansion to multinational and global program architectures. We’re also seeing a trend toward the blending of MSP and RPO.” These trends, she adds, are driven in large part by the desire to achieve more value over time. “Many MSPs are second and third generation; therefore, the value from traditional temporary labor categories has often already been optimized,” Creech explains. “By addressing the edges of these categories, both clients and providers have an opportunity to produce significant increases in measureable results.”
 
 
Others, such as Allegis’s Winstead and Zain Wadee, managing director at RPO provider hyphen in London, also cite growing requirements from clients for their organizations to provide SOW offerings. “We’ve definitely seen increased interest for companies to rely on their MSP providers to manage their services procurement SOW global spend,” Winstead says. “MSP providers with a solid services procurement offering are able to reduce the risk of misclassification and perform detailed assessments of work being performed to determine proper allocation of resources, which then offers visibility and control around a client’s various indirect spend categories.”
 
 
Wadee says that buyers increasingly expect MSPs to ensure that selected deliverables are met, citing as an example contingent workers hitting project timescales. “This moves MSP into a new space that traditionally was the preserve of consultancies, signifying an area of growth,” he explains. “With a continued commitment by organizations to reduce costs, this trend is likely to continue over the next three years, and it is likely that a proportion of fees paid to MSPs will be aligned with these key deliverables.” As this trend increases, MSPs “are set to become much more involved in total workforce management for contingent workers,” he adds.
 
 
Another trend, cited by Moray Brown, practice director at London-based Reed Consulting, is a continuing focus on reducing costs and improving control and compliance. “In the last two years, we’ve noted a growing number of private sector businesses wanting a more robust, direct sourcing model included within the capability of their MSP provider,” Brown says. “While we can and do operate as a hybrid MSP provider, the ability to drive these efficiencies through the MSP supply chain has a limited reach, and rightly so, as we need an engaged and motivated supply chain moving forward.” Consequently, the firm is moving toward a greater proportion of direct sourcing, giving it more control over driving greater efficiencies into its MSP programs, in addition to working with customers to achieve cost reductions. “We believe this offers the greatest benefits in efficiencies versus risk,” he says.
 
 
Robust Prospects
Total spend under management by MSP providers was up more than 20 percent from 2009 to 2010, according to the Staffing Industry Analysts (SIA), and the temporary penetration rate continues to climb back to prerecession levels. Although SIA’s 2011 Contingent Buyer Survey indicated a decrease in the MSP penetration rate among buyers, SIA is projecting greater penetration in 2012. Additionally, McKinsey reports that 58 percent of employers plan to hire more contingent workers in the years ahead.
 
 
Many observers agree with these major growth projections for MSP, as more organizations turn toward total workforce solutions. Not that impediments don’t exist.
 
 
Says Winstead, “A key challenge of any integrated solution is configuring the implemented technology systems to manage all labor categories, including full-time, contract, and outsourced project services work.” Organizations need such tools implemented properly to accurately provide the required data to successfully manage the on-board/off-board processes, and to extract the relevant metrics to help plan for future needs, he explains.
 
 
As companies continue to increase their reliance on contingent staffing, Osty believes that MSP growth will continue. “That said, we do recognize a shift taking place in the marketplace. Many of the largest users of contingent staffing have implemented an MSP program, so new client acquisition in the largest program segment may be leveling off,” she says.
 
 
Osty projects a “tremendous opportunity” to drive continued growth by focusing on “bringing MSP services to clients with smaller contingent labor expenditures,” she says. “MSP providers have generally not invested in an effective solution to meet the needs of the smaller market ($10 million or less of primarily domestic spend). While we manage some of the largest and most complex MSP programs in the industry, we also continue to focus on smaller and mid-size clients, and believe that those users will yield further opportunity for growth and expansion.”
 
 
Reed Consulting’s Brown says the growth of MSP across domestic, regional, and global markets “is set to continue and with pace. The challenge for some suppliers will be demonstrating experience in embedding themselves as a key part of the business’s hiring authority and delivering an agile contingent workforce solution.” He adds that Reed Consulting has noticed an increasing number of businesses reviewing their MSP contracts partway through the contracted terms with the current provider. “We believe this is linked to a wider market shift that is seeing businesses increasingly move away from seeking a multisupplier managed MSP platform to a MSP platform that delivers more direct sourcing agility,” he explains.
 
 
While cost efficiencies are undeniably a key driver in the MSP decision, hyphen’s Wadee cites other factors driving MSP growth. “The level of service through MSPs is high, and the cost is less than traditional agency models, which has encouraged many organizations to explore this option,” he says. “MSPs also allow organizations to deal with large recruitment volumes, while ensuring the consistency of hires. Managing all contingent recruitment under one roof ensures this consistency, while enabling organizations to measure performance more effectively.”
 
