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.”
Davison reports that 2011 was a strong year for Staff Management | SMX’s MSP practice, with growth in the new client arena plus significant geographic expansion for existing programs. She is forecasting continued increases in 2012.
With her wealth of knowledge and compelling market perception, Davison offers a few predictions for the coming months in 2012.
MSP programs will continue to expand beyond contingent labor to all manner of outsourced services. No stone will be left unturned, Davison says: from call center operations and IT help desks to food and lawn care services, as well as other segments previously untouched by MSP, including learning and development. Tackling these environments is becoming more acceptable since it is possible to drive more contract standardization and consistency.
“MSP programs will truly become the single source for all labor-related, contracted services in order to provide consolidated billing, compliance with policies, visibility, and cost savings,” she says. “MSP programs will also continue to provide a platform to ensure fair and equal treatment of contingent workers and staffing suppliers, and will become even more focused on protecting staffing clients’ employer brands regardless of a worker’s employment status.”
Increased interest in performance based pricing models. Traditional models operate under a structure of charging a percentage of spend, and it’s a widely accepted practice. But companies are starting to seek an evolution. The understanding of a baseline fee structure is accepted, but as MSP delivery becomes more sophisticated, payment models are following suit. Davison says businesses are taking note of the deliverables—price reductions, standardization of contracts, and consistency of applications and onboarding—and they want to be charged based on the performance outcomes. “We are driving toward that path,” she notes.
More sophisticated service level agreements (SLAs). Most companies that deploy an MSP receive reports on the basics: employee hours, the number of employees, the fill rate, amount of turnover, amount of overtime, retention, and compliance. Davison says 2012 is the time for a new push in value. Where will that come from? The client. “We partner with our clients to understand what metrics are priorities and how we can use those metrics to drive value and improve their business, progress to more sophisticated SLAs such as productivity, quality and safety performance,” she explains.
For example: safety. Safety is something that has been traditionally overlooked, but can be measured by analyzing a 30-day safety record of contingent labor compared to the same of a full-time employee. Another new metric is productivity—how much contingent labor employees are producing versus full-time staff. SOW productivity can be accumulated by looking at the number of contracts actually being completed on time or how long they are lagging behind.
“Today, the analytics that we are able to generate for our clients drive enterprise decisions on overall workforce planning strategy for their business,” she says.
SMBs market surge. “We believe that, regardless of size, all clients will benefit from a managed staffing program and an integrated technology platform that provides them with the data, analytics, and management needed to gain visibility and control of their contingent labor program. MSP providers have generally not invested in an effective solution to meet the needs of the smaller market, those with $10 million or less of primarily domestic spend. We expect to be partnered with more small to mid-sized clients 18 months from now,” says Davison.
Traditionally, this segment of the marketplace has been neglected, based on the traditional pricing models that have been deployed (i.e. the spend is too little to justify the fee). But a vendor management system (VMS) and MSP can really impact a small or midsized business (SMB) since the overarching program is the same. Davison says SMBs would still receive the consistency of application and professional advice on how to leverage spend. Where the engagement would differ would be in the types of technology—some of the applications wouldn’t be as robust as they are with large global companies with more than $100 million in spend. “The core components would stay in place, but the sophistication of what may be needed in terms of technology would differ,” she says. “I don’t think SMBs will need the full power.”
Initial feedback has been good, she says, signaling this area as one for growth. “I think it is still new to them, and they are trying to understand how they can utilize it to get full value from it. We are seeing interest, dialogue, and momentum. And I think that SMBs just appreciate the fact that they can have what large global companies have, regardless of their size. There is a real market for them.”
Global growth, especially in Latin America and India. While numerous cultural and regulatory differences affect adoption of an MSP country by country—including pricing models, how business is conducted, and the structure of the solution—Davison says commonalities lie in the strategic goals a program can offer: visibility, savings, brand protection, controls, consistent processes, risk mitigation, and mutuality. She spies Latin America as a huge area for growth. “Companies continue to look at the market for expansion of their own business,” says Davison. “And clients who are already there don’t have transparency or controls over their contingent labor usage. It’s definitely a different culture and way of doing business, and contingent labor can help with that.”
Davison also forecasts activity within India and Singapore—and, of course, wherever else her clients dictate a need. “Using a sound global program governance framework, it is possible to take a client’s corporate goals and agenda and bring them across different regions, lines of business or staffing segments, while still customizing the program to fit the region,” she says.