Managed Service Providers for Mid-Sized Companies: How companies spending less than $100 million a year on contingent labor can achieve greater efficiency, compliance and cost savings. 2013 Monument Consulting. All rights reserved.
Contingent Labor: A Growing Trend Over the last decade, contingent, or contract, labor has grown as a percentage of the overall workforce. A leading temporary placement service provider predicts the growth rate among contingent workers to be three to four times that of traditional workforces, and that the contingent labor force may one day represent nearly 25% of the global workforce 1. It s a trend driven by workers and employers being drawn to the greater flexibility contract labor allows. Attitudes, too, are changing. Being a contractor no longer carries a stigma. In fact, to many it s more in tune with today s modern, more agile, more balanced, more mobile workforce. In short, the world has become comfortable contracting, and many Fortune 500 companies have embraced contingent labor and successfully implemented a variable model across entire global networks. Large companies spending upwards of $100 million or more a year on contingent labor can afford to create their own HR/procurement infrastructure to support their contingent labor needs, investing time and resources into optimizing their hiring processes. Increasingly, small to mid-sized companies, those spending less than $100 million a year on contingent labor, are moving toward augmenting their HR departments by turning to MSPs to outsource key management functions. Managed Service Provider: a company hired to manage procurement, selection and engagement, and provide ongoing tracking and reporting on contingent (non-employee) labor and staffing vendors. In addition to day-to-day labor management, MSPs also consult businesses on reducing costs and issues such as supplier management, life cycle tracking, compliance, co-employment and other regulatory issues. While growing your contingent workforce has its benefits, managing the requisition, procurement, hiring and onboarding of contractors can shift these administrative activities to internal team members. This is especially true for small to mid-sized companies that often lack the resources and standardized processes required for an efficient, centralized contingent workforce program. These circumstances lead to an overall lack of visibility and fragmented hiring processes. It s common for companies not to know exactly how many contractors they have working for them at a given time, let alone how much they re spending each month. Without being able to predict and share this data, decision-making, strategic development and planning for the business becomes difficult. Mid-sized companies also face challenges related to compliance. Onboarding processes are rarely standardized especially if there are multiple hiring managers or vendors submitting candidates. Companies sometimes inadvertently become exposed to liabilities and penalties that add to the expense of engaging contract resources. 1 Erickson, Tammy. The Rise of the New Contract Worker. Harvard Business Review. Web edition. September 2012. 1
MSP s Offer a Solution MSPs provide HR departments and hiring managers a single point of contact for managing vendors and contractors. By bringing together all of these functions, companies can streamline their hiring processes and often achieve significant cost savings. Selecting an MSP If you re like most mid-sized companies who hire MSPs, you may not know the full extent of the services they provide. But don t worry initial conversations with a prospective MSP should be about your goals, not their capabilities. As you explore your options, you ll find a range of sizes, approaches to services and tools offered. The important thing is to find the provider who feels like the right fit for your company. What to look for Working with an MSP can be a transformative process for your company, but it doesn t have to be disruptive. Look for an MSP that can be a true partner, one you d trust to consult on critical business issues. One that complements your corporate culture, shares your sense of urgency and whose approach to change management mirrors your own. In addition to compatibility, you should look for vendor neutrality in your MSP. Some MSPs have their own VMS or offer staffing services. Our belief is that companies get the best results when they work with an MSP that doesn t have a bias toward or business interest in a particular VMS tool or staffing vendor. 2