 
While Randstad Sourceright’s Creech agrees with the contentions about further growth, she cites a potential challenge—variable and fixed talent often failing to be combined as a single strategy for buyers. Wadee shares this view: “This still isn’t an exact science. There continues to be a disconnect between planning for permanent hiring and the use of contingent workers across many organizations.” He adds that flexible workforces are often hired to complement established workforces, whereas contingent workers are not factored into overall recruitment plans. “This results in a lack of planning, with several organizations taking on contingent workers as a ‘distressed purchase,’ ” he says.  
 
 
Creech believes that as talent preferences shift and the global economy remains uncertain, companies increasingly will look for ways to take a holistic approach to talent acquisition and engagement. “Our role as a strategic talent advisor is to help clients . . . build a cohesive plan to enhance the quality, utilization, and cost effectiveness of both variable and fixed talent,” she says.
 

Osty expands on this idea. “Our clients look to us to do more than manage their contingent workforce,” she says. “They also look to us to keep them abreast of market trends and how their program compares to others.”
 
 
Multiyear and Then Some
Multiyear MSP contracts are largely the norm among buyers, with expectations of further growth in this regard. Creech comments that the more MSP providers become an integrated part of the talent strategy, the more difficult it becomes to separate a client from the provider. “Together, we become mutually accountable for mission critical workforce planning and execution,” she explains. “This is the most important reason to carefully engage in the appropriate due diligence to secure a successful partnership.” Kelly OCG’s Carroll also predicts contracts of longer duration. “The level of time, resources, and necessary change management to implement an MSP implies that companies do not want to continue to implement new programs,” she says.
 
 
Osty concurs that MSP programs are long-term partnerships demanding a strategic plan. “Without a multi-year contract, it is harder to realize the strategic vision for the program,” she says, adding that buyers recognize that there “is more to an MSP program than the low hanging fruit of vendor consolidation and have come to expect a strategic approach to driving ongoing return on investment.”
 
 
Multiyear contracts further allow for true program governance, thought leadership, and ownership of all program elements with an alignment between local, regional, national, and global leadership, she adds.
 
 
While Brown agrees that businesses are in favor of multiyear contracts, given that their longer durations enable buyers to negotiate more cost-efficient contracts, he says the deciding factor will always be how compelling an MSP provider’s solutions are—and what is being promised in terms of operational and commercial value over the agreed term. Regarding this duration, Wadee anticipates that contracts will remain around three years’ length. Why? “This amount of time allows for a sufficient tenure to secure a decent level of return on investment, while also allowing the flexibility for organizations to ensure they have the best overall solution for their requirements,” he says.
 
 
Some other trends affecting MSP include what Carroll cites as various industries seeking to emphasize employee safety and how MSP partners can help them manage their talent programs to ensure safety objectives are achieved. Osty, on the other hand, cites a wider interest among buyers in the inclusion of light industrial staffing, as well as heavier industrial positions, in their MSP programs. “There has been a feeling in the marketplace that light industrial wasn’t the right fit for MSP . . . because of their complexity, lower margins, and higher risks,” she says. “Now, buyers are more and more interested in getting a better handle on all aspects of their labor supply chain.”
 

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2012 Baker’s Dozen Customer Satisfaction Ratings: MSP

HRO Today’s Baker’s Dozen rankings are based solely on feedback from buyers of the rated services; the ratings are not based on the opinion of the HRO Today staff. We collect feedback annually through an on-line survey, which we distribute both directly to buyers through our own mailing lists and indirectly by sending service providers the link to send to their clients.
 

 


 

Once collected, response data are loaded into the HRO Today database for analysis to score each provider. In order to determine an overall ranking, we analyze results across three subcategories: service breadth, deal sizes and quality. Using a predetermined algorithm that weighs questions and categories based on importance, we calculate scores in all three subcategories as well as an overall score. The rankings are based on those scores. The numbers presented in the tables represent those calculated scores; we include them to demonstrate the relative differences among the ranked service providers.
 

 

While we do not claim that our methodology is the only viable ratings program available we do vouch for its statistical validity. We hope this ranking provides you some insight into your next RFP process.

 

1. Randstad Sourceright
2. Staff Management | SMX
3. Allegis Group Services
4. Adecco Solutions Group
5. The Bartech Group
6. Guidant Group
7. Advantage xPO
8. Kelly OCG
9. Hyphen
10. Agile 1
11. Yoh
12. Hays
13. ZeroChaos
 
 
Click here to learn more about the Top 13.
 

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Moving Up

Joan Davison’s vision for contingent labor management is pushing the market forward.

