Full-time, temp, freelance—the great labor pool realignment is in full force.
By Russ Banham
Once upon a time, there were full-time, salaried employees and the occasional temporary staff brought in when business picked up or too many people headed off on vacation. Now and then, a third party might come in to ride herd on a project. Freelancers were few and far between for a simple reason—the staff could handle the workload.
Fast forward to today, and all of the above describes the modern workforce, except that those temps and freelancers and third parties are integral to the whole megillah, all of it under one roof, coming together to drive improved results. This new and evolving paradigm not only affects company talent management objectives—it is beginning to change the shape of the provider marketplace.
In the United Kingdom, and elsewhere in the European Union, a single managed services provider (MSP) routinely offers a total workforce solution that comprises the recruitment of both permanent employees and contingent labor, marketed to a single buyer in procurement. In fact, recruitment processing outsourcing (RPO) is a term that is not used in the U.K.; the term MSP covers both subjects. In the United States, however, these two types of workforce solutions typically are cleaved.
Indeed, up until quite recently, one type of firm historically recruited full-time labor positions, and another type of firm recruited contingent labor. The reason, in part, had to do with client companies. Within U.S. organizations, procurement typically rode herd on buying the contingent labor, while HR was in the driver’s seat when it came to more permanent positions. This model is now changing. As Joan Davison, president and COO of on-site staffing and MSP vendor Staff Management | SMX, sees it, “As organizations continue to increase their reliance on the flexibility of contingent workers, it has become critical that HR leaders incorporate their contingent workforce strategy into their overall HR strategy.”
A series of mergers and acquisitions in the provider space is abetting this need to create total workforce options for clients. It’s a sea change from what existed just a few years ago, and the future bodes more of the same. Nevertheless, the onus is on these broader-based service providers to bring together disparate types of labor to reflect a company’s brand, make good on their promise, help them rise up the employment value chain, and deliver vital talent-based information for decision-making purposes that yields significant business and strategic advantages.
None too soon, either. “Years ago, this was all about the management of lower-end skills,” says Rebecca Callahan, president of Atlanta-based MSP and RPO provider SourceRight Solutions. “Today, we’re seeing higher-end skills like IT, accounting, and finance becoming part of MSP programs. As they go up the value chain, they will want to manage permanent recruiting, as well. At the same time, RPO providers, since they’re sitting in the seat with the talent acquisition managers, are starting to gain control of the contingent spend.”
These up and down movements promise one thing, says Callahan: “convergence.”
She is not alone in this view. “We are beginning to see more integration of both MSP and RPO within our clients, merging these two pieces together as one from a strategic workforce standpoint,” says Teresa Carroll, senior vice president and global practice leader of MSP at Troy, Mich.-based provider Kelly Outsourcing and Consulting Group.
The firm’s own evolution reflects this trend among clients, while testifying to the ongoing movement within the provider sphere to provide a combination of talent recruitment and staffing services. Back in the mid-1940s, temporary workers were called “Kelly girls,” whether the temps were provided by Kelly or some other temporary staffing provider.
Today, Kelly OCG, with $5 billion in revenue in 2010, employs more than 530,000 individuals annually, in areas including office services, accounting, engineering, information technology, law, science, marketing, creative services, light industrial, education, and health care. Today’s “Kelly girl” might have a Ph.D. in bioengineering.
The British Are Coming (Sort of)
When it comes to HR or other matters of business, the U.S. often leads and others follow. In the case of a total workforce solution from a single provider, the U.K. can lay claim to leading the way. Although the U.S. has more critical mass in both RPO and MSP, individually, HR has traditionally purchased RPO and procurement has purchased MSP, a divide that makes little sense in the emerging workforce of tomorrow. “The U.S. is behind in the blended approach, despite the sensibility of it,” says Candy Lewandowski, vice president and global practice leader of RPO at Kelly OCG.
This is gradually changing. “We’ve recently seen HR becoming more involved in MSP programs that started in procurement,” Carroll notes. “This, in part, is leading to interest in a movement of having a single sponsor inside the client. And that is begetting a move in the provider space to develop a more integrated solution.”
The workforce itself is another factor in this evolution. People right out of college these days are more willing to be a free agent on the contingent labor side. Full-time, seasoned workers are open to more contingent positions, particularly retirees not yet ready to retire in the volatile economy. And some contingent workers often are open to a full-time job at the hiring organization at some point in the future.
A study by Kelly OCG backs up these trends, indicating that free agents—anyone non-full-time like an independent contractor, a freelancer, or temp—accounted for 28 percent of the workforce in the U.S. in 2008. In 2011, the percentage jumped to 44 percent—a pretty remarkable increase.
What factors explain this historic metamorphosis? “Companies are looking more now at the total talent supply chain than at different silos of labor,” Carroll says. “Also, high-demand skills like IT or engineering are crossing over from full-time to contingent in ways that we have not seen before. Frankly, an SAP programmer could care less about being a full-time employee; there is enough work out there for him or her on a contract basis.”
Providers must follow the needs and demands of clients. As managers of business units and divisions increasingly handle the hiring of both full-time and contingent workers, it is more efficient and possibly cost-effective for them to buy the related services from a single provider. Says Lewandowski, “One program that reaches across the whole spectrum of talent is a much more user-friendly approach for an organization.”
What the Mergers Mean
One can argue that the spate of recent mergers and acquisitions in the talent space—Manpower’s acquisition of CRI, Adecco’s acquisition of MSP Group and TalentTrack, and Randstad Holding’s acquisition of SourceRight—is driven by these convergence trends. All these providers have one thing in common—both MSP and RPO solutions at their fingertips. Nevertheless, as the titles of the interviewees in this article attest, within these organizations a single person leads RPO and another MSP. Part of this silo approach has to do with technology—as yet there is no integrated system addressing both service areas.
