SI Review: November 2013

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Confessions of a Procurement Guy

A former manager sees the error of his ways, offers advice and help to providers

By Bryan Peña

I’m sorry. I would like to apologize to all the providers that suffered through my own procurement learning curve. Let me explain.

I jumped into managing contingent workforce as a category while not understanding the unbelievable differences between sourcing materials and sourcing people. I apologize for the buyers who don’t understand that markup is not profit and the ones who do but don’t think you should make any of the latter, expecting you to provide talent as a public service. I look back on some of the deals I negotiated and I am surprised that the providers didn’t walk out of the room or curse me — although I’m sure some did when they were out of earshot.

One of the lesser-known issues with many procurement professionals is that we fancy ourselves jacks of all trades. By combining procurement tools and techniques as well as negotiation acumen and interpersonal skills, I’ve often prided myself on being able to source anything. And over the course of my career, that was somewhat true. From office supplies to software, furniture to airline contracts, as long as you follow a consistent methodology and properly involve stakeholders, there really is no limit to the types of categories that can be resourced successfully by a confident procurement person. Or so I thought.

As part of this evolved understanding, I have come to accept that a more evolved collaborative approach is necessary to succeed in today’s staffing universe — an approach based on mutual appreciation of each other’s business and how to create a reciprocally beneficial relationship. Cost and reducing cost will always be a core issue and the tension between buyers and provider will always be a harsh reality, but it is possible to move beyond that. But how?

The contingent universe is wide and deep and can be quite overwhelming. Here are some core themes that providers need to understand in order to be successful. This is a large market and by evangelizing these core themes within your organization and amongst your clients we can work together to create the change we need to move this market forward.

Common Language

Like any relationship, the supplier and buyer need to be able to speak a consistent language, one that clearly allows for mutual understanding and resolution. For example, at a Contingent Workforce Strategies Council event for staffing buyers, we asked members to define a relatively simple and seemingly straight-forward benchmark: fill rate. Everyone in the contingent workforce market knows what a fill rate metric is supposed to measure: supplier/program performance in filling open requisitions. It’s an obvious and important metric. However, we were surprised that out of the 17 companies represented at the event, we found 17 different definitions. Some defined it as time in hours from the moment a requisition is released to the moment a candidate is selected. Another doesn’t measure fill rate in terms of time at all but instead as a percentage of total hours requested vs. total hours filled. Yet another looks at fill rate as a function of open requisitions after promise date. I can only imagine how difficult it would be as a provider to satisfy buyer expectations when the very nature of something as simple as fill rate can be so varied. This speaks to the need for a consistent nomenclature. By encouraging consistency in what companies can measure and how they measure it, we can greatly increase the level of efficiency in how services are delivered and how success is measured.

Mutual Understanding

One of the more interesting developments in today’s contingent workforce environment is the evolution of the role the contingent workforce plays in today’s buyer companies. It’s interesting to note the evolution in the titles of attendees to our buyer events. Eight years ago attendees to our CWS events were human resources managers and buyers; now attendees have titles like contingent workforce lead, third-party labor manager or contingent workforce program lead. More and more companies are recognizing that to create value effectively in managing the contingent workforce requires a skill set that is not just about cost savings, contracts and negotiation, but about risk control, labor law and human capital management.

Click on chart to enlarge.

As these companies dedicate more resources to this increasingly important labor source, educated buyers will come to demand more from their providers beyond cost savings. Essentially the educated market is coming to expect strategic solutions as a way to create value. This migration from cost savings to value creation presents a huge opportunity and challenge for staffing providers. The opportunity is for those providers that can provide a service that sets them apart from the others. Many buyers are focusing on the challenge in filling roles, or deciding on how to build a 21st century workforce.

Suppliers that can help provide strategic solutions will be better positioned to succeed. But the challenges and the risk are both very real to those suppliers that don’t understand the new paradigm. For those suppliers — which is the bulk of the provider population — their challenge will be to develop a strong value proposition that resonates with the buyer community. The first step in getting there is to understand what the job is like on the other side of the table. This goes for both providers and buyers alike. So this all begs the question: what do providers and buyers need to know in order to be successful? While the answers may be debatable, here are just a few high-level topic areas that providers and buyers alike need to understand to create a 21st century workforce.

  • Contingent workforce industry basics. The history and application of the contingent workforce along with how macro and micro economic events shape the landscape. Categories of contingent labor. Future direction and how legal and legislative events may shape demand and usage.
  • Program design. How companies structure contingent labor governance models and the pros and cons of each. Process mapping rules and how to structure scopes of work. Supplier and user adoption best practices.
  • Supplier management strategies. The RFx (request for quote or request for proposal) process and best practices for evaluating supplier performance. Service-level agreements vs. key performance indicators. Scorecarding and issue resolution.
  • Cost management. Supplier and buyer economic model. How do the parties make money? Cost savings definitions and revenue implications for suppliers.
  • Legal/risk management. Risk assessment and analysis. Contract basics and government agency oversight (Occupational Safety and Health Administration, National Labor Relations Board, etc.). Co-employment and indemnification.

Our field is constantly evolving and as we comprise an ever-greater piece of the labor economy, the need for collaborative approaches and partