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Direct sourcing of talent grows as a business strategy, but requires technology and a plan

03/30/2021 By

While engaging an extended workforce is nothing new, the ways that companies find those workers is changing. The global pandemic, paired with a fragile business climate and so many people out of work, has amplified the need for contingent workers and the ability of those workers to choose where and when they prefer to work.

A recent survey from the HR Research Institute, “The State of the Free Nation and Contingent Workforce,” shows that 90% of HR professionals expect their companies’ contingent workforces to grow or remain the same over the next three years. Currently, about 40% of the workforce is contingent labor, with an expected jump of 10% to 20% at Fortune 1000 organizations over the next three years.

Over the last decade, direct sourcing of workers has emerged as a viable alternative to traditional staffing and recruiting methods.

Direct sourcing, as a concept, has been around for as long as companies have hired workers. Historically, it often materialized as personal referrals or program managers maintaining small private networks of candidates. While seemingly simple in concept, the execution of an effective direct-sourcing program often proves more complex. Today, effective direct sourcing requires a strategic approach that involves a combination of technology, program management and organizational readiness. And a company that has worked hard to create a strong, recognizable brand can use that to attract talent.

By adding the practice of direct sourcing to an existing talent acquisition program (or incorporating it at the outset into a new program), companies are better able to access alternative labor channels or niche talent that has not been found when relying on traditional recruiting and staffing channels.

The motivations to establish a direct-sourcing program include: access to new talent sources; cost savings; quicker time to fill; and the ability to create and maintain talent pools filled with available, vetted contractors.

Direct sourcing of workers: balancing act

Companies looking to take advantage of direct sourcing need to consider how to use it as part of a larger talent acquisition strategy, making sure to adopt an approach that yields the best outcomes.

Andrew Karpie, the research director for services and labor procurement at Spend Matters, has written about the scope of direct sourcing and has found that it is not a full replacement for “other incumbent channels for sourcing contingent workforce and service providers,” nor should it be viewed as the “best option for all.”

One of the key decisions a company will make with regard to direct sourcing is program management. Since this approach is not a substitute for other sourcing channels, companies have to consider the benefits of using in-house personnel versus hiring a third-party provider for management support. The experts at PRO Unlimited have found that many organizations enlist external help because they lack the internal staffing and expertise to run the program.

Since direct sourcing has only really taken off in the past few years, best practices are still emerging. As many technology and services vendors enter the marketplace with different philosophies, approaches and ideas, leading practices are bubbling up, which over time, will become best practices.

Today, many companies use an MSP and/or a VMS as part of their extended workforce management. Expanding to accommodate direct sourcing should include conversations about how to integrate all of the partners to achieve the best outcomes for their joint client.

An MSP can manage direct sourcing, but care needs to be taken to ensure it does not become a master vendor program or one that ignores the direct-sourcing program because it is viewed as competition. One way to accomplish this is by selecting a vendor-neutral MSP that has no affiliation with any staffing agency. In reality, when MSPs and direct sourcing work in tandem, all parties benefit. VMS technology can be effective for finding, curating, filtering and matching candidates.

Attention must also be paid to the technology ecosystem in place for extended workforce management and an organization’s overall workforce. Specific direct-sourcing technologies are available, and “while implementation of one of these technology solutions does not equate to a well-designed and functional direct-sourcing program, they are an indispensable part of one,” Karpie wrote.

Functionality can include “workflows, talent acquisition strategy, digital sourcing campaigns, requisition-based sourcing process, digital profiles for candidates, evaluation/selection of best candidates, compliance/verification, onboarding, work/project tracking, and invoicing/payment,” he wrote in an article on direct-sourcing technology.

In many cases, the experts at PRO Unlimited have seen organizations struggle to optimize direct sourcing when using separate vendors for MSP, VMS, direct sourcing, payrolling, curation, data and analytics, independent contractor compliance and more. Without a comprehensive solution from a single provider, these organizations experience disjointed communications, poor data sharing and program inefficiencies.

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Companies should also evaluate whether a solutions provider incorporates data and analytics (including market data when available) that offers visibility into the entirety of an extended workforce management program. With this information, organizations can better understand where a program is running efficiently, where changes can be made, and how they might strategically shift their approach to direct sourcing to better align with broader organizational goals.

Curation and the human element

Beyond technology, experience and know-how is critical for effective talent pool curation within a program for direct sourcing of workers. Curation differs from traditional recruiting in that it deals with active, interested candidates who have submitted themselves for a specific role or inclusion in a company’s talent pool.

For example, after an organization has implemented direct-sourcing technology that serves as a client’s job board where candidates view open job roles, a curator manages those individual relationships. Curator interactions result in better-quality candidates in talent pools, better matches for open positions and more efficient hiring processes.

Talent curation takes time and commitment, but it keeps an organization’s talent pools healthy. This can be the critical element that allows a company to surpass the competition and snag top talent. Working with a comprehensive solution provider that offers a range of technologies and curation services can lead to direct-sourcing success as part of an effective extended workforce management program.

This Brand Studio post was written with PRO Unlimited.