Costs have always been a matter of high priority for the contingent workforce program manager in good and bad times. As companies start emerging from the effects of the pandemic, what we will find are numerous job openings and not enough people to fill them. Sourcing contingents is going to play a big role in any relevant sourcing strategy so any cost management measures must be sensibly balanced against quality, efficiency and risk management performance concerns.
Cost management as conducted across the marketplace today can be segmented into two major management practices: cost savings and cost correction. Cost savings is the traditional lowering of costs by negotiating deals, incentives and discounts within a CW program practice. Cost savings can be segmented further into hard or soft savings dependent on an organization’s corporate definitions and budget rules. Cost correction, meanwhile, is getting the right value for the money you spend through the transformation of how a CW program and engagements are structured and executed.
There are numerous cost management practices available to CW programs. Here is a “baker’s dozen” list of costs management initiatives being executed in the marketplace today.
This list comprises both cost savings and cost correction management practices being executed in the marketplace today.
The Baker’s Dozen List of CW Program Cost Management
- General rate management
- Partner optimization strategy
- Optimizing discounts/incentives
- Job and skill set description alignment management
- Remote engagement savings
- Attrition reduction management
- Talent sourcing channel mix and engagement classification management
- Direct sourcing
- SOW engagement management
- Spend data management and analysis
- CW program digital transformation
- CW engagement TCO and enhanced resource utilization
- Strategic CW workforce spend management
Here’s a breakdown of the first six cost management best practices being executed in the marketplace.
General rate management. Falling into both the cost correction and cost-savings categories, general rate management entails maintaining visibility into your bill and pay rates, statutory costs requirements and markup cost structure so you can actually manage them. You’ll want to ensure compliance with an established rate card and maintain its alignment with local and macro market trends. You’ll also want to ensure your staffing partners are participating fully at each individual requisition level to ensure competition. When extending or modifying engagements, review rates so they are aligned to their revised tasks. Also, manage active rate card data to eliminate overbuying and underfunding. You’re managing to the correct funding level of an CW engagement, not just the lowest costs.
Partner optimization strategy. This also involves both cost correction and cost savings. You would execute newly obtainable discounts/incentives with an optimized (reduced) strategic partner portfolio. Annually reset/competitively energize your strategic staffing partner portfolio membership, with high performers staying and low performers being demoted or released from the program. All requisitions should be competitively bid with your optimized strategic partner portfolio Tier 1 and/or Tier 2 groups.
Optimizing discounts/incentives. Execute all appropriately available discount/incentive opportunities that drive CW program priorities without negatively affecting strategic partner performance and CW service engagement quality. Measure performance quality to understand limits and impact of a discount/incentive strategy. With this cost savings strategy, be careful how much of a discount to push for, though, because you do not want to underfund a partner’s CW engagement service delivery resources.
Job and skillset description alignment management. As a cost-correction strategy, solid job and skillset descriptions help eliminate overbuying on CW skill levels that are not required. Therefore, it’ s a good practice to establish and maintain up-to-date job and/or skillset descriptions for your CW engagements. And when CW engagements are extended, apply appropriate job and/or skillset descriptions for the new work engagement and review rates so they are aligned to the engagement’s revised tasks.
Remote engagement. Leverage new emerging cost savings opportunities by engaging some CW resources remotely versus traditional on-site arrangements, which can result in savings not just in terms of less real estate being needed to house the workers but also by opening up pools of talent in areas with lower costs of living. Also, you could potentially reduce asset management investments to facilitate CW engagements by having them provide their own tools and equipment, such as laptops.
Attrition reduction management. Attrition can be quite costly in terms of lost productivity as well as increased recruiting and replacement costs, making attrition management another cost-correction strategy. Establish visibility into your CW talent engagement attrition occurrences and rates and then set reduction goals. Provide talent management training to engagement managers to drive down unnecessary, unplanned CW attrition. Another way to save within this strategy is to evaluate and enhance the sourcing process to eliminate any unnecessary, repetitive expense for each engagement. Also, again, clean up your job and skillset descriptions to ensure the talent being engaged is the right talent for the role. While the program can share in the savings from the lower attrition rates, your partners’ margins are also enhanced, leading to enhanced cost-effectiveness throughout your supply chain.
The Part 2 of this cost management Baker’s Dozen practices list will cover the final seven cost savings and correction practices being executed in today’s marketplace.