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Measuring the Success of a Contingent Workforce Program

September 20, 2013

contingent workforce programThe only true measure of success is the ratio between what we might have done and what we might have been on the one hand, and the thing we have made and the things we have made of ourselves on the other.  – H. G. Wells

 There are good habit and bad habits; then again, there are ruts! No one knows more about a rut than a manager who is swamped with running the day-to-day affairs and operations. When caught in the unrelenting rush of daily deliverables, it is often not possible to stop, take a step back and verify if performance expectations are being met. It gets even harder when implementing new programs to get a measure of where we are and to decide where we want to go.

Consider a contingent workforce management program. Everyone has heard about how efficient it can be, and its potential for on-demand talent and cost savings.  What are the parameters by which a contingent workforce management program can be measured? Have they changed as programs – and the companies that use them – have become more sophisticated?  How does a company decide on specific targets to be established at the outset of the program?   Many companies make the mistake of exclusively focusing their assessment efforts on the resources delivering the program – the suppliers and program managers.  They lose track of why the program was undertaken in the first place.  Evaluating the business impact of a program is as important as measuring whether the program was executed as initially specified.

Since the use of contingent labor is expected to yield greater results on both financial and human capital parameters; it would be necessary to measure the program’s effectiveness on both aspects. It is easy to get carried away when establishing key performance indicators (KPIs) for a contingent workforce management program.   Many companies establish and attempt to track so many KPIs that they can’t see the forest for the trees!  We advise you to follow this advice: measure what matters!

Start with an evaluation of what you are trying to achieve, and prioritize your objectives.  Then tie specific metrics to each objective.  If you have more than 4-5 objectives, then start again.  Otherwise, none of these objectives will receive the needed level of focus and attention.  Some areas to consider:

  • Superior deliverables:   In a nutshell, contingent workforce management programs are all about providing needed talent.  Where are your pain points?  Do positions remain open too long, impacting completion of critical work?  Do the resources being supplied fail to bring the needed levels of skill or experience?  Are you experiencing a high level of project over-runs?
  • Improved internal stakeholder satisfaction:  Do internal hiring managers express frustration with the effort required to communicate their needs?  Do they generally feel that they could do better on their own?
  • Better supplier relationships: In highly successful programs, the supply base understands the client needs, is capable of delivering top talent, and is motivated to do so.  Suppliers are rewarded for top performance with increased business opportunities. The supply base includes back-up strategies so that talent can be found even when a primary supplier drops the ball.  In evaluating supplier performance, metrics should consider both the individual companies and the supply base as a whole.  This will provide insight into program design flaws that are adversely impacting supplier performance.
  • Cost savings:  Nearly every program can identify Year One sources of savings.  Once the rate cards have been rationalized, tenure discounts come into play, and other low hanging fruit have been picked, what are the sources for continued cost savings? Compare and contrast the cost and effectiveness of alternative sourcing options such as social recruiting or the establishment of talent communities.  Continuous improvement initiatives should be formally considered at least twice annually, forecasts of potential savings should be included with each improvement proposal, and each should be tied to measures of cost savings.
  • Program development:  To measure the strategic impact of the program, metrics should be established that measure changes in completion of project and work assignments. How much is actually saved when contingent workers are engaged rather than permanent employees?  What is the impact on project deadlines, or quality of deliverables?  This information is vital for ongoing workforce composition planning.
  • Reduced risk and improved compliance:  Nearly every program includes a risk mitigation goal.  Often, this is a top priority.  Yet, this is one of the toughest objectives to measure.  Many programs measure activity – percentage of independent contractors validated, or percent of contractors who are drug tested or background checked.  While this is an important first step, the true test, unfortunately, can be the results of audits.

Last but not the least, it is important for a business to recognize that its goals, objectives and needs are unique. Customization holds the key to success. Don’t blindly adopt a list of metrics published by industry analysts or – worse yet – proposed by staffing companies.  Once you have established your objectives and desired KPIs, select a VMS solution or an MSP based on their ability to fulfill your specific requirements. Establish a governance structure, with scheduled reviews, and fully participate. Periodically consider whether your needs have changed or program has evolved in a way that requires a tweaking of your KPIs.  This up-front effort will result in the highest possible return on your investment.


Disclaimer:
The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.

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