When developing a contingent workforce program or reevaluating your current program, one of the first decisions you will need to make is whether to manage your CW program internally or engage the services of a managed service provider (MSP) in some capacity. There are many evolving models to be considered. This two-part series discusses several options for support models as well as how industry leaders determine the appropriate model for their companies.

Here are the various management options these articles will cover:

  • Internally managed CW program
    • Insourced program management office (PMO)
    • Insourced PMO with tactical services from a MSP
  • Outsourced CW program
    • Vendor neutral MSP
    • Master supplier /vendor
    • Hybrid program
  • Alternate models
    • Strategic partner CW program:
    • Total talent acquisition management

First, let’s review what a contingent workforce program is and does.

A CW management program is the coordinated management of a company’s contingent workforce and associated suppliers for the betterment of the company’s operations across four key dimensions: Quality, Efficiency, Cost and Risk. The program can be administered by either the company’s employees or be outsourced to a third-party provider, referred to as an MSP. The primary responsibilities of a CW program are:

  • Requisition, evaluation and selection (recruitment) process
  • Oversight of all operational processes (i.e., onboarding, timekeeping, invoice management, change management, offboarding)
  • Oversight of staffing supplier rate competitiveness and compliance with client rate ranges (if applicable)
  • Consolidated invoicing & payment to staffing suppliers
  • Issue management and resolution
  • Supplier performance and compliance management
  • Policy enforcement
  • Worker quality management
  • Program reporting & planning
  • Ongoing end-user training (both suppliers and internal users)

Internal program management models

Insourced program management office (PMO) – A client-led PMO takes on primary responsibility for managing an organization’s program. The PMO is within the client’s premises and is typically managed by the purchasing/global sourcing or HR organization. The client builds an internal team to handle all of the program responsibilities.

  • All staffing suppliers are given an equal opportunity to fill contingent job requisitions without the concern of an MSP associated with a staffing firm having visibility to their candidates.
  • The CW program is inherently vendor neutral and can manage multiple suppliers for competitive bidding and also incorporate master suppliers for specific labor categories.
  • PMO is familiar with company culture
  • Enhanced company data privacy and confidentiality
  • Re-use of existing HR/procurement workforce management skills and expertise
  • Greater flexibility with program scope of service, key performance indicators (KPIs) and service-level agreements (SLAs)
  • Able to maintain direct ownership of supply base for contingent talent.
  • Higher levels of engagement with senior stakeholders.
  • Better integration opportunities for technology
  • Internal resources have access to both client and VMS systems
  • Better opportunities to create a strategic in-house solution acting as a competitive advantage
  • Direct control of program services and initiatives
  • Less access to industry leading practices than an external MSP
  • Lack of market knowledge: Country requirements, market rates, contingent workforce legal issues and best practices
  • Lack of access to MSP project teams, such as supplier management, reporting and scorecarding, Implementations, and all back-end accounting functions.
  • Lack of experience with VMS.
  • Potentially limited VMS implementation experience
  • Not as much leverage with the VMS
  • Cost for client-run program, including global costs.
  • Ability to have resources in all needed global locations.
  • Challenge to flex program resource needs with volume changes.

Insourced PMO with tactical services from an MSP – This is when a client-run PMO manages strategic initiatives of CW program and outsources the tactical services such as: requisition management, onboarding, offboarding, reporting, invoice creation and reconciliation, and assignment management to a third-party MSP.

  • Client is in control of strategy but doesn’t need to carry overhead for tactical or transactional work
  • Less internal overhead is utilized than an insourced PMO
  • Maintain direct relationships with suppliers
  • Re-use of existing HR/procurement workforce management skills and expertise
  • Able to maintain direct ownership of supply base for contingent talent
  • Opportunity to create stronger working relationships between procurement and HR.
  • Higher levels of engagement with senior stakeholders
  • Lack of visibility to multiple programs and solutions that clients are using in the marketplace
  • Lack of market knowledge: Country requirements, market rates, contingent workforce legal issues and best practices.
  • Build internal team for strategy
  • Additional layers and no single voice of program
  • Cost considerations from program resourcing

