CWS 3.0: February 13, 2013

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Cost Correction, Not Savings

In our industry, cost savings is a perennial topic of conversation. For contingent workforce managers, it is usually a directive coming from the top. For staffing suppliers, it is usually that same directive being passed down from the buyer. We know that there is a relationship between cost and quality, so how do we manage the cost without affecting the quality?

Procurement and HR have always had a different mindset when it comes to cost savings. Procurement looks to obtain cost savings by negotiating better rates, or incentives and discounts being applied to the program. But to HR those same strategies mean risking the quality of the talent and relationships with suppliers. It’s not that saving the company money isn’t important to people in HR, it just has a different level of importance.

So what can be done about this disconnect? Instead of focusing on cost savings, consider cost correction. Cost correction is really what we are trying to obtain: getting the right service at the right cost. Knowing that your company is getting the best service at the best price and at the same time knowing that you are paying your suppliers the right price will enable the CW program to be successful for everyone.

There are many areas within a CW program where cost correction can be applied. From a review of your VMS and or MSP fees to a review of the hourly rates being paid for your contingent labor, there are many options for a program to obtain “savings” without affecting quality.

But you need to have an understanding of what goes into your bill rate and what your suppliers require in order to be profitable as well. Understanding how your pricing strategy will affect your supplier’s profitability can enable you to balance quality with market-correct pricing. Further, understanding what goes into the supplier’s markup is critical for someone in HR as it can have a huge impact when trying to convert a contingent worker into a full-time employee. Such knowledge will enable you to make better hiring and salary decisions.

So the next time you are tasked with identifying cost savings, suggest pursuing a cost correction instead, as getting the right service at the right price is really what’s most important for your CW program and your company.

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