In the first of a three-part series, we will discuss our approach to central management of contingent labor programs. Historically, these programs have been tightly managed within a single company under a common workflow. These monolithic programs provide broad scale efficiencies and unified supply bases across a large enterprise. Entire support industries have sprung up to enable this model, such as MSPs to provide governance, and VMS systems to manage the workflow. We see further expansion of these programs to now include all procured services (i.e. Statements of work) and bolted-on direct sourcing models.
As demonstrated in our previous white paper, middle market companies have typically utilized contingent labor at similar rates as their larger counterparts. Yet, historically, they have not organized this category sufficiently, and as such have been forced with paying higher rates and have had a challenging time attracting the best talent for their contract openings. They also haven’t garnered the attention of contingent labor providers, such as MSP/VMS and RPO firms, which provide high levels of service to only their largest customers.
Many middle market players (and one could argue some large enterprises) are part of one or many of the coalition groups defined below. While these firms arguably can find benefit from standalone contingent labor programs, they can also look to expand their value by joining forces with other members to gain economies of scale and expand access to top talent.
First, let’s define what we mean by “coalition” for this purpose. We are defining it in the broadest business sense possible: groups of financially linked companies, organizations, agencies or business units that share a common need for and access to an external labor force. Under this definition, there is an intent to in some fashion to align some or all parts of their contingent workforce programs to gain benefit for each coalition member.
The features of a coalition by our definition may include:
- A group of independent organizations linked in some way
- Able to gain benefits by contracting third-party services or goods as a group
- Typically comprised of smaller or middle-market companies
- Linked through a “parent” or investor organization able to benefit by leveraging group buying power across the organization
- Not necessarily under the same ownership
Now let’s look at some of the forms a coalition might take:
- Holding companies – Conglomerate companies that own majority stakes in several different member business. Examples include Berkshire Hathaway, Comcast and Danaher among many others.
- Investment companies – Private equity or other investment vehicles that hold significant equity in companies within their portfolios. There are many examples, including Carlyle group, Serent Capital, etc.
- Group Purchasing Organization – Companies without common ownership but participate in group buying programs that leverage aggregate size of their membership to gain improved pricing and synergies, such as Omnia Partners and InsightGPO.
- Government Agencies – Federal, state and local governments with different missions, budgets and even potentially different funding sources.
- Consortiums – Similar organizations which pool resources with the objective of participating in a common activity for achieving a common goal. These can be formalized under a legal structure (e.g. Alyeska Pipeline Service Company) or assembled under a simple contractual agreement (e.g. Five College Consortium)
- Franchises/Licensees – A broad spectrum of operating arrangements where each organization goes to market under a common brand and leverages common business systems, processes and specifications. Commercial examples span from McDonalds to Blue Cross/Blue Shield.
- Associations – While likely the loosest of all the coalitions we’ve discussed, associations can play a role in providing group buying power for industry segments. Associations have long provided their affinity groups with third-party insurance, credit, and other goods and services.
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.
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