Some themes are perennial favorites. Cutting costs within a contingent workforce program is definitely one. Of late, however, it has become a hot topic. While some programs always seem to be in cost-savings mode, others find themselves forced to cut costs due to unforeseen market dynamics in their industry. Acquisitions, mergers and even reduced profit margins such as those being experienced by the oil and gas industry have lots of attention being focused on the contingent workforce spend and how it can be reduced.
When being forced to cut costs expeditiously, some CW programs end up reacting without thinking things all the way through. An example of this would be an activity known as “tempnapping,” whereby an organization informs a supplier it will be “taking” the supplier’s tenured contingent workers and placing them with a more cost-effective supplier — possibly even that of a payrolling provider. Although the program will save money in the short term, does it come at a higher price in the long-term? Too often, tempnapping actions do not take into account any or all of the CW engagement management support delivered by the original staffing provider, such as talent transition support, worker benefits, incident management, etc. You may now find that you are stuck providing some of that support internally one way or another.
Although your agreement with your staffing provider may allow you to move a contingent worker after a set period of time, consider the ramifications this type of action may cause.
From the staffing provider’s side, although the agreement may allow you to convert its tenured resources, it usually applies to converting them to a full-time employee status, but not a “cheaper” supplier. Although they are not always happy to have one of their resources converted to a full-time employee status as they lose the headcount and the revenue stream, it is usually done as a sign of a good partner. Simply stated, this is a revenue-generating employee of theirs that you are now moving to a market competitor.
From the contingent workers’ perspective — we have to remember there may be more to the relationship with their current employer than just this engagement. They may have worked with this staffing supplier and recruiter on several assignments. Or the worker may be a salaried employee of the staffing company, which may include benefits. Being moved to another supplier can affect all of this, and the resource could choose to stay with the initial staffing provider and be assigned to a different engagement. It’s possible that you could lose an experienced and skilled resource.
Longer-term, this can have a negative effect on future engagements. How? Given the choice of presenting a quality candidate to a client that is known to tempnap or one that doesn’t, a recruiter will likely favor the latter. And CW programs cannot afford to lose out on the best possible candidates with the best possible skills just because they have damaged their engagement brand.
So, before considering this practice, review other cost-saving options, such as alternative program discounts. Tenure, early payment or statutory discounts may give the cost savings needed without having any potentially long-term negative impact.
A program could also scale down the use of CW engagements as a whole, similar to actions one would take during an economic downturn. An important benefit of CW usage is its utility feature of turning the services off when engagements need to be ended. A tighter rein on the total spend engagement activity may yield bigger results faster than cutting margins down to unprofitable and lower-quality, C/D talent levels. Yes, this is tougher, but so is cutting FTE headcount in a recessionary period. Engaging some rate rationalization initiatives can also yield important savings from your current total spend levels.
Finally, it is time to test the depth of the partnerships you have in your value chain, with both your staffing and program management partners. They need to face your “cost-cutting” reality and could bring innovative ideas that have not been considered in your program. At the end of the day, beware of shortsighted solutions; in many cases they are terribly expensive long-term.