It is possible for SMBs to leverage managed service programs. Here’s how.
By George Lanzano
Efficient utilization and management of a contingent workforce remains an area of focus for human resources leadership across all organizations. Due to ongoing issues with worker misclassification, the emerging impact of the Affordable Care Act, globalization, and cost savings pressures, this segment of the workforce is also being evaluated by procurement, legal, finance, and C-level stakeholders. In a 2013 survey of more than 200 business leaders administered by Ardent Partners, the primary areas of concern related to contingent labor usage were:
- The need for cost reduction within this category: 55 percent of respondents
- The need for better visibility into contingent labor: 45 percent of respondents
- The workforce becoming more blended: 35 percent of respondents
- Concerns about compliance (federal, state, regulatory, etc.): 33 percent of respondents
Technology-enabled managed services programs (MSP) have continued to evolve, providing visibility, compliance, and cost controls for high-volume users of contingent labor. Organizations that implement a global workforce management solution often partner with MSP providers to establish consistent performance standards and program governance while also remaining compliant with country- level legislative and regulatory requirements. Spend management for these programs—sometimes in excess of hundreds of millions of dollars annually—is a natural target market for many MSP providers. As a result, MSP provider solutions have historically catered to large users of contingent labor, providing a full suite of services: supplier management, requisition review and distribution, candidate down-selection, reporting, analytics, benchmarking, compliance reviews, and multiple workforce management value-adds.
Small and mid-sized businesses (SMB) with spend in the $10-million range that leverage contingent labor face the same cost, compliance, and talent acquisition challenges as larger organizations, but have traditionally not had the same range of MSP solutions available to them. Another challenge facing SMBs is the lack of an internal resource dedicated to overseeing contingent workforce utilization.
So how can an MSP ‘fix’ these issues and bring value to lower-volume users while controlling costs and creating tangible value?
Define a pay structure. A funding model for SMBs and an MSP provider needs to be compatible for the client and their supplier network, while at the same time ensuring a revenue stream that sustains the solution. Overcoming this challenge requires a significant amount of discovery, which includes data gathering from HR, procurement, business leaders, legal, and end-users. The goal of this discovery is to gain a thorough understanding of the current state, reveal the primary areas of concern, and develop the corresponding objectives for the solution.
Establish a service model. An MSP provider can align its program model to address the targeted objectives of a SMB. A smaller business may wish to “unbundle” the full-service MSP model by selecting the specific services most important to their goals. This often reduces the fee structure. For instance, if a small to mid-sized organization maintains ownership of the candidate evaluation process, the MSP can focus on supplier evaluation as opposed to requisition management. This allows the MSP service team to be leaner while still achieving client objectives and controlling costs. The solution becomes a function of setting expectations and directly correlating the level of MSP support to the client’s primary pain points, operational preferences, and short-term objectives.
Apply MSP resources to address a client’s most immediate concerns. The process of sourcing a supplier network and capturing out-of-program contingent labor spend is often a pressing issue for buyers. An effectively applied solution for a SMB buyer can be to leverage an MSP to conduct a supplier gap analysis, launch a sourcing event, evaluate responses, and assist in the development of the supplier tiers and requisition distribution strategy. Once completed, the MSP provider assumes a more limited role in on-going program management, and the fee structure mirrors this diminishing level of the MSP’s engagement.
A SMB buyer also might choose to engage an MSP provider exclusively to support the program implementation process. In which case, the provider would manage program implementation, configure the VMS technology, and bring the process to a steady-state before transitioning program management to the company’s internal program manager.
With an effectively scaled MSP solution, the range of possible program configuration options is both limitless and attainable by contingent labor users of all sizes.
The ability of the MSP provider to act consultatively, to understand the critical objectives of its client, and to provide a corresponding solution directly correlates with the ability of SMBs to realize a viable value proposition from their program.
George Lanzano is executive director of business solutions of global MSP programs for Staff Management | SMX.