The scoop on managed service programs.
By Elliot Clark
So I was in Toronto giving a talk on MSP (managed service programs, that is), when I finally articulated what had been bothering me for awhile. Everyone has been talking about the global demand for talent. Everyone has been talking about generational shifts and talent supply issues. The two problems are on a collision course—economically, culturally, and logistically. We have a global talent supply problem and some really deep-seated global talent quality issues. All the king’s horses and all the king’s software may not be able to fix productivity in the long term. This may be particularly true in some of the technical professions. And before we start dishing on the East or the West, I would suggest—at least, from what I have heard anecdotally from both sides of the globe—problems are brewing everywhere.
Managed service programs are, at least for contingent labor, the most holistic approach to managing the workforce from planning, pipelining, and cost perspectives. Of course, they lack the succession planning and performance management strategic elements reserved for full-time labor, but I worked some discussion relating to those issues into my address in Toronto. If you are reading this at a major company today, chances are that 25 percent to 35 percent of your workforce is contingent labor in some form or another. Of that group, some portion is longer term, composed most probably of technical and professional contractors. A student graduating from college in 2012, according to some studies, is expected to have as many as 10 to 14 jobs…by the age of 38.
What is the difference between hiring that long-term contractor for a year through your MSP and hiring them directly? Is it regulatory? Is it a succession planning issue? Arguably those both may be true, but equally true is that you need to rapidly deploy and engage that hire FT or PT in short-time windows, and you may want to ask your MSP provider to evolve in a way to help make 25 percent to 35 percent of your workforce more productive. What’s more, that contingent percentage may grow as new grads prefer contracting over direct employment and as the regulatory environment changes.
You may want to think about how you will face the realities of the future management of talent in short-term horizons. How do you make them care about your corporate outcomes?
Canada offered a great economy for focusing a discussion about managing recruiting under global pressure. Unemployment is 7.62 percent. That sounds a little high to readers in the United States, but in truth the average unemployment since 1982 has been 8.53 percent with the low in May of 2007 at 5.6 percent and the high in December of 1982 at 13.10 percent. The estimated natural rate of unemployment is estimated in the low “6’s.” Do you know what these numbers are in your economy? You should.
So Canada is at a strong “B” for employment. Yet it has a labor pool the size of California and must compete globally for talent. Its banking sector, for example, has firms like Royal Bank of Canada. RBC can’t very well tell wealthy Canadian investors or Canadian business leaders, “You need to accept lower returns because we don’t have the labor pool to compete with New York banks like Goldman Sachs or Morgan Stanley for the best financiers.” Not a winning recipe, even with “go team” on the end of the sentence.
All business now competes globally, and as a result all businesses need to have the talent be global players regardless of the available pool. It is intense pressure. The truth is that regardless of when McKinsey & Company published The War for Talent (it was 1997) that war had never “started” and never “ended.” (If you have ever heard me speak live, you have heard this diatribe before, so I apologize in advance.) The “war for talent” is perpetual. I doubt any of you have ever run an ad stating, “We seek mediocre employees capable of doing passable work.” The truth is that everyone has always competed for the top 10 percent of the talent pool, and the McKinsey people just got the word late. The only variations in the “war” are that sometimes there are just more jobs than others, but there is never, ever a desire for subpar.
If you know you are going to be in a war, do you prepare by getting to the edge of the battlefield and running around in circles trying to think about what to do? I am pretty sure Sun Tzu recommends against that as a first choice.
Talent management needs to be a lot more like strategic planning, and it needs to be ready for the coming demographic changes. Most companies also need to get much better at workforce planning. Most HR departments are really pretty bad at it, though partly due to the line organization being weak forecasters. However, HR should take the lead and show its value by making the line staff become proficient and also providing better and even more sophisticated tools. MSP providers with vendor management software, many RPO providers, and HRO providers all offer platforms and expertise around this forecasting issue from multiple engagements, and this is a hidden benefit of external support. Eliminating 100 unnecessary hires from budget more than offsets the markup on 500 others.
Lastly, I mentioned the “global demand” issue. Yes many companies are hiring, but are they growing or replacing resources with just more bodies? I am more concerned that we have a global supply issue. Certainly, there is skyrocketing hiring in Asia, but rapid turnover (more than 100 percent a year in some Indian companies) eviscerates productivity due to constant knowledge transfer issues. In addition, there may be issues with the labor pool for graduate hiring.
More universities have been founded in India and China in the last decade than in the previous five. This may be controversial, but I have heard many complaints that the quality of the graduates is far below the respected schools such as Pune, Gujurat or Madras. I have heard some of these new “universities” scoffed at as “diploma mills” and being little better than “vo-tech” schools. A plethora of poorly trained engineers is problematic.
Here in the Old World we are not much better. We are contending educationally with our own “new lost” generation. One 18-year-old recently told me that she was going to go college to take a few years to find herself. My harsh response was to remind her that there was a GPS on the iPhone that mommy and daddy gave her when she turned 14 so she knew exactly where she was in space. In the career-oriented generation that preceded this one, few parents would fund the education of a child who gave an answer like that; my parents would have called me a dunderhead and given me the Sunday paper help-wanted section.
Student graduates in most engineering and technical disciplines are down. The U.S. labor pool is shrinking. In China, the one child policy has left the country about to hit the 50-year-old tipping point, so by 2015 as many workers will be over 50 as under. In a decade, tumbleweeds may be blowing through all the new office parks they are building today. The same thing will happen in Singapore in 2020 to 2025. This will all come to pass, unless these countries become immigrant economies (something the U.S. should think more openly about returning to).
Meanwhile, in India in 2006 54 percent of the 1.1 billion people were under the age of 25. Watch India and China, who have long been wary rivals, eventually become labor trading partners. Signs of this are already emerging. The key question for the employer will be what is the quality available? If it is as weak as I fear, you will need several people to do what one engineer should be able to do, and the shortage will only grow.
Are you ready? Do you have a strategic plan and the workforce plan to compete and win? Is your plan to go to market with the same aggressiveness that your company plans for sales and the procurement of manufacturing materials and other resources? We are in a global labor economy, and it is changing rapidly, and not all signs are encouraging.
So stow your tray, put you seat back in an upright position, and get ready. Depending on the quality of your preparation, you will know soon enough whether you are taking off or landing.