With several years under their belts, many program managers have been asking what the next-level program looks like. They’ve addressed — to the extent possible — the obvious problems of supplier management, cost control as well as process deficiencies. So, what’s next? Expanding the definition of talent that fits into your program.
First, I’ll break down the basic decision process in simple terms focusing on the types of labor that exist in the organization: Internal/traditional workers, and contingent workers, which break down further into subcategories, two of which are staff augmentation/agency resources and statement of work consultants.
Inhouse. In simple terms, you consider hiring traditional, internal resources when you have a long-term need and it is related to a core business activity — something that is integral to your business and that by its very nature creates an additional competitive advantage for your organization. You should also consider internal resources whenever there is a high need for intellectual property protection. Internal hires are often thought to be more expensive than contingent workers because of the benefits, long-term expense, additional employment risks and acquisition costs. But failure to protect intellectual property could be more devastating to the company’s overall business. Consider a company that, after some internal review, learns a core piece of its proprietary technology was entirely developed by independent contractors and the company has very little protection in the event those workers choose to leave. The company would want to take swift action to enjoin those individuals as full-time permanent hires of the company.
Staff aug. The next type of labor is staff augmentation or agency-sourced resources, typically billed on an hourly basis. Exactly as you would expect, these workers are best suited for shorter-term needs, or situations that call for flexibility to accommodate short-term deficiencies and labor availability. Maybe it’s a specific location that’s temporary by nature or a unique set of expertise is needed for a short period of time. Also, because these roles turn over very quickly, they are often more responsive to fluctuating needs than a traditional, W-2 workforce. The downside is that they also may be much more expensive, and subject to supply-and-demand fluctuations.
Some companies try to mitigate costs in specific ways, though those efforts may not realize the desired results. One company tied its contingent resources’ pay rates to those of their internal hires, only to see a multi-million-dollar year-over-year increase; pay rates for contingents were subsequently lowered. Conversely, another company found the rate for a particular type of chip engineer went by more than 50% over the course of three months as a competing project from another company scooped up all the available talent in the area. So, while companies may have rate cards and contracts in place with their staffing providers, market changes may still require adjustments.
Statement of work. An SOW makes sense when you have specialized services that can be brought to bear upon a specific business challenge or opportunity. The most common funding mechanism for statement of work is paid via milestones. You should consider statement of work when you have a clear and discrete project that is defined in a comprehensive document called the scope of work.
There are many arguments against outsourcing truly strategic core products that can create a competitive advantage. Most SOW agreements are executed under a master services arrangement and the need for IP protections should not be too onerous. You should also consider statement-of-work providers over staff augmentation when there is little need for continual oversight. Essentially, when engaging an SOW in its true form, you would focus simply on the milestones and their associated final deliverable; the means of delivery should be irrelevant. The work may be done offsite, for example. With some exceptions, you shouldn’t worry too much about who is doing the work, only that it being done in line with the deliverables outlined in your scoping document.
This is truly a high-level overview of an increasingly important and immensely complex topic. The road to talent management can take many forms and just like a map may provide multiple avenues to the same destination. It is up to the navigator to decide which way to turn.