I have had a number of requests for information from companies considering running their contingent workforce programs internally — what functions should be retained and how to go about calculating the associated full life-cycle costs. What are the potential risks and what are the potential rewards?
Over the years, I have seen a number of organizations go through the process of making this decision?
Four years ago, I attended a breakfast seminar in London. The guest speaker, the head of talent acquisition for a well-known company, explained how they ran their talent acquisition program internally with a cost per hire of just £250.
The presentation was extremely interesting, and for many people attending, the thought of acquiring talented workers for a fee of just £250 must have seemed extremely compelling.
During the networking period that followed the end of the seminar, though, I took the opportunity to have a deeper discussion with the speaker. As it turned out, the only costs that had been attributed to running the internal program were the external advertising costs. No account had been made for the internal resources needed to run the day-to-day operations or any costs associated with developing, maintaining and improving the ongoing service provision to the business.
There was no doubt that the internally managed program (IMP) was extremely good and delivered what the business wanted. But what was the real cost? The IMP relied heavily on the attractiveness of its employer brand. It did not need to be overly outward focused, as it was replete with applications for its core demands of unskilled workers in a single location. Many other organizations, however, are not so lucky, and have to overcome the additional challenges associated with lower levels of brand recognition (or perception) and the need for more highly skilled workers in multiple locations that may not always be in plentiful supply.
We quickly did some sums for the presenter’s company and the cost per hire quickly rose to more than £5,000. If the cost per hire was that high for a well-known brand that had to put little effort into seeking applicants, what would the cost be for the lesser-known firms?
This illustrates the need to be thorough in your cost analysis, especially when using your estimates in gaining stakeholder support. If you only focus on certain expenses, your stakeholders will get sticker shock when they see the actual costs down the road.
Over the next few months, I will be developing a tool that will help our CWS Council members calculate the true costs of running an IMP and assist them in making this all-important make or buy decision.
If you have any interest, experience, opinion or any other contribution to this project, then I would be most delighted to hear from you and set up a discussion. Please contact me at the email address below.