HR meets procurement meets the future.
By Ben Walker
Managed service programs (MSPs) matured in scope and importance during the past several years, as cost savings and risk mitigation became critical business drivers for many large corporations. The rapid expansion of program scope into additional outside services categories, such as independent contractors, project-based engagements, and other professional services (e.g., recurring audit, legal, and marketing services), created a considerable spike in spend managed by MSPs. According to recent Staffing Industry Analysts reports, client spending through MSPs for these outside services categories more than doubled in just two years—from $4.1 billion in 2008 to $10.6 billion in 2010. As a result, client organizations are relying increasingly on MSPs for continuously evolving solutions to manage an ever expanding list of categories.
Innovative companies have begun to incorporate high volumes of direct employee placements through MSP, in addition to external labor and services. It’s not hard to imagine that eventually all things human capital, including full recruitment process outsourcing (RPO) solutions, will be managed within one program. This “one-stop-shop” for human capital management is a solution that was predicted years ago, but few have successfully implemented it. The primary reason for the lag between vision and reality is that very few organizations have been able to achieve the requisite level of insight, which would include:
- Gaining a holistic and “normalized” view of their total workforce—including all internal resources across all divisions and business units, as well as all external resources and services, including work bundled into projects and recurring professional services;
- Identifying the optimal mix between internal and external resources; and
- Establishing an operating environment, systems, and metrics that enable the two components to work in synchronicity.
Forward-thinking MSP providers are beginning to establish themselves as the conduit to make this happen. By leveraging their experience with both internal and external workforce solutions, they are bridging the gap between human resources and procurement and bringing the two functions together for a collaborative initiative that requires both perspectives—total workforce synchronization.
Key Components, Key Questions
A synchronized workforce includes several key components: visibility, collaboration, standardization, and governance across all divisions, functions, and geographies. An organization with a synchronized workforce has the necessary policies, processes, technologies, and metrics in place to ensure that all elements of the internal and external workforce are segmented as needed to reflect varying work scope and operating environments, yet remain visible as a whole.
MSP providers can take the first step by asking some fundamental questions about their clients’ total workforce to assess the current environment at a macro level. Among these questions:
1. Is your workforce flexible enough to quickly adapt to market changes and seasonal needs without incurring significant costs?
2. Do you have a clear picture of which functions and positions are core to your business, and which ones are non-core?
3. Do you know how much you spend hiring, training, and developing non-core resources, and the cost of turnover for these non-core resources?
4. Are you managing your external workforce and outside service providers holistically across the organization?
5. Are you effectively communicating across business lines and geographies to ensure you leverage shared experiences, needs, and solutions pertaining to your workforce?
The answers to these questions impact the specific activities, tools, and changes needed to achieve workforce synchronization, but generally the following initiatives are a great place to start:
Workforce Analysis Activities & Tools
1. Internal Workforce Inventory. This task involves collecting information from the client’s human resources information system(s) and slicing and dicing the data to gain insight about the composition and size of the existing internal workforce. Ideally, the data set will include start and end dates for records of inactive employees over the past 24 to 36 months to allow for mining of tenure and turnover data by function and job title (high turnover, non-core functions and positions are typically well suited for external workforce solutions). Note that names, salary, and other sensitive personal information are not needed and should be excluded from the data set. Workforce inventory analysis is an important first step to establish a baseline, and to begin the next step.
2. Core vs. Non-Core Workforce Analysis. Using the data set from the workforce inventory described above, this evaluation allows a company to objectively and consistently assess the extent to which functions and specific job titles are core to their business. Rather than using a single definition of core and non-core that’s subject to differences in interpretation, it’s best to consider multiple specific variables for the analysis. For example, Volt Consulting Group’s workforce design practice uses a five-variable evaluation formula (i.e., “access to critical intellectual property” is one variable) and applies ranges (high, medium, low) for each variable, rather than simply a yes or no value. The tool then quantifies and aggregates the values for all variables and automatically determines whether a position is core or non-core. After this determination is made, the company can focus on the ideal workforce solutions for non-core resources, such as: retaining them internally and maintaining the existing structure, centralizing one or more functions into a shared service model, and outsourcing positions or entire functions via the most appropriate outside service category.
3. Outside Service Spend Analysis. The purpose of this activity is to analyze the ways that outside services are currently bundled, sourced, and delivered throughout the organization, and to identify opportunities to reduce costs and risks by re-categorizing work (particularly in the case of how and when independent contractors are used) while increasing flexibility. Re-categorization could entail transitioning statement of work (SOW) engagements into contingent labor arrangements when it’s more appropriate for the nature of the work. It could also entail bundling high-volume demand for homogenous contingent labor positions (i.e., call center positions) into a packaged business process outsourcing (BPO) solution to leverage spend, streamline MSP transaction processing (buy a packaged solution once, rather than individual workers many times), and build formal service level agreements (SLAs) into contract terms.
4. Job Title & Description. Standardization and normalization. Lack of job title and job description standardization is a challenge many large companies face. Rather than simply addressing the symptoms of the problem (i.e., “fixing” discrepancies with existing positions one at a time), it’s important to:
- Identify the root causes of variation between job titles and descriptions for similar, if not identical, roles across the organization—if you don’t understand why it’s happening, it’s virtually impossible to implement changes that stick;
- Implement system, policy, and data management improvements and controls; and
- Communicate the case for change to a wide range of constituencies throughout the organization.
Beware, it can be difficult to overcome the “we’re different” rationale unless you’re prepared with compelling information that highlights the commonalities of functions and, more, summarizes the specific benefits of standardization relevant to each stakeholder. For example, standardization not only decreases recruiting/sourcing cycle times, it also allows for resource sharing across different areas of the business to minimize supply and demand gaps, and reduces the need to recruit/source new resources.
5. Shared Services Usage & Readiness. This analysis identifies opportunities to expand existing use of shared services solutions and to identify additional transaction-oriented non-core functions that are well suited for new regional or global shared service solutions. Variables to consider for this analysis include: transaction volumes, transaction complexity, process and policy standardization, and existing headcount to prioritize which non-core functions are best suited for a shared service model.
These are just some of the initial activities MSP providers should undertake in collaboration with their clients to avoid simply “lifting and shifting” positions and services into an MSP wholesale. Workforce synchronization requires taking a close look at the total workforce, and implementing fundamental changes to the way work gets bundled, sourced, and delivered throughout the organization.
This analysis results in greater success for MSP solutions as they expand from their more traditional, homogeneous contingent labor scope to a far more complex combination of internal and external workforce categories and services.
Leading MSP providers are equipped to leverage their experience with internal and external workforce solutions. They can ensure an MSP’s processes, policies, supplier management strategies, and sourcing/recruiting tactics are flexible enough to accommodate the unique requirements of each, while providing a single point of entry when it comes to human capital management.
Implementing an MSP that incorporates both internal and external labor categories and achieving workforce synchronization requires patience, diligence, and sometimes investment, but the benefits to an organization’s agility and competitiveness are well worth it.
Ben Walker is vice president at Volt Information Sciences, inc.
