Three organizations prove how contingent labor is now viewed: specialized, skilled, and highly sought.
By Russ Banham
As contingent labor continues to grow, organizations are now looking at these types of workers through a different lens. Once considered strictly tactical, contingent workers are now increasingly skilled, with talents stretching well beyond the types of positions that organizations had sought in the past.
Much of this effort is still centered on project-oriented placement of contingent workers, where a variety of freelance specialists in technology, engineering, manufacturing, and management are onboarded for a few months to a several years to staff and even lead a venture through its completion. These roles in past were performed by full-time employees.
“Our clients are using a much higher level of professional expertise and strategic skill sets for contingent work, as opposed to their long-time historical use of tactical or transactional labor,” says Mike Mulder, head of operations at global MSP provider Guidant Group in Atlanta.
While companies will continue to recruit tactical labor for short-term purposes, their contingent workforce as a whole comprises more strategic positions. “These are people who are experts in a certain technology, system or application,” Mulder explains. “In many cases, they have the expertise to guide the strategy of the project going forward, and not just work on it.”
Obviously, this is a far cry from the temporary workers brought in to straighten out some files or a construction crew hired to remove debris. Today’s contingent workers are highly talented individuals who could easily find long-term employment, but prefer the flexibility of the freelancer’s life and work.
This suits most companies just fine. Say a business wants to implement a new information technology system. More often than not, it will hire skilled individuals who are able to understand and assess the current state of its technology and expertly integrate and execute the new system within this infrastructure in a given timeframe and budget.
The alternative is to hire additional employees in the IT department to achieve the same aims, who then stay on the payroll at high expense merely to operate and maintain the system.
This emerging work paradigm is quickly taking hold across diverse industry verticals, from pharmaceutical concerns to mining ventures to journalism. “We’re seeing this especially grow in the creative space,” Mulder says. “There are lots of highly talented designers, writers, and other creative freelancers, in addition to a growing number of online staffing marketplaces and portals for them to pitch their wares. They’re collaborating on everything from the actual design of something through its development and sales and marketing.”
Why can’t current staff take on these responsibilities? “In many cases, they may not have the skills or bandwidth to do it,” Mulder says.
Such skilled people are recruited by employment agencies on behalf of company hiring managers. Managing these varied suppliers of talent is the province of MSP. In this regard, the providers are leveraging more sophisticated vendor management systems (See sidebar VMS Toolboxes Broaden on page 10) and realigning their internal resources to better serve clients as they migrate toward higher skilled contingent workers to staff and fulfill strategic projects.
As companies increasingly recruit this diverse assortment of highly skilled contingent labor to execute myriad tasks across wide-ranging projects, managing this complicated process—from recruitment through onboarding and ultimate release—is a burden better left to MSP specialists. Taking on the responsibility internally is expensive and unnecessary— like having an internal catering service to serve up food at company events.
A case in point is IMS Health, a technology and services provider to the healthcare sector. “We had more than 200 high-level contractors performing different roles and had no idea where they were coming from,” says Steve Kirk, IMS Health’s director of sourcing. “We didn’t know which of the dozens of employment agencies we were using had hired them and how many hours each contractor was working. There was no visibility into the contracts, much less into the employment agencies’ margins to understand how much we were paying them.”
Contingent worker volume was less of an issue than the complexity of the roles needing to be filled. These highly skilled positions forced the company to reach out to multiple employment agencies nationally and even globally to recruit the proper talent. “Historically, we’d go to market to hire a specialist of some sort, receive a half-dozen CVs, and then have no control over the pay rates the agency was negotiating and affirming,” Kirk says. “We had no visibility into the submittal ratios or turnaround times.”
Worst of all, IMS Health had scant control over its intellectual property—a vital currency of a technology company. “This was a huge employment risk for us, not knowing if someone would take our IP with them out the door once a project had concluded,” Kirk says. “Certainly, this was no way to manage our growing contingent workforce spend.”
IMS Health wanted talent suppliers to develop standardized pay rates for the different types of contingent workers and rate cards that were hinged to each job’s particular taxonomy. The company brought in MSP provider Yoh to apply rigor and accountability to the contingent worker management process.
“There was no spend under management when we were engaged, or visibility or control of the contingent workforce assets,” recalls Jonathan Grosso, vice president of managed services at Yoh. “What IMS did have was a clear vision of where it wanted to go.”
Over the past five years of the parties’ long-term contract, Yoh has put all types of non-employee spend under management, including the client’s statement of work (SOW) spend, which went live in April.