Who s involved It s important to have early input from key stakeholders at your company. They may come from multiple departments and levels within your organization. A good place to start is by identifying the business units that currently have a hand in the contingent labor process. For most companies this includes: Human Resources Procurement Legal (if you will be migrating contracts) Facilities and Access Control (if equipment, badging and security are concerns) Finance/Accounts Payable (their role is most critical at implementation) CFO (if cost savings is the primary focus of the initiative) Heavy users of contingent labor Costs (The Good News) MSPs are paid by your staffing vendors. There are no up-front or ongoing direct costs to you. To make sure a prospective MSP is putting your needs first, try bringing up these topics: Culture Get to know them. Ask them to discuss and cite examples of their client service in action. Does their approach reflect your own? Responsiveness What is their feedback cycle? How do they communicate with you and your vendors? Vendor Neutrality Are they affiliated with or owned by a staffing firm? Do they offer their own staffing services? Do they have a good reputation with staffing partners? Tool (VMS) Agnostic Do they have a proprietary system? If so, are they willing to look at other VMS options? HR Focus Make sure your MSP has roots in the HR industry. At its core, this is about talent, not a commodity. Results This is a data-driven business, so ask to see some numbers, specific success stories, case studies, even references. Companies are often (pleasantly) surprised to learn this. It s not too good to be true. Staffing vendors absorb these costs because the efficiencies of MSPs create significant value for vendors such as standardizing requisitions to accelerating payment schedules to helping them grow and expand their relationships. The right MSP will be embraced by the vendor community. 3
Benefits (The Better News) Partnering with the right MSP can be truly transformative for your contingent labor workforce. Let s look at the areas where MSPs can have the most impact: 1. Centralization Fragmented contingent labor hiring isn t just a headache it s inefficient and can even result in errors that expose a company to compliance-related liabilities. Centralizing these functions creates consistency, and standardizes recruitment and hiring processes, reducing the amount of time your team has to spend on each engagement. By outsourcing the contingent labor process to a single partner, hiring managers are free to focus on the business at hand and more strategic goals. An MSP also makes your company s contingent labor data easily accessible to multiple departments or locations. Greater access to this data can benefit decision making across your entire organization. 2. Efficiency An MSP brings experience and tools to streamline your contracting process. By implementing the right Vendor Management System, many previously manual tasks can be automated, reducing redundancies and errors. A more efficient hiring process means faster onboarding and offboarding. Positions are filled faster and compliantly. You ll also see greater efficiency in your dealings with staffing vendors. With a standardized evaluation process in place, you can manage your vendor pool to focus on the high-performers. Your MSP will help you screen out unqualified candidates, saving your hiring managers time. And single vendor invoicing means you ll have the opportunity to consolidate to one invoice for all your staffing vendors instead of dozens. Hiring Efficiency Data An MSP can help you monitor how long it takes a manager to hire someone after they ve been supplied with candidates. You ll get detailed data on each manager s TTP (Time To Present) and TTF (Time To Fill) so you can identify bottlenecks and improve efficiency within your organization. 3. Profitability When every dollar counts and everything is on the table, MSPs can help your company discover cost savings in new ways. MSPs have a unique vantage point working with many vendors across their client base. This increased visibility allows for better information to help negotiate and optimize bill rates. Promoting appropriate levels of vendor competition, MSPs combine saving strategies that include do not exceed hourly rates, tenure and volume discounts, single-sourcing blocks of positions, and more. Greater visibility also gives companies more control over contractor engagement, labor budgets and other project milestones. This information can be used either to justify overtime pay or to plan for an increase in the workforce to meet a greater workload. 4
4. Visibility Visibility is often something many companies don t realize they lack. However, once they begin receiving real-time reporting and key metrics from their MSP, the importance of visibility becomes clear across the entire organization. Because an MSP has line of sight on every aspect of the hiring process both internal and external detailed information and insights are provided, often daily. An MSP will provide a dashboard and other analytic tools that companies can use to monitor contractor performance, yearly budgets and spending. By implementing a VMS, companies can access this data any time from anywhere. 5. Quality of Hires MSPs take a comprehensive approach to helping hiring managers find the right candidate for the right job. It starts with refining the vendor pool to those with a track record of performance. An MSP will implement metrics to assess, compare and evaluate vendor productivity in this regard. By standardizing and improving job descriptions and requisitions, vendors are better able to find candidates that meet your specific requirements more precisely. Examples of key metrics MSPs provide to help businesses make performance-based decisions: Vendor score cards ongoing evaluations of each vendor to determine the top performers Seasonal usage monitoring trends in order to become more effective at projecting and meeting seasonal hiring needs Overtime providing reports and alerts to help minimize spending or identify if more contractors are needed Enhanced and consistent screening of candidates including background, security and other compliance-related checks results in higher-quality contractor engagements. Once on the job, contractor performance is reviewed and reported to optimize talent quality and productivity. Finally, MSPs provide improved invoicing and payroll processes, keeping workers satisfied and reducing turnover. 6. Compliance Most MSPs will tell you, when it comes to compliance, something is always missing. This isn t because companies are negligent, it s just that compliance spans so many areas, and regulations change frequently. Greater compliance not only helps companies avoid costs associated with fines and fees, it helps protect them from certain liabilities. 2 MSPs have both the experience and industry knowledge to help companies navigate the contingent labor laws and regulations. This expertise emphasizes the need for each contractor s taxes to be managed appropriately and that the proper withholdings are being made by the payor. An MSP can also avoid or resolve co-employment issues by clearly defining and differentiating contractor and full-time employee roles. Onboarding is the primary area where MSPs can establish or improve compliance standards. In addition to standardizing the protocols for background and credit checks, drug screenings, confidentiality agreements and credentials verification, an MSP can make sure a contractor goes through the same philosophical screening as the full-time employees to ensure they re a good fit for your company s corporate culture. Compliance Today: A moving target. Why is compliance such a challenge for mid-sized companies? Imagine dozens of staffing vendors, each supplying dozens of contractors, across dozens of locations. That makes for a lot of paperwork. Without a standardized process, there are pretty good odds that eventually someone somewhere is going to forget a form. And that s all it takes to get fined or worse. Furthermore, keeping up with constantly changing employment regulations is practically a full-time job of its own. MSPs help keep HR managers up to date and make any changes before there s an issue. 2 United States Department of Labor website. 5
Making the First Step How To Build A Contingent Labor Solution 1 Engage a Managed Service Provider It s not just capabilities that make a successful partnership. Look for an MSP that understands your company s contingent labor goals and complements your corporate culture and size. 2 Select a Vendor Management System Working with your MSP, review your options and choose the system that suits your company s specific requirements. A system-agnostic MSP will help with the evaluation and make sure you get the solution that s the right fit for your company. Technology is a tremendous enabler for managing the contingent labor workforce, but the VMS shouldn t be the primary solution and shouldn t be a substitute for personal service. Brad Cummings, Monument Consulting 3 Evaluate Your Staffing Partners Your MSP will provide you with performance data on all of your vendors based on criteria you set. Identify the top performers and narrow down your list to the vendors who deliver the best results. Tip: Some consultants or organizations may try to wrap all three steps into a single RFP. We highly recommend choosing an MSP first so you can leverage their expertise and resources to guide the following steps. 6
Contingent Labor QUIZ How much of what has been covered in this paper applies to your company? Ask yourself the following questions: 1. Do you know how much you re spending on contingent labor? 2. Is it easy for you to obtain and share information about your contingent labor force across your company? 3. Are you confident that your company is protected from workforce compliance issues? 4. Do your hiring managers have a well-documented process for how to request and obtain contractors? 5. Are you using performance metrics to identify your top- and bottom-tier vendors? 6. Are you getting the best possible rates from your vendors? 7. Are you using standardized rate cards and job descriptions? 8. Are you using a Vendor Management System to automate processes? 9. Are you using consistent, best practices for onboarding contractors? If you answered no to most of these questions, your company is a good fit for an MSP. http://www.dol.gov/_sec/media/reports/ dunlop/section5.htm 10. Do you have a standardized process for background checks? 11. Are you evaluating contractor performance during their engagements? About Monument Consulting We are a Managed Service Provider specializing in helping mid-sized companies achieve greater visibility and efficiency in their contingent labor hiring processes. We are service-driven, highly collaborative and maintain complete vendor neutrality in order to create customized Contingent Labor Solutions scaled to meet your company s needs. Learn more about our company, and what your company can gain by making us Your Contingent Labor Department. After hiring Monument Consulting, our clients ask themselves the same question: Why didn t we do this sooner? Matt Aprahamian, Monument Consulting Contact Matt Aprahamian (804.622.9992) to get started. 7