Realizing Savings in Your Contingent Workforce Program — People Are Not Widgets

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Spend Matters welcomes this guest post from Kanita Brown, managing partner at KH Brown Solutions.

One of the challenges for the contingent workforce management professional in demonstrating value from your program is having your cost savings recognized by your organization. As procurement, you know that it can’t be all about warm and fuzzy things like risk mitigation and compliance — ultimately you are measured by how much money you save.

Procurement and finance typically have a hard time accepting much beyond old price minus new price equals savings. This is a completely logical formula for commoditized products, but with contingent labor, very rarely are you engaging two resources with the same levels of experience and expertise, therefore “old price” is not applicable. It also is not advisable to adjust the rate of a resource in the middle of an assignment without introducing the costly risk of attrition. Given this reality, you have to be more creative in our approach to reporting the tangible benefits of a contingent workforce program.

There are many different ways that your program generates hard dollar savings to the organization via the competitive bidding process, benchmarking and process efficiencies. One of the most important things you can do prior to program go-live is identify which methodologies will be accepted. Everything from improving the submittal-to-hire ratio to hiring resources below the market rate to standardizing invoicing should be on the table as valid savings contributions.   

Below are a few tips that may bring you more success in developing contingent workforce savings that will be recognized by your organization:

1. Align with the decision makers before launch. Explain the process today and what you expect it to be through the program. Highlight all the ways it will enhance how the organization improves the acquisition and management of contingent labor. Identify where the process will be streamlined and most importantly where competition will be introduced to lower overall cost. Some questions to be considered in your discussion:

  • Is the market rate/bill rate card acceptable as the baseline cost?
  • Will they agree to take average savings based on the number of bids submitted for each position?  
  • Most contingent workforce programs are in a constant state of bidding so new savings are generated with each placement. Therefore, can bill rate savings be reported beyond year one?  
  • Are there any company-wide estimates that are acceptable as average cost for FTE burden, onboarding or invoice processing?

2. Document agreement. Ensure that you have written agreement to the accepted methodologies and evidence required for validation, especially if it differs from standard company policy.

3. Share with your MSP/service providers and document in the contracts. Set a KPI with your supplier partners related to savings generated and how that will be achieved. Ensure that they will be able to provide the documentation required for validation.

With increasing expectations on procurement to have an impact on the bottom line, the last thing you want is to spend months implementing a program that doesn’t deliver reportable savings. For that reason, having the upfront conversations with your internal and external partners at program design is critical to ensuring savings are recognized from your contingent workforce program.

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First Voice

  1. Simon Shott:

    Like this piece and have done this for clients, typically delivering between 10 and 25% cost savings on contingent workforce costs.

    A little bit of well applied technology and service, goes a long way in establishing governance on contractor spend. Unfortunately many businesses are caught up in core delivery challenges and this area of business improvement gets overlooked

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