Duke Energy also exemplifies the trend toward recruiting higher skilled contingent workers on a project-by-project basis. “For our shorter-term project needs, it makes more strategic and financial sense to bring in people with specialized project management experience or IT expertise, rather then redeploy our full-time staff to take on this work,” says Joe Lentz, Duke Energy’s director of talent acquisition. “It makes little sense for us to hire additional full-time equivalents to take on these roles, although it is not uncommon for us to offer the contingent workers long-term positions at the company. By and large, these are pretty gifted people.”
Many pass on the opportunity, preferring the freedom of taking on different projects at different organizations. “Today’s younger talent pool wants more flexibility and work-life balance,” says Joseph O’Shea, director of client strategy and development at MSP provider Superior Workforce Solutions Inc. “They don’t want lifetime jobs like our parents had a long time ago; they want diverse, interesting experiences where they can further their abilities and expertise.”
Accommodating this preference works for Duke Energy too. “We have learned that an added benefit to hiring such professionals, even for a short period of time, is that they pass on their skills to our own staff,” Lentz says. “There’s a transfer of knowledge that occurs that further develops the expertise of our own people.”
Duke Energy’s MSP partner is Guidant. Says Lentz, “Not only do they manage all the different contract companies we work with, they ensure we find the right person for the right job quickly.”
Visibility and Compliance
Like Duke Energy and IMS Health, Frontier Communications also wanted to get its arms around how much it was paying its growing pool of contingent workers. The company had little visibility into its headcount, lacked standardized job titles for the various contractors it was employing, and had no rate cards to measure its pricing. In late 2013, Frontier Communications created its first strategic sourcing department to apply some structure to these processes.
“Our team needed to understand, from a market analytics standpoint, why we were paying more for a particular contractor in one state than in another,” explains Keith Alchowiak, Frontier Communications’ manager of strategic sourcing.
Frontier engaged MSP provider Staff Management | SMX in late 2014 to assist with these data granularity needs. “We now have visibility into our supply base to justify contractor rate variances in a particular state or region, and to benchmark the variances against market conditions,” Alchowiak says.
This deeper insight into the myriad types of contingent workers being recruited and hired, and what they are being paid on a state-by-state basis, is valuable for another reason besides cost containment: government regulations. As more and more organizations hire independent contractors on an SOW basis, compliance with labor and tax laws becomes more convoluted.
“The more independent contractors you hire on a 1099 basis, the greater the risk of categorizing them incorrectly,” O’Shea points out. “MSP providers are taking on this responsibility to ensure these workers are in fact independent contractors—to confidently call them that under IRS regulations. If they aren’t, then they will fall under the category of temporary workers.”
The IRS treats such workers differently for corporate tax purposes. As O’Shea sees it, “The last thing any company wants is the IRS knocking on the door and saying, `You screwed up and owe us money.’”
Amen to that.
Russ Banham is a Pulitzer-nominated business journalist and author. His new book, “Higher: 100 Years of Boeing,” will be in bookstores in July 2015.
BOX: VMS Toolboxes Broaden
Choosing the right vendor management system (VMS) is just as important today as choosing the right MSP. Today’s VMS tools must incorporate robust technology to provide companies with broad data and reporting capabilities, yet still be simple enough for all employees to use.
“Not everyone in the organization needs robust reporting capability or flashy graphics,” says Mike Mulder, head of operations at MSP provider Guidant Group. “They’re not looking to run these massive reports for the quarterly business review. They just want to type in the kinds of contingent workers they’re looking for and then work with the MSP to ensure they get them. They’re more interested in a way to effectively and quickly do the time sheets and expenses, as opposed to doing deep data dives.”
Others have more demanding needs, such as a company’s client relationship specialists—the people within operations who work with the hiring managers, interpret their contingent worker recruitment needs, and then send out requests for these specialists to the entity’s staffing partners. “The bottom line is you want a VMS that balances these competing interests,” says Mulder.
Not that simplicity of use is more important than unobstructed insight into highly granular contingent workforce data. To achieve this level of transparency, the VMS must be able to extract data from talent suppliers’ own systems. “We require the suppliers we work with to complete a very extensive data pull as part of our RFPs, such as the rates for a specific job title in a specific state,” says David Arp, managing director of operations at MSP provider Staff Management | SMX. “All of this is loaded into the VMS tool, so when we pull up the requirements, it shows exactly what each supplier’s markups are.”
This information was important to the firm’s client, Frontier Communications. “We’re able to do analytics on the hourly rate of our contractors (a mix of engineering and IT candidates) to understand and compare the markups,” says Keith Alchowiak, Frontier’s manager of strategic sourcing. “We’ve only been live with the VMS for a few months, but we’re already in the right percentage of our three-month spend targets.”