Outsourced CW program models

Vendor-Neutral MSP — An outsourced MSP takes on primary responsibility for managing an organization’s CW program. The MSP may have a physical presence on the client’s site. An MSP may or may not be independent of a staffing supplier. If the MSP operates independently from its organization’s staffing arm and does not source candidates for the program, it is referred to as vendor-neutral. Key points of this model are:

  • Incorporating multiple source channels, not just the staffing suppliers, into sourcing strategies for the program.
  • All staffing suppliers are given an equal opportunity to fill each order without the MSP giving preference to a specific supplier.
  • Suppliers or sourcing channel is selected for each order based on criteria as defined by client policy.
  • The MSP is restricted from deciding which orders are routed to any supplier.
  • Incorporating social media recruiting and Freelance management systems (FMS) in to the management model
  • Creates highly competitive program dynamic, generally resulting in lower rates and better supplier performance in the aggregate.
  • Competitive bidding helps ensure market rates
  • Simplified billing to customer
  • Greater checks and balances
  • Designed to establish trusting relationships with suppliers through a genuine sense of fairness
  • Too much focus on neutrality may result in quality issues (if providers are unable to develop an understanding of client requirements/culture)
  • Reliance on a VMS to realize a significant benefit from competitive bidding
  • Potential for too much competition per req. (>5 suppliers) with suppliers less inclined to compete
  • Supplier fee is often higher in neutral model
  • Neutrality often less useful in light industrial and other high volume low-skilled options

Master supplier /vendor — A staffing supplier that takes overall responsibility for providing clients with temporary staff. In a master supplier relationship, typically all orders will go first to the master supplier to either be filled or distributed to secondary suppliers. For master supplier MSP solutions, not only will the supplier provide a significant portion of the temporary staff, but also manage an organization’s CW program. Key points of the model are:

  • A master supplier assumes overall responsibility for providing a client with temporary workers.
  • All requisitions/orders go first to the master supplier to either be filled, or distributed to sub-contract suppliers.
  • Scope of service typically includes program office, on-site (“vendor on premise”)
  • Accountability from a single supplier
  • Highly predictable cost, enabling budget forecasting
  • Able to leverage volume for lower mark-up rates
  • Stabilizing markup rates enables focus on variation of pay rate
  • Simplified billing
  • Profit margins can afford access to additional services and systems at low to no additional cost to client
  • Vested interest in mutual success
  • Solid understanding of recruiting requirements
  • Lack of competition
  • Gaps in skills and geographic coverage may negatively impact quality and efficiency
  • Limited visibility in sub-contracting relationships may increase rates and risk
  • Increased risk associated with single supplier
  • Bad experiences or misconceptions about the supplier by end-user are hard to overcome

Hybrid program — A CW program management strategy that involves blending the vendor neutral and master supplier sourcing models. For example, a buyer might engage a single provider to act as the sole supplier for its light industrial and clerical/administrative job requisitions while having multiple providers bid competitively on IT positions.

  • A hybrid MSP is the blending of different sourcing model attributes to manage a contingent workforce program. This model may differ by skill or geography.
  • Typically, a hybrid program includes elements of a vendor-neutral and a master supplier program.
  • Better MSP and/or staffing pricing – staffing margins enable additional software & services at low to no cost
  • Competitive bidding reflects market rates
  • Elements of neutrality reduce dependency on a single staffing supplier, while elements of a master supplier program allow supplier to develop a thorough understanding of requirements
  • Hybrid programs are getting increasing support from VMS
  • Simplified billing
  • Can encapsulate “best-of-breed” design elements
  • Often a more effective global model, taking into account regional variations in laws and culture
  • The distinct nature of the different services (recruiting and managed services) may necessitate teams from different divisions within a given supplier organization, adding complexity
  • The draw of recruiting and staffing margins can distract from other managed service program resources or responsibilities
  • Skepticism from other suppliers as to elements of neutrality
  • Without a mature process, competitive bidding scenarios can be challenging

Next week, I’ll focus on the alternative models — strategic partner (center of expertise –CoE) CW programs and total talent acquisition management — as well as share some opinions from industry leaders on how they have approached making this decision.