Which Contingent Workforce Model is right for you?
by Cheryl Tracz – Draper Jones Consulting
April 20, 2021
Often buyers rely upon the sellers of Contingent Workforce solutions to provide edification upon which model is best for the buyer’s organization. To further complicate this process, it is commonplace for organizations to label essentially the same offering by slightly different names. A thorough look at these models will certainly highlight their advantages and shortcomings. The models vary by the level of integration of the partners to your organization from least to most incorporated. If you imagine this as an arrow starting at your organization with an Internally Managed Program (IMP) and extending to fully outsourced to a Managed Service Provider (MSP) there are many stops along the arrow. We have outlined four of these models:
The Internally Managed Program
The Internally Managed Program (IMP) has the least integration from partners. Often before programs are formalized with a VMS tool to govern various policies and processes there is some form of IMP in place. This IMP typically will manage suppliers, onboarding of temporary workers, and is a portion of someone within the organization’s responsibility. With the maturation of the use of contingent workforce, there is a rise in the use of Internally Managed Programs. The benefits of an Internally Managed Program include the level of control, customization, and ownership of the contracts. Therefore, a higher level of control over the terms with the suppliers for various service lines, including the staffing suppliers, Independent Contractors, and statement of work providers. Additionally, many programs are funded by a percentage of spend for the program and clients can often charge a similar or slightly lower percentage and utilize that to fund internal staff or outside consulting. A potential drawback of an Internally Managed Program can perhaps be a lack of knowledge of the contingent workforce space and best practices, which is often combatted by hiring a consultant, such as Draper Jones.
The Shared Program
There is a middle ground between an Internally Managed Program and total program outsourcing: The Shared Program. Various VMS or MSP providers have different offerings to support various functions of the program. Often this can be accomplished with as little integration from the provider as facilitating consolidated invoice and payment process to the suppliers. This allows for organizations to lessen the load on their account’s payable teams. Alternatively, providers will offer to support just the administrative aspects of the program leaving the strategy and oversight to the client. Such tasks as staffing supplier audits, fulfilling open job orders, and or administration of the VMS models can be customized to suit the clients’ needs. Picture a menu of a la carte services from which to select what suits your organization’s needs. A client started with this model several years ago. When the program launched, the client realized they entered into this model unknowingly. During the sales process they discovered that they had not clearly defined roles and responsibilities. Now years later they have built a small internal team to support the needs of the program not covered by the provider and are in the process of taking over the administrative functions from the MSP. A best practice when using this model is to ensure your sales and contracting process includes a RACI matrix to ensure a clear understanding of each party. This model offers benefits to the client that they are still in control of the program yet can outsource functions that the client is not interested in owning or have the expertise to take on.
The Hybrid Program
There are various models on the end of the total program outsourcing. The first of which is a Hybrid Program: again, a Hybrid Program is customizable where there are various structures where more than one provider is supporting your program. Yet it is fully outsourced where the client provides the oversight of the strategy for the organization. The Hybrid Program can encompass providers supporting different service lines or organizations. For example, about twenty years ago when I started in this field a client had two programs each for temporary workers. However, only one supported different business units. Other options would be to have different providers supporting the different contingent categories such as one handling the temporary workers, one handling the Independent Contractors, and perhaps a third handling the statement of work consultants. Likewise, a Hybrid Program can indicate that one provider has been identified to support the majority of temporary openings and then if they cannot fill, they manage the sub suppliers. Draper Jones assisted an Executive Search and Information Technology staffing provider to build out a Hybrid Support Solution for their largest client. This solution was focused solely on the temporary workers where our client focused on supporting specific job titles that the client hired frequently. As well, they managed seven other suppliers to support the remaining needs. This model has provided the client with a 15% cost savings in the first 3 quarters and has grown the staffing firm’s business more than 10%. This model provides the benefit to the customer that they have firms aligned that focus on their specialties and have the oversight to govern the use of them. The drawback is this approach requires a level of spend where the various lines can be broken up and are still large enough for the providers to find them beneficial to support.
The Outsourced MSP Solution
At the end of the spectrum to partner integration is the fully outsourced solution to a Managed Service Provider. This is where a single organization takes on the primary responsibility for managing an organization’s contingent workforce program. In this model the Managed Service Provider takes on the responsibility for all aspects including supplier selection and managing the contracts. There are two major categories of Managed Service Providers, those that are VMS neutral and those utilizing their own technology in the form of a proprietary VMS. VMS neutral providers support all major VMS allowing clients to make the selection of technology in conjunction with the MSP or independently. The benefit to utilizing these providers is that they provide a complete outsourced solution, often there are very minimal or no implementation costs as those are recovered by the MSP via a supplier funded management fee. However, drawbacks can include adoption by your internal users as they often feel closer to their suppliers than they do a new MSP. Or after a period of time organizations notice that MSP focus on the administrative tasks and fall short on providing value beyond the initial scope of the program after three, four, or five years.
Should you be considering implementing a contingent workforce program and need assistance in determining which model might work best for your organization or if you have an existing program and are seeking to update or change your model, Draper Jones would be happy to support your organization.
Cheryl Tracz is a Sr. Solutions Consultant at Draper Jones Consulting (DJC). Draper Jones is a group of proven practitioners making a difference in the extended workforce.
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