By Debbie Bolla 
 
 
As a corporate relocation executive, Joan Davison was used to placing professionals in new locales for their jobs. But there came a time to make a career move herself.
“I was looking for an opportunity that would allow me to tap into my entrepreneurial spirit and where my efforts could really make a difference,” recalls the now president and chief operating officer for staffing solutions firm Staff Management | SMX.
 
 
Davison was looking to stay in the human capital industry and began to hear whispers about the Chicago-based firm. “I was inspired by how they spoke about labor, labor management, and statistics. Back in that time, no one was looking at data and how it could drive the entire labor market. I really liked their story.”
 
 
So she dipped her toes in the contingent labor pond by taking on a role as a regional director covering the midwest in 1996. Davison focused on people management by leading project teams and working collaboratively with sales teams to develop new strategies and create opportunities to drive business.
 
 
Her transition into the contingent labor market was easy. “In both the relocation industry and contingent labor industry, you are dealing with human capital. You are touching companies’ most important aspect, which is the people. Understanding that, and the value of human capital, whether they are full-time or contingent, really made the transition pretty seamless,” she explains.
 
 
After taking on a more client-facing role as VP of operations for the company, Davison continued to expand her responsibilities as president and COO. Her leadership skills positioned her to grow strategy development and strategic business planning, oversee operations, and leverage existing partnerships.
 

To put it lightly—her career move was a good one. And perhaps Davison had the foresight to know that the industry she was moving into was poised for rapid growth. In recent years, the percent of contingent labor in the workforce has seen a big increase. According to Aberdeen Research, in 2009 19 percent of the workforce was contingent, contract or temporary. Fast forward three years and that same statistic has risen to 25 percent. Davison says companies are seeing the value of managing some of their workforce on a contingent basis.
 
 
“Some organizations make the presumption that full-time employees are better, and that is not necessarily true,” she says. “When you analyze the data, some clients are surprised to find that contingent workers’ productivity is better. We are trying to track the data that allows clients to answer the questions that are compelling to them.”
 
 
MSP: Right Now
Contingent labor and MSP are both enjoying a recent surge in activity. Is it economy-driven? “The recession has increased a reliance on contingent labor, and it is only expected to increase,” Davison explains. “The use of staffing firms to meet just-in-time and project-based hiring needs has become an integral part of an organization’s overall workforce planning strategy as companies choose to rely on the flexibility of contingent labor to adjust quickly to changes in the business cycle without having to add and shed permanent positions.”
 
 
In fact, McKinsey reports that 58 percent of employers plan to hire more contingent workers in the years ahead. Davison says that MSP programs provide a responsive way to manage contingent labor usage and can help organizations not only save money but also meet corporate goals.
 
 
She says, “Through our MSP programs, we have helped many of our clients create strong working relationships with suppliers that might not have gotten a chance through traditional master supplier staffing relationships. This creates a win-win situation where our client is able to meet their goals, streamline expenses, and manage labor, while allowing these diverse businesses to grow. Another advantage of our MSP programs is that the savings we help our clients generate can be reinvested in their internal organization, allowing our clients to be more competitive, eventually growing their business and with it their labor usage—another win-win.”
 

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Talent2: Privatization Proposal for Global Growth

Talent2 International Limited reports that its major shareholders Andrew Banks and Geoff Morgan have proposed to take the business private in a move to allow the company more flexibility to meet its strategic global growth plans. The privatization proposal, unanimously recommended by the Independent Board Committee (IBC) in the absence of a superior proposal and subject to an independent expert concluding that the offer is in the best interests of shareholders, aims to position Talent2 to be the best end-to-end talent management organization in the world by 2015 and expand its global footprint in human resources outsourcing (HRO) for the benefit of clients and stakeholders

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Prime Time

The last five years in outsourcing from three experts.
 
 
By the Editors
 
 
During the past few years, the HR outsourcing market has endured growing pains and enjoyed maturation. Misperception, followed by consolidation and reformulation has led to a new understanding between practitioners and providers. Oh, and there was the small matter of a financial meltdown and a global recession, fallout from which has not stopped even now. Where does it leave the marketplace. HRO Today asked a trio of thought leaders for their views.
— The Editors
 
 

Maturing Market
The HR outsourcing market has changed dramatically over the past five years. In the mid-2000s, the market was overwhelmed with buyer demand and providers were challenged to digest and support newly awarded contracts.
 
 
Focused solely on transaction processing and reducing HR operating costs, buyers and providers were trapped in what Accenture refers to as second and third-generation BPO. Providers were unable to make the most of their emerging scale since very little was being shared across contracts. Clients were hearing noise—problems in delivery—and were not seeing the level of innovation and cross-client synergy they expected. As such, the market reacted. Contracts were cancelled and the industry saw a consolidation of providers, dramatically changing the landscape.
 
