Industry research predicts 25 percent of the average company's workforce will be considered contingent (independent professionals, temporary contract workers, independent contractors or consultants) by the end of 2012. The trend of increasing numbers of contingent workers is being driven by macro business environment factors including:
The continued uncertain economic environment that requires organisations to maintain tight controls on full time equivalent (FTE) costs and to use flexible workforce options.
The challenges and costs of engaging and disengaging permanent staff making contingent worker scenarios more attractive in some conditions.
The ever increasing quantity and cadence of business transformation requiring contracted resources to supplement FTE.
Changes in employment style preferences at the professional level in information technology, change management and human resources. The financial benefits of independent contracting see this becoming a popular alternative to full time employment, forcing organisations to adapt.
This is requiring organisations to take a hard look at how well they are managing their contingent labour.
For many organisations, the growth of their contracted workforce almost takes them by surprise. Typically this is due to their costing and managerial focus being largely on controlling their full time workforce. Contractors are commonly engaged “under the radar” at divisional level and as a result, onboarding and management processes can be inconsistent.
Responsibility and accountability for onboarding processes, management and outcomes can sit in the grey area between the HR and specific divisional functions. This can almost be a state of preference, as contractors can be an expedient solution for a number of internal issues and accountability is avoided. Management of the contractors generally falls to line managers who are already struggling to meet the managerial requirements of their own FTE teams.
Rightfully there is an expectation for a contracted resource to be able to work independently with a short lead time to full productivity. However, as they are not full time employees there is a temptation to overlook standard, appropriate, HR and management practice. This can expose the organisation to risk and performance issues during the engagement.
Not surprisingly clients that increase the scale of their contract workforce to meet increasing capital activity typically experience challenges maintaining performance for a variety of reasons:
1. Quality, consistency and culture
Inconsistent quality in talent being sourced from multiple recruitment partners and resource agencies.
A lack of cultural alignment between contractor workforce and permanent staff.
Pricing model variance between different resourcing partners.
Providers focused on “body shopping” and not on improving internal capability.
2. Non-core business activities
Significant business as usual (BAU) time spent on the end-to-end recruitment process
Significant BAU time spent on managing contractor performance and commercial issues
Opportunity cost for the distracted management team to advance the business
Lack of visibility of total contractor and talent pool
3. Organisational capability
Difficult to retain knowledge and IP within the business
Lack of ownership for delivery or quality within the contractor pool
Variable quality of thought leadership
Limited development of contractor pool
Some organisations take a reactionary approach to these issues by the wholesale cutting back of their contingent workforce headcount. But this short term approach ignores the fundamental drivers that created the need for them in the first place, while failing to address the internal governance issues that contributed to rising costs and poor outcomes.
In an age where the ‘contingent workforce umbrella’ is prevalent within high performance firms, it is critical for companies to implement effective strategies and processes that provide visibility into spend and utilisation of their entire non-employee workforce.
Strategies that enhance the contingent workforce program
There some basic strategies that will allow organisations to better realise the benefits of having a contingent component in their workforce and optimise business performance;
1. Have a more strategic approach to workforce planning
Take a holistic view of the balance of your total organisational workforce and consider the short and medium term market environment.
Understand your forward schedule of transformational projects and change, the roles where IP retention is critical and which components of a programme are best insourced or outsourced. Also consider the level of internal maturity, capability development objectives and critical timeframes for programme delivery.
2. Develop resourcing partnerships instead of supplier relationships
Panels of ‘suppliers’ and commoditised resourcing models are not serving high performing organisations in the current business environment. This is evidenced by significant numbers of unfilled vacancies being back filled by contractors and high turnover of the contracted staff in organisations that are yet to have a more strategic approach.
Smart companies are building partnerships with a smaller number of resource providers, leveraging the increased opportunity to their mutual benefit.
In return a business should expect the partners to deliver an increased investment in growing a thorough understanding of their culture and skills requirements, along with specific resourcing strategies that ensure timely delivery of ideal talent.
3. Ensure the organisational alignment of contracted resources
Commonly the duration of a contracted engagement can be six to 12 months. Therefore consideration to the cultural fit and team alignment requirements is crucial to avoid disruption and discontent within the area of deployment. Create job specifications or requests that, along side skills, take into account the cultural alignment requirements of the contracted resource to the role.
Examples of basic alignment considerations are;
Is the working environment an open team or work alone one?
Is there a high degree of autonomy in the role or are processes strictly controlled?
What communication skills are required – do you need presentation skills and is there a high level of written content?
Do you want an individual who will challenge your processes or do you prefer a complimentary approach?
Do you want to grow your IP and capability through this engagement?
4. Work with providers that specialise
Seek resourcing partners that have real industry experience and are specialists in the field they support. This will ensure an accurate alignment to your technical skill requirements, will save time on recruitment processes and costly rework. Experienced practitioners can also provide your management and the contracted resource with appropriate technical and delivery support for the duration of the project.
5. Set up structured review processes that focus on outcomes
An outcome focussed project specification with agreed milestones will ensure that the deliverables are kept on track, within budget and issues are addressed in a timely manner. Structured and regular progress reviews can be managed internally or in conjunction with your resource partners.
6. Select a workforce resourcing and management solution that matches the size and scope of your contingent workforce
As the contingent workforce grows, typically organisations will ‘soldier on’ doing what they always have done without recognising the rising cost of non core business activity and risk exposure.
As numbers increase, supporting technologies that automate processes and provide high visibility become viable. Where there are significant numbers, technologies can be combined with fully or semi outsourced management of the end to end processes. This ensures consistency across the programme, assists in risk mitigation and shares the total cost of ownership.
In the current trading environment, the case for having a balance of permanent and contingent resources within the organisation continues to make sense. This allows companies to speed up the delivery of transformation programmes as well as leveraging experience and capability that can assist internal development.
At the same time the organisation remains nimble in conditions of uncertainty and in a better position to take advantage of opportunities, or to react to unexpected changes.
A strategic approach to contingent workforce planning and resourcing, supported by clearly defined accountabilities for process and outcomes, will ensure efficient contingent workforce engagement and cost effective delivery.
Steve Martin is strategic solutions manager of NZ consultancy Tomorrow. He has worked on a variety of executive roles across industries including recruitment, manufacturing and engineering.
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