Applying Strategic Sourcing to Talent Management: What You Need to Know

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By 2020, more than half of the U.S. workforce will be involved in contingent work. Companies are rethinking their talent management strategies accordingly, and those that are familiar with strategic sourcing may already be a couple steps ahead.

How strategic sourcing can be applied to talent management was the topic of a webinar that Spend Matters analysts Jason Busch and Andrew Karpie presented last month with NextSource’s chief executive, Catherine Candland, and senior program director, Jim Gallagher. NextSource has been in the contingent workforce business for the past two decades.

Candland kicked off the webinar with a few figures that provide an overview of where the contingent labor market is today. Currently, more than 30% of the U.S. workforce is involved in contingent work, a percentage that will swell to more than 50% in, yes, just two years. As for the global workforce, 40% is already composed of non-employees — that is, independent contractors, freelancers and temporary workers.

Busch noted that some big changes have taken place in regards to the labor market.

“If there’s any single indicator in terms of how this market is changing, it’s that it used to be that if we looked at recessionary data, a decline in temporary workers was an indicator of a coming recession. But this correlation no longer holds,” he said.

“Worker preferences have changed too,” Busch continued. “What’s happened in areas of IT [and] AI for instance, a lot of workers prefer to be independent. We have this complex landscape of demand.”

Karpie added that a decade ago, the labor market didn’t look quite as complicated from the buyer’s side. “Now it’s not possible to ignore this complexity because there are all these opportunities out there and organizations are being compelled to pursue them,” he said.

The Push to be Data-Driven

Busch emphasized that organizations need to become more data-driven overall. In order to be successful in navigating this new and complex contingent workforce world, organizations must look analytically at their contingent workforce spend across current categories, sourcing channels and suppliers.

“I may be able to get a gig worker for 30% less, but from a total cost perspective, for a whole bunch of reasons, that may or may not be the right decision,” Busch said. “So we need to look at all the elements within a given program.”

The audience members were asked to respond to a poll on which element of their companies’ contingent workforce management provides the biggest challenge.

Source: “The Strategic Sourcing of Talent in 2020: Balancing Cost, Compliance and Agility”

“These are not surprising results with the exception of compliance and risk, which is perhaps a necessary evil to attend to,” Candland said. “But the pain points are really around access to talent, getting the notion of agility working in these programs, and then the change management across organizations.”

Candland noted that contingent labor has traditionally been procurement’s responsibility, whereas HR took care of full-time equivalent (FTE) employees. But now organizations need to look at talent management as a whole, she explained, which means that HR and procurement must collaborate.

Strategic Sourcing Meets Talent Management

Fundamentally, strategic sourcing can be described as a process driven by some sort of goal. This process involves evaluating current and potential sourcing opportunities and relationships; assessing their value and relevance against long-term goals and overall business objectives; and making action plans for critical commodities or supply networks.

An easier way may be to approach this process as a series of disparate steps. According to A.T. Kearney, strategic sourcing can be thought of thus:

  1. Profile the category.
  2. Select sourcing strategy.
  3. Generate supplier portfolio.
  4. Select implementation path.
  5. Negotiate and select suppliers.
  6. Integrate suppliers.
  7. Benchmark supply market.

Gallagher then dove into the critical components for applying strategic sourcing to contingent labor:

  • Category profile and spend analysis
  • Demand analysis and forecast
  • Supplier market analysis
  • Sourcing strategy and KPIs
  • RFX/supplier selection
  • Continuous optimization

Take demand analysis and forecast. This involves determining the optimal workforce mix for your organization, which naturally will vary depending on organization. Another audience poll revealed that this component is tied with continuous optimization as the most challenging of the six.

“Particularly in organizations where you have variants like call centers or groups of folks [who] are going to be hired and rotated out of those roles [and] get promoted very quickly, contingent labor can be a quick way to bring trained labor in and move them up in the organization,” Gallagher said.

In conducting a spend analysis, another critical component, organizations should determine the labor categories used, the number of suppliers engaged, which buyers are affected and how many buyers are affected. Some important data points on buyers include where they are located, the categories in which they are buying, the number of providers they are using and the processes they are using.

For what Gallagher has to say about the other four components, as well as questions from the audience, check out the webinar replay, available for free. 

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