 
Today, the HR BPO market has markedly matured and buyer values have shifted. Leading buyers and BPO providers have realized the same thing: there is a wealth of insight about client organizations that providers can leverage to help achieve better performance. Buyers are beginning to seek providers that can help them obtain tangible results that include better selection of top performers, improved retention of critical performers and workforces, and accelerated time to competency. Companies need partners that can help create competitive advantage by forecasting and fulfilling talent requirements, and aligning talent plans, workforce capabilities, and employee performance with business strategy.As the HR BPO market has matured, buyers want industry-specific expertise and deep-process knowledge from their outsourcing partner.
 
 
Over the past several years, interest in HR BPO has been particularly strong in consumer goods, retail, and industrial companies as well as the financial services, communications, media and technology sectors. What is driving this interest? Across industries, the global economy, new marketplace realities, and continued cost pressures are factors making it challenging for companies in these industries to figure out how best to grow and manage their organizations. A key strategy in the current economic climate for most organizations is getting better utilization from people to increase workforce productivity and performance.
 

It’s this slew of demands that are driving a new fourth generation of the market. Providers who possess deep industry and functional knowledge can apply analytics to create insights and drive real business value. Recent Accenture research, conducted in conjunction with the Everest Group and The Outsourcing Unit at the London School of Economics, validates that leveraging analytics to mine data about the functions and processes being outsourced to more predictably drive business outcomes is one of eight best-in-class practices of high performers.
 

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From Cradle to Grave

Best practices to ensuring your program’s success.
 

By Julie Planko 
 
 
A managed services program (MSP) can be an integral way to manage a company’s contingent workforce. But there are a few best practices to follow in order to reap the rewards of that practice. Program adoption begins during the implementation phase and is a very important measure to monitor throughout the lifecycle of the program. From an implementation standpoint, it is critical for the MSP to understand an organization’s current landscape and the existing pain points for the customer. It is also vital to fully understand the processes that are in place to obtain talent management resources. This includes, but is not limited to, the following:
 
 
• Process. What is the typical process to obtain contingent services?
• Approval. How does a contingent labor requestor obtain
budget approval?
• Request build. Does the organization utilize job descriptions when communicating their openings to the supply base? If so, where are they retained?
• Sourcing. How does the client engage suppliers? What’s the typical resume flow and do the suppliers short list?
• Selection. How does the client interview candidates? Who determines the rate?
• Due diligence. Who administers the process and how involved is the hiring manager?
• Onboarding. What does the hiring manager do to prepare
for the contingent worker’s arrival? What responsibilities lie
with suppliers?
• Timecard/expense approval: What’s the process and frequency? How does invoicing work?
 
 
All of these discovery questions are important to drive program adoption early in the program. Fully understanding how the process works pre-MSP can positively impact the future state design, ensuring a user-friendly system and program for all user groups: hiring managers, key stakeholders, and suppliers.
 

Overseeing Change Management
Change leadership and executive level support are mission critical to a successful and timely deployment. As a best practice, it is important to dedicate team members to effectively manage and drive a comprehensive communication plan and strategy. Best practices related to change management that will enhance program adoption include the following:
 
 
• Identify “change champions” within the client business units—high-using managers, resource coordinators, and/or executive-level personnel—and engage them in the design and implementation phase.
• Ensure executive sponsorship has a stake in the success of the program by effectively communicating key corporate initiatives that hiring managers will need to clearly understand and embrace.
• Position the program correctly—it is not an HR or Procurement initiative but rather a corporate strategy to attract top talent most effectively and meet an organization’s growing demands.
• Establish a strong escalation plan in order know when to escalate and have a recommended solution in place when escalating so timely decisions can be made.
 
 
Train to Gain
Creating a thorough training plan for all user groups is key. By having an effective and detailed training plan for suppliers, they will become advocates for an MSP program and assist in messaging the value of the program to the hiring managers.
 
 
As the project moves from the implementation stage to operations, it is essential to provide training to hiring managers and suppliers, as well as other business units or teams that are defined as high-user groups. A cost-effective training method is via webcasts, and a standard training plan is comprised of the following milestones that have a direct impact on program adoption:
 
 
• A supplier introductory meeting announces the program and outlines supplier registration requirements and deadlines.
• Mid-implementation supplier information session further defines how the program will be designed and provides an opportunity for the supply base to interact with the program office team.
• Go-live training session(s) provides users with increased knowledge of the VMS technology, future state processes, and the value-add of program management office.
• Distribution of FAQ’s to all users, including hiring managers and suppliers, outlines the reason and benefits of the MSP program.
• Distribution of operational user guides as easy reference documents outline important processes—how to submit a candidate, onboard, offboard, etc.
 

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