Procurement Free Agents: Are You Ready?

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Spend Matters welcomes this guest post from Naseem Malik, managing partner at MRA Global Sourcing.

Call them on-demand workers, contractors, free agents or mercenaries — just don’t call them inconsequential. Procurement is no longer immune to to the increase of contingent workers other functions have experienced in recent years. And the shift from employing permanent workers to temporary ones is gaining ground.

According to the consultancy HCM Works, for the average company today, contingent workers comprise 18% of the workforce, and that number will increase to 40% by the year 2020. This on-demand workforce has doubled over the past seven years, and today there are an estimated 53 million people in the U.S. that identify themselves as freelancers.

You’ve likely heard the reasons behind this shift before: a continued talent shortage, retiring baby boomers, the need for skilled and adaptable employees. But while procurement teams have become adept in managing the contingent workforce spend the past few years, they are now grappling with managing this very same workforce for themselves. These workers aren’t just the temp labor or contractors; consultants, advisers and managed service providers (MSPs) are also included in this new contingent of employees.

Over the past five years, we have observed that the number of requests for temp hiring in procurement organizations has been steadily growing. It isn’t limited to any particular industry or service sector. Across the board procurement, procurement groups will approach us with short-time talent needs for an urgent position they are staffing.

Most organizations cite reducing headcount cost, closing talent gaps, executing targeted projects and initiatives, and helping to navigate change as top reasons why they’re trending toward free agents. Knowing this is critical for employers, so they understand what attracts workers to a contract assignment. Gone are the days that only the unemployed or a certain demographic of the workforce can be found in this category. Many modern workers even prefer this arrangement for several reasons, including variety of challenges and activities, filling gaps in experience, focusing on the work rather than the politics and the flexibility it affords.

Depending on maturity of the organizations and their requirements, expectations fluctuate in terms of the type of talent available and the ease with which it should be acquired. Companies will undoubtedly have a wider contractor pool to choose from as more workers join the ranks of contingent labor, but this will also increase the competition for these workers as demand picks up. Thus, we advise our clients to differentiate the characteristics between the temp and permanent hires.

We find it beneficial when HR and procurement work together when considering temp hires. One common pitfall is to take an hourly rate and multiply it across the standard 2,080 hours worked in a year and marvel at the expensive nature of temp hires. This is not an accurate cost assessment, however, since there’s a difference between an hourly rate and billable rate, and whether there’s a third-party staffing agency involved or if you’re going direct with the contractor. Procurement teams need to be skilled at managing contractors at the micro level, as well as at the macro level, when they’re optimizing the overall contingent workforce spend.

Equally as important is identifying the source of talent needed to bridge the gaps between generalists and specialists. There are still a healthy majority of clients who are completely averse to considering contractors. Even when the positions remain open for months on end, they stubbornly insist that they don’t have time to train people on procurement.

There was one especially tough search in the heart of the Rust Belt in which a client was seeking specific category experience. After several discussions, we were able to prevail by explaining that this specialist contractor with deep category knowledge wasn’t coming from Robert Half or Manpower, but through referrals or specialist procurement search firms. These workers would hit the ground running and be out when their assignment was completed.

Clients found it hard to fathom that these contractors wouldn’t even consider joining full time after their gig was over. But this new breed of mercenaries is more than happy to roam the marketplace as freely as possible.

Procurement functions are trending toward using “blended organizations” as they adjust to this new reality. At the strategic level, the focus will be on team development and alignment with broader business goals, and they will hire permanent resources to execute. At a tactical level, these blended organizations have an internal focus on stakeholder management and strategy development. They’ll also use defined sourcing initiatives to execute against the strategies put in place and will use a hybrid of perm and temp resources. Finally, at an operational level the activities tend to be repeatable, (e.g., P2P, e-auctions, etc.) and thus usually outsourced.

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Voices (2)

  1. Andrew Karpie:

    Naseem, Great article. Would love to discuss a some point. Regards, Andrew

    1. Naseem Malik:

      Thanks Andrew, appreciate it. Sure, would be happy to discuss further. Regards

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