In our last post, we discussed our approach to central management of contingent labor programs. Our next post will focus on the benefits that contingent labor realizes when it is leveraged within a coalition structure.
In today’s competitive marketplace, nearly every company utilizes external labor. Smaller firms typically struggle from insufficient mass to leverage buying power and best practices that larger firms benefit from allowing them to effectively manage this category. These well-documented benefits include:
- Reduced cost – Typical savings from centrally managing staffing providers ranges from 7-25%.
- Reduced risk – Challenging labor laws can put companies in danger of tax penalties or joint employment suits.
- Improved supplier mix – Ability to alter the supply base to best fit changing business needs.
- Reduced administration – Move the sourcing activities off managers and HR.
- Elimination of contract management – Establishes one contract, one invoice process instead of one to many.
- Increased Visibility – Understanding the breadth of your workforce beyond your FTE’s.
Since the upper market of Global 2000 programs are well established, new nimble providers and technologies are now focused on helping mid-market firms gain the same benefits as large firms. Further, through coalitions, these individual firms can gain even more benefits by actively managing contingent labor across their conglomeration of members. Let’s break down what this means:
- Joint buying power – Rolling up the spend under a group will help further reduce services fees rather than negotiating individually with staffing providers who can gain access to more programs. Further, discounts can be offered for firms that gain large amounts of spend across the coalition.
- Supplier mix – A potentially larger supply base will be available to help fulfill labor requests. While needing to avoid dilution (i.e. having too many vendors receiving requirements) the coalition can expose additional vendors by niche and geography to help fill requirements tactically. It can also analyze supplier performance across the portfolio and proffer superior performing suppliers to other coalition members.
- Direct talent acquisition – Organizations can use shared talent pools to directly access skills and share resources across the portfolio. This is especially useful for high-skill or niche positions where the resource may be needed sporadically (e.g. workers with federal security clearances).
- Expand membership – Other organizations within the coalition can opt-in to the program through a common contract process. In some cases, it can be as simple as an addendum under the coalition’s charter.
To be clear, coalition members may have disparate products/services and go-to-market strategies. Hence, it would be unwise to think of these organizations as having a unified one-size-fits-all program. Each member requires different talent needs, processes and some unique vendors or niche suppliers. However, many of the constructs and suppliers may overlap and, in some cases, provide synergies otherwise not experienced.
Programs then can be thought of as having a standard framework which likely applies to most of the constituents. These are standard operating procedures for most contingent labor programs, regardless of whether they are managed via a third-party MSP or in-house.
From the standard structure, a set of variable processes may apply, including:
- Approval Workflow – Coalition members will have their own methods for permitting spending levels and approving orders/headcount
- On-Boarding Procedures – Different jobs may have different requirements, including background checks, licenses, certifications, etc.
- Time collection mechanisms – Time may be collected within a VMS or outside of it, with time and expense data passed into the VMS.
- Integrations – Program data (e.g. Invoice records) may be integrated into corporate systems in a unique way for coalition members.
There may be other unique features not mentioned above that may apply to some coalition members. In all cases, it is important to anticipate variable structures so they can be accounted for as part of the coalition’s initial setup. The danger is that procedures are “hard coded” for the initial coalition members to the detriment of those that join later.
Some challenges do need to be accounted for in program construction, depending on the modality of the coalition:
- Under some scenarios, competitors may be members of a coalition. The depth of the competitive forces needs to be accounted for and activity firewalls need to be established so that the benefits are gained without providing undue benefit to one or another firm.
- In the case of PE portfolio firms, it is important to have a clear continuation of services covenant as part of any separation as it is expected that the portfolio company will be sold off at some point. This will allow them to still take advantage of the network while counting on a future where they will be separated from the coalition.
- Program analytics need to account for variances in program activities. For example, suppliers may have different fill rates for different coalition members due to the disparate roles they fill in each. In the end, a one-size-fits-all score carding method should not be adopted.
To learn more about how your organization can expand its value by joining forces with other coalition members to leverage economies of scale and gain access to top talent, download our white paper, Coalitions and Contingent Labor: Leveraging your company’s existing corporate networks to win the war on contingent talent.