Own the Workforce

As organizations change, talent acquisition practices must evolve with them.

By Debbie Bolla

When the nature of your business can cause unpredictable volume levels on a day-to-day basis, headaches are bound to happen for HR. For Todd Vallely, group vice president of global distribution and fulfillment for Abercrombie & Fitch, managing volume-sensitive functions common in retail like online merchandise orders, redlines and direct-to-consumer sorting and packaging was challenging to say the least.  Working with labor management firm SIMOS Insourcing Solutions instead of multiple staffing agencies, provided Abercrombie & Fitch what they needed—and a whole lot more.

Take, for example, Abercrombie & Fitch’s online business. Prior to working with SIMOS, merchandise would come from vendors unbagged and Vallely’s crew would need to polybag it before it could be placed back as stock. Because it was difficult to predict the ebb and flow of merchandise volume, this was not handled by a fully staffed department. But when volumes were high, Vallely was essentially robbing Peter to pay Paul—pulling in employees from other departments to get the work done and causing a lag in those areas. Needless to say, handling the process internally was a challenge. Now, SIMOS fully owns that function within Abercrombie’s operation. This means that SIMOS provides—and is accountable for—the relevant labor and its productivity. Passing along workforce ownership to a third-party provider has resulted in a more consistent process, reduced costs, and increased productivity across the organization.

“SIMOS is able to provide value-added services in areas of our business that are not easy for us to plan around,” explains Vallely.

The partnership allows the retailer to manage their growth and focus on the big picture. “Abercrombie can grow as a company but hit their direct-to-consumer expectations,” says Harold Baro, executive vice president of engineering for SIMOS.

This cost-per-unit approach—common in light manufacturing, distribution, retail, and ecommerce—provides organizations with fixed costs per unit and allows for budget certainty. Baro and his team partner with clients to study and analyze their workflow, understand each step in the process, and document the scope of work; this helps establish a baseline of cost and productivity. Then later, process improvements are introduced to reduce both metrics. This approach results in cost savings of between 8 and 15 percent and a 10 to 20 percent increase in output.

Retailer Williams-Sonoma has experienced cost savings through their partnership with SIMOS, which handles their unloading and packing processes. Brad Cowen, vice president of distribution for Williams-Sonoma, says the detailed work on the front end leads to no surprises. “They are a mathematical and engineering company and there is lots of science behind their approach,” says Cowen. “They use math and science to validate the process, so what they quote is what they charge.”

In addition to hard savings, the decision to go with SIMOS also shifted an important piece of workforce responsibility from HR to the hands of third-party expertise. “We allow organizations to focus on their core competencies so they don’t have to worry about things like how many heads are in on a particular day because that is now on SIMOS,” explains Baro.

So how is this different than working with a staffing agency to source contingent workers? SIMOS essentially “owns” the associates they provide: They are recruited by SIMOS and work for the company. A staffing agency can also provide a cost per unit, but aren’t held responsible for the labor’s productivity.

For example, if a company is having trouble with an underperforming worker provided by an agency, HR or procurement is responsible for asking for a replacement and is still billed for those worker’s hours, regardless of their productivity—or lack thereof. Through SIMOS’ approach, it is their responsibility to handle workforce issues.

“We have more skin in the game,” says Baro. “Our KPIs are lined up with the organization’s KPIs. We measure our quality as well. In the cost-per-unit world, some organizations get concerned that quality may be impacted due to output and how many units need to get out.”

One way SIMOS helps monitor quality is by keeping employees accountable through an incentive program that is tied to productivity, quality, attendance, and safety. Offering employees the opportunity to earn gift cards, pizza parties, and monetary bonuses helps with retention and overall turnover as well.

All of this drives a more partnership-based approach. “I consider the SIMOS onsite general manager one of team members even though he is a SIMOS employee,” says Cowen from Williams-Sonoma. “He is very loyal and dedicated, and there is a high level of trust.”

Vallely from Abercrombie agrees. “For it to work, we need to see them in the same way as our management team,” he says. “They are fully integrated in the processes, and we value their opinions. The way we handle the relationship is different than how some others view a third party and keep them at arm’s length. We don’t believe that is the most effective way to be successful.”