Another factor has to do with the client sphere—not all U.S. companies are structured yet to encourage a total workforce solution. “We have clients that want both solutions in one program, and we also have clients that prefer to have both solutions separated,” says Penny Queller, senior vice president of strategic solutions at Advantage xPO.
What separates the two from a decision standpoint? Queller says clients that want both solutions in one program are typically looking at permanent hiring and contract labor from a total workforce planning perspective. The other clients, on the other hand, prefer to have both solutions separated because they tend to manage permanent hiring and contract labor in very different ways—the typical HR full-time employees and procurement-contingent employees structure.
Still, Queller is a firm believer in the value afforded by an integrated approach. “The two solutions can work together beautifully, with each stream of work leveraging off the other,” she says. “For example, MSP project office recruiters are required to provide and know the specific needs of their assigned hiring managers and departments relative to their contingent talent requirements. They must know the environment, pace, flexibility, leadership style, and teamwork versus individual work. All these aspects can be applied to a permanent hire, as well.”
Pros and Cons Considered
Try convincing resistant companies of that, however. The blended model has its plusses, but the “tried and true” is a formidable barrier to altering the paradigm quickly. “Frankly, I can count on two hands the deals we’ve pursued and won where we implemented both MSP and RPO as an integrated solution for clients,” says Dana Shaw, vice president of provider Manpower’s global center of excellence for MSP.
While Manpower has the manpower to provide both solutions, selling them as an integrated unit to a single buyer within an organization has been elusive. “I honestly cannot think of a lot of companies that have gone in this direction, and I was an analyst for six years before coming here 10 months ago,” Shaw adds. “These are complex decisions, and the HR manager at a mid-management level is not in a position to make important RPO decisions, which customarily is the province of procurement.”
Her colleague on the RPO side of Manpower’s global center of excellence, Vice President Jim McCoy, notes that he and Dana may line up to pitch their respective wares to clients, but to different sets of listeners. “I’m not sure the clients are ready yet,” he acknowledges.
Callahan and Queller are more sanguine. “The bundled approach has caught on in Europe and especially the U.K., and I believe we will see similar traction in the U.S. with first generation programs,” Queller says. “These will tend to be in the middle market segment.”
In five years, the rubber will really meet the road, she adds. “For U.S. programs that were first generation post-recession, the solutions will be completely blended,” Queller projects. “The VMS [vendor management software] tools will have developed workflows for permanent hires. Either that, or we will see integrations built between clients’ applicant tracking systems and the pure-play VMS tools.”
Callahan has a slightly different perspective. “As MSP is evolving in the U.S., it’s moving toward more of these hybrid models where the staffing provider is leading the supply chain and doing a lot of direct sourcing, or filling in as a supplier and using fewer outside suppliers in the supply chain,” she says. “We also will have the reverse, where RPO is rapidly growing and recruiting on the direct side. The thinking is, ‘We’re already managing your permanent recruitment, so why don’t we also manage your contingent recruitment?’ ”
She calls this model a “holistic solution,” seeking to fit the right job with the right person. “We will see a convergence where recruiters will still recruit the permanents, while RPO moves across the talent chain to include the management of contingent labor under the same umbrella. We’re already sitting in the seat with the talent acquisition managers anyway.”
Even a skeptical Shaw acknowledges that more clients are having discussions about integrated resource fulfillment (or “workforce McModeling,” as she calls it). More clients have been asking about it in the last six to 12 months, wanting to know how to optimize their contingent labor, she says. “You can’t just look at contingent or traditional full-time hires without looking at the whole ecosystem.”
Prepping for the Future
For now, expect more sales trips by people like Lewandowski and Carroll, shoulder to shoulder, armed with their respective RPO and MSP solutions. Ditto McCoy and Shaw.
As Carroll puts it, “It’s whatever the client wants. When you have a high-demand resource like oil, you go wherever the oil is, and you get it out of the ground through whatever means. Same with talent—we go where they are, bringing in whatever worker category the company wants. The key is to provide a common landing page.”
She adds that in this quest, “We don’t have to homogenize the process, just make it easy for the user. From our standpoint, it’s all one big supply chain.”
Advantages of an Integrated Approach
MSP and RPO providers in the United States tout the significant advantages of offering both together, whether as an integrated unit of services or two sets of distinctly different services, albeit from one provider. As Penny Queller, senior vice president of strategic solutions at Advantage xPO, sees it, “There are key leverage points with your people, processes, and technology when you deliver both solutions.”
Among these leverage points is being viewed by the client as a partner insofar as its total workforce planning, which Queller maintains creates higher-level relationships and a greater degree of intimacy between the two organizations. “When you provide a deeper solution set to your customer, you are simply more valuable,” she explains.
For companies considering accessing both MSP and RPO services from a single provider, Joan Davison, president and COO of Staff Management/SMX, offers a few caveats. “To maximize value and reduce risk, ensure that your staffing provider will enhance your employment and company brands,” Davison says. “As your brand ambassador, you need to ask if they are upholding your standards, creating a positive employment experience for your contingent workforce, and making a good impression in the communities where you operate.”
If the answers to these questions are no, rethink the relationship, Davison advises. “You also want to be sure that your staffing firm isn’t the next to land in the headlines, and that they are following employment industry best practices,” she adds. “Last but not least, make sure you get the information you need to effectively manage the contingent staffing program.”
The Rise of Blended RPO by Everest Group
