Why Your Contingent Staffing Management Office Should NOT Be Part of Procurement (original) (raw)

Contingent Staffing Program Management and the continued evolution of this talent supply chain is becoming a more strategic and integral part of the talent ecosystem. There are figures that estimate the percentage of talent that will be contingent (or flex, or temporary, or “gig” or whatever term you want to use) will equal 50% of the workforce by 2020.

Organizations are also beginning to look at their entire talent ecosystem more holistically. Over the past few years, more and more companies are looking at talent as a complete "People Supply Chain", and the term "Total Talent Management" is becoming more common in theory and practice.

Traditionally, the oversight of contingent workforce programs fall into two categories; outsource (via MSP) and internally managed programs (via internal Vendor Management Office). Focusing on the internally managed programs, they can be aligned under:

1. HR (CHRO function)

2. Operations (COO function)

3. Finance (CFO function)

4. Procurement (CPO function).

Which one is best and why does it matter? As for which one is best, I believe it depends on the structure and culture of the company. For a services organization, it may be best to align under the COO or CHRO. For a manufacturing or product company, they traditionally can (and do) align via any of the 4 functions. A lot of factors can be considered in terms of which alignment is best for an organization:

1. Does the company view contingent labor as a strategic or critical part of its talent ecosystem?

2. Is the company engaged in or practicing principals of TTM- Total Talent Management?

3. Is there an operational strategy in terms of the acquisition and management of contingent labor?

4. Is there an established process and rules of engagement for contingent labor?

5. Is there a maturity within the organization in terms of how and when contingent labor is engaged?

6. Is there a central function (in house or outsourced) that manages and controls contingent labor acquisition?

7. What are the company objectives as it relates to usage and procurement of contingent labor?

8. Are there established guidelines, metrics and processes for the procurement and management of contingent labor?

In addition, there are always political and structural aspects that can and should be taken into account. Answering some or all of the above will give an organization insight as to how it strategizes, values, manages and oversees the utilization of contingent labor.

Why does it matter? Why do I take the position that the acquisition and management of contingent labor should NOT be part of a procurement function? Let’s start by understanding the 4 common business objectives of the CPO function:

1. Cost Savings

2. Save Money

3. Reduce Spend

4. Support Operational Requirements

Put simply, the objectives of the central procurement are to save money (yes I know that the first three listed above are just the same thing said differently). While the above may seem like an unfair viewpoint, look at this functions goals and objectives in your company, at any externally written procurement plans you find online, at any operational plans that have been written with procurement input or even education plans (college, certificate programs) around the procurement function. You will invariably see that almost every single objective given has an underlying goal of reducing, avoiding or optimizing costs incurred. In other words, saving money is the number one, number two AND number three objective of this function.

That’s not to say that the objectives of the procurement function are wrong or misplaced. Any organization is in business to make money (unless it’s a true nonprofit) so it is in a company’s best interest to control and determine spending to insure they are getting the best return and value for the money being spent. What it is saying is that the primary objective (s) of a procurement function and the primary objectives of a contingent staffing program are not aligned.

I have seen and talked to professionals that manage contingent staffing programs, and some have only done procurement their entire careers. When you ask them how they got into the role they have, they say they started out doing category management in facilities, or IT and Telecom, or catering services and then moved into “Professional Services” or “Recruitment Services- Temporary/Flexible”. What this signifies to me is that the organization views contingent labor not as a strategic part of their overall workforce strategies and engagement, but as another procurement category like buying toilet paper or computer hardware. The problem with this, is that your temporary/flexible/contingent labor is not a laptop or roll of toilet paper. You cannot just create a purchasing category and order up 100 at a time. If that is the thinking, then you are doing a disservice to your company and the contingent labor (and suppliers) you engage with.

The second challenge with this scenario is that the individual who has now moved into the category of purchasing “Recruitment Services” comes from a purchasing background, not a talent acquisition or HR background. So if you cannot understand the operations of your staffing vendors, how can you set effective performance metrics that both support your organization and align in fairness to how your suppliers service you? Are you a low margin, high volume account or are you a low volume, high margin account (or are you trying to be low volume AND low margin, effectively killing any potential for a function that will meet organizational objectives)? Do you understand the investment suppliers do or would make to support your program? Do you understand the difference between acquiring contingent labor in commodity versus niche categories and how your expectations and pricing need to be adjusted within each? Do you know how to set effective pricing standards to support your program success? Do you use mark-up, bill rate, rate not-to-exceed, rate by position, tenure discounts, volume discounts, any, all, or none of the above? If you are going to rely on an MSP provider to give you all of this input and manage your program, and you are only managing the MSP provider, do you know the advice and inputs being given are the best, most effective and will drive results that your organization wants?

For contingent labor, the variables are many, the inputs and considerations are almost immeasurable. Skills sets, length of assignment, locations, years of experience, opportunity for conversion to employee, role and project are just some of the aspects that make the “purchasing” of contingent labor unlike any other category managed. The bottom line (worth repeating) is that labor, no matter if classified as employee, temp, contingent, freelance, consulting or any other category, is not like buying computer hardware, real estate or toilet paper. It cannot be approached in the same manner with the same objectives if you want your company to be able to compete in the war for talent.

Procurement, and the procurement function have a vital role in the success and financial health of any organization, but if you view your contingent talent as a line item on a spreadsheet subject to continued pressure to reduce costs on an ongoing basis, then I believe you will lose the battle and the war.