For example, SIMOS joins Abercrombie team members in annual business reviews and planning meetings to evaluate work performance and processes. “We are pushing them for more continuous improvements, and we challenge them to find us better ways to do the work, resulting in overall savings for the business,” says Vallely.

And that’s the way Baro likes it. “We are often treated like we are one of the team and this is where the success really happens,” he says. “We can really drive the performance and output by applying best methods. When organizations look to us for help and answers, that’s when it really flows consistently.”

One result of this partnership approach is that SIMOS now completely manages one of Abercrombie’s distribution centers. SIMOS provides all of hiring needs to staff and support the center, which can fluctuate greatly during peak season. Vallely also finds that SIMOS leverages its own recruiting methods to help the distribution center find talent in an effective way that allows them to get up to speed and productivity faster. Vallely says this is invaluable, especially during peak season. “We are already trying to hire a large number of people to support the parts of the business we own ourselves,” he says.

And this is where the rubber meets the road. “We allow HR the ability to think long term and strategically instead of being in the roots and weeds. We can deal with all the nuances and daily headaches,” says Baro. “By allowing us to help, we can put out those fires and HR can manage big picture.”

 

SIDEBAR: RPO 4.0?

By Elliot Clark

Evolution is inevitable and sometimes gradual.  But other times, evolution is rapid and painful. I think that if the average Neanderthal understood the concept of evolution, they would be unenthusiastic. They would probably say something like “I’m feeling a little left behind.”

Workforce management practices and workforce composition are moving through different stages of execution and evolution at an astounding rate. So, the question is not “What is coming next?” but, rather, “What is already happening that HR needs to know about?” 

That brings us to this month’s cover story on Williams-Sonoma and Abercrombie & Fitch. The two retailers worker with provider SIMOS, which delivers a packaged workforce and is compensated based on task completion or transaction volume. The model of outsourcing specific internal functions is nothing new. It’s actually quite common in the pharmaceutical industry where contract sales forces, provided by firms such as Quintiles or Ventiv, are quite commonplace. In the IT industry, this approach is also not unusual. 

What is interesting about these client stories is that SIMOS is a sister company to PeopleScout, which is one of the top RPO firms in the world and a fellow division of TrueBlue, one of the largest staffing and professional employment services firms in the U.S.   

The reality is that SIMOS was acquired a few years back by TrueBlue and is now jointly operated by the same leadership team as PeopleScout, headed by Patrick Beharelle, chief operating officer of TrueBlue. We have seen RPO firms evolve over the last two decades from transaction projects to ongoing contracts to the current model of strategic partner and advisor on both permanent and —increasingly—contingent workforces through a total workforce solution that combines RPO and MSP.

If strategic partnership is RPO 3.0, then what is RPO 4.0? Perhaps it’s a model in which the providers recruit and then operate the workforce. That is one potential evolutionary branch of the tree and one that is already happening at SIMOS. 

How does this change the responsibility of HR? Does the fact that this may be an operational decision from the head of manufacturing  mean HR is not involved? What happens if an employee of a contract provider shows up wearing a t-shirt with an offensive message?  What is the role of HR as it applies to other workforces in company-owned buildings?

These are complex questions, and HR will need to face them soon because they are fast approaching. Although there are restrictions with respect to “co-employment,” the model of the workforce is changing. And if one provider—in this case PeopleScout’s parent TrueBlue—sees the crossover coming from RPO and contingent labor services to business process outsourcing (BPO), others will offer this as well.

In a sense, it makes sense. If a company can hire the workers and the leadership, why not just retain that entire team and offer it as a packaged service? So whether it is called RPO 4.0 or if it just merges with other BPO services, none of this changes the questions raised above about the role of HR. The service offerings may be evolving, but the role of HR in helping oversee and manage them will need to evolve as well. After all, the only gig a Neanderthal can get nowadays is a GEICO commercial, so there is not much left for HR executives who don’t keep up.