All posts by Doug Leeby

Procurement’s Most Valuable Tool In An On-Demand World

Do you know who your non-employee workers are? Where they are? What facilities, networks, and data they have access to? If not, chances are very good that you need a Vendor Management System.

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For most organisations, human capital expenses constitute the largest single cost of doing business, often up to 70 per cent of operating expenses. Human capital is also a growing source of concern for executives who fear they don’t have – and can’t acquire – the top-tier talent they need to compete and succeed in an increasingly on-demand world.

Companies that have traditionally relied on internal workforces of direct employees are increasingly adopting a more flexible, extended workforce approach that lets them adapt quickly to market changes while effectively managing their fixed costs.

To manage this extended workforce, companies increasingly employ sophisticated vendor management systems (VMS). These VMS solutions can do much more than simply automate the contingent staffing process. They can source and manage all types of talent and deliver a wide range of insights to help organisations make better workforce decisions.

Where does VMS fit in your procurement picture?

Simply put, a VMS is the software that automates the hiring process of an organisation’s non-employee workforce. It is often a web-based application that helps manage and procure staffing services, from requisition through billing.

Most VMS tools are delivered through a Software-as-a-Service model. A VMS provides significant improvements in reporting and analytic capabilities that far outperform manual systems and processes. VMS tools are typically operated externally by a Managed Service Provider (MSP) or self-managed by a program office within the organisation.

This structure enables a streamlined and automated process with real-time of all contingent labor: who they are, where they are, and what access they have to your facilities, networks, and data.  A VMS allows you to see all relevant job orders and accurately assess labor services spend and performance, often leading to significant cost reduction.

Should you implement a VMS?

Typically, large organisations, or companies who employ more than 100 contractors at a time will benefit greatly from a VMS solution. Companies with non- employee workers in multiple countries and varying labor classes can also streamline their hiring, management, and payment processes with a VMS.

Below are some of the top reasons to implement a VMS for your organisation:

  • Cost savings: A VMS helps eliminate rogue buying of labor and maverick spend. You can gain hard dollar savings by consolidating suppliers and benchmarking rates to gain negotiated savings or volume/early pay discounts, as well as soft dollar savings through process improvements like consolidated invoicing, reduced timecard and invoice errors, and compliance tracking.
  • Visibility: Cost savings from a VMS are driven by the analytics and reporting, which help reveal where and how you are spending money on contract and project-based labor in order to make better decisions for the future.
  • Compliance: Transparent analysis of all stages of the procurement lifecycle provides greater control and ability to enforce procurement strategy and policies. By implementing a VMS and gaining full visibility into your staffing spend and activity, you can ensure that all labor is properly categorized and mitigate risk of potential exposure to co-employment and tenure litigation.
  • Quality: A VMS allows you to measure and monitor the performance of your suppliers and non-employee workforce to ensure there is an efficient process in place for acquiring the best talent at the best rates (through self-sourcing or using staffing suppliers) and a strong program for sourcing and managing statement of work (SOW) contractors.
  • Operational efficiency: By implementing a VMS, you can automate many steps in the procurement process.

How to select a VMS provider

There are many VMS providers in the market today, ranging from software solutions offered by MSPs or ERP providers to independent contingent workforce specialists. Make sure you choose wisely.

Here are eight things you will want to consider when selecting your VMS provider:

  1. Trusted partner commitment: It is critical to find a partner that is willing to invest in a relationship with you, to work with you, and to support your program’s changes, including geographical or labor category expansions.
  2. Financial stability: Your VMS provider should be a viable choice for today, tomorrow, and over the next decade.
  3. Flexibility: VMS providers should understand trends, emerging talent acquisition models, and how best to facilitate sourcing talent.
  4. Expandability: The tool should have the ability to accommodate all labor categories and easily expand to include SOWs, not just contractors on a time and materials basis.
  5. Global reach: Select a provider who understands the tax and labor laws in all geographies where you do business.
  6. Visibility: Robust reporting and analytics capabilities are critical to maximising the value of your investment.
  7. Ease of use: The tool should be intuitive enough so that users can learn about 90 per cent of the functionality on their own. Training, online help, online tutorials, and help desk assistance should be available for the remaining 10 per cent.
  8. Technology compliance: The vendor you’re considering should be certified by an independent service auditor to ensure they have undergone the most rigorous data security assessments and compliance

Now more than ever, contingent workforce managers, procurement teams, and human resource professionals need a significantly enhanced toolkit to address business executives’ priorities. They need innovative solutions that can dramatically lower costs while boosting productivity. They need to find and engage the right people with the right skills – quickly – to deliver better customer value in an on-demand world.

Most of all, you need solutions that will help your companies turn your workforce into a competitive advantage, differentiate your business, and set up your organisations to win. A VMS is that kind of a solution.

For information about the value a VMS can offer your business and how to build a winning business case for a VMS in six easy steps, click here.

Doug Leeby will be speaking at Big Ideas Chicago on 27th September. To follow the action live from wherever you are in the world, register as a digital delegate.

Six Steps To Optimise Your Procurement Workforce

To become more agile, companies are re-evaluating their workforce strategies. Although strategists often talk about “total workforce management,” what their companies need most is something much simpler: total workforce optimisation.

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For most businesses, human capital is both the organisation’s most important asset and its largest single operating expense. It is also a constant concern for executives who fear they don’t have, and can’t acquire, the right mix of top-tier talent to compete and succeed.

Total Workforce Optimisation is the process of determining the right mix of employee and non-employee talent to meet operational requirements. It ensures that the organisation has the skills it needs as well as the flexibility to anticipate and respond to market changes.

What it is, and what it’s not

Total Workforce Optimisation is sometimes confused with Total Workforce Management (TWM), also called Total Talent Management (TTM), which is a much larger and more comprehensive process. TWM/TTM not only incorporates the engagement and management of employee and non-employee labor, but also issues such as training and succession planning, which are outside the scope of Total Workforce Optimisation.

Total Workforce Optimisation is also different from Total Talent Acquisition (TTA), which is a subset of TWM/TTM. However, Total Talent Acquisition is compatible with, and can be incorporated into a Total Workforce Optimisation program.

Total Workforce Optimisation is actually very simple. It is nothing more than looking at your organisation’s entire employee base and your non-employee base, putting them together, and determining the right mix to achieve your desired business outcome.

1.Focus on business outcomes

The focus on business outcomes is one reason Total Workforce Optimisation is more specific and easier to achieve than Total Talent Management. While Total Talent Management has the potential to offer great long-term benefits, which are often somewhat abstract, Total Workforce Optimisation is concerned with finding the most cost-effective, highest-quality way to accomplish specific tasks and achieve specific outcomes.

Total Workforce Optimisation is the process of modeling and sourcing the right mix of employees, contractors, freelancers, and consultants—all viable labor options—to achieve the outcomes that are important to your business.

To get there, there are six key steps you need to take.

Step 1: Get the data in one place

To implement Total Workforce Optimisation successfully, you must start by getting all of your workforce data in one place. It is all about visibility.

Most organisations are already doing a great job in terms of employee visibility. You probably have human resource platforms containing all relevant employee data. So, the missing link tends to be non-employee data.

With the advent of vendor management systems (VMS) about 15 years ago, we started collecting data addressing the contractor population. And, about 7 years ago, organisations started managing statement of work (SOW) based activity and putting that data into their systems as well.

With the advent of the gig economy, freelancers represent another large labor pool whose data must be gathered and put in one place where it can provide visibility.

This can be accomplished using your VMS or possibly another system, but the important thing is to gather this non-employee data and make it visible.

Step 2: Risk-proof the workforce

The second step is to risk-proof this workforce, both employees and non-employees. This means ensuring proper classification of every individual worker. Every organisation has a governance model in place to protect against co-employment and statutory compliance risks. To risk-proof your workforce, you must ensure that every worker is in the proper employment bucket.

You start by putting them in the right classification bucket and then ensure that they’re in the right sub-buckets—temporary staff or contractors, W-2 or 1099, outsourced labor, freelancers, interns, or retirees. Then you can confidently put them to work and not worry about what the legal, compliance, or security consequences are going to be.

Step 3: Ascribe quality to all workers

The third step is very important, and for some reason, it appears to be very elusive for many companies. It is simply the process of ascribing quality to all workers and all work efforts.

Organisations do that already when it comes to full-time employees. Virtually all organizations require periodic performance appraisals, as well as quarterly KPIs or similar processes.

So, the concept isn’t foreign, and implementing it is not a challenge. The challenge is to extend this process to contractors, to consultants, and even to freelancers. Sometimes clients tell us that they’re afraid measuring non-employee quality due to co-employment risks. We believe that is only an excuse because there are ways we can assign quality measurements to the work effort and even to individuals without getting into co-employment trouble.

So, organisations must correct this misconception internally. Once you become comfortable with ascribing quality to all workers and all work assignments, you can rate the work and tie the cost equation to the quality equation.

For years, organisations have been so focused on costs and the lowest bill rate. While this is valuable, it is also short-sighted. To optimize the workforce, it is absolutely essential to factor quality into the mix.

Step 4: Merge the data

If your organisation has good employee data, and make a serious effort to bolster your non-employee data, what is next? The next step is to merge those two together.

It does not necessarily have to be one database. Organizations have separate Applicant Tracking Systems and Vendor Management Systems. Analytics programs available today can consume data from both sides with ease. By analyzing and comparing this data, organizations can get to what is really interesting and fun, which is the modeling. Modeling leads to predictions, forecasting, and what-if scenarios. That is the next step.

Step 5: Analyse the data for decision-making

Once the employee and non-employee data is merged, the next step is to analyze and apply the data. Artificial intelligence and the spectrum of the analytics available today allow organizations to use visualisations to discern where changes in the workforce mix will produce the most benefit.

For example, you may traditionally be working with 80 percent employees and 20 per cent contractors. On a specific task that will deliver a specific outcome, what would happen if you changed the mix to 50 per cent full-time staff and 30 per cent consultants, 10 per cent freelancers, and 10 per cent contractors, based on skills? How would that compare to other possible blends of resources.

Modeling also allows you to factor in scarcity of talent, core and non-core positions, and other considerations. Once you start to bring these factors into play, you can engage in a variety of what-if scenarios to determine what would best fit your business strategy.

Step 6: Take action

Of course, the last step is to do it—simply execute a workforce optimisation program. Create a model and try it.

You are probably closer to Total Workforce Optimisation than you imagined. You already have a tremendous amount of data. What you lack—probably the performance quality data from certain elements of your extended workforce—can be obtained with a little effort and the right technology.

Of course, implementing Total Workforce Optimisation cannot be accomplished by snapping your fingers. It will take resources and commitment. But your workforce mix is critical to your organisation’s agility and competitiveness.

So, now is the time to begin to make progress toward the goal. And, frankly, the technology is there to enable you to reach it. To find out more, click here.

Doug Leeby will be speaking at Big Ideas Chicago on 27th September. For more information and to request an invitation to this leading CPO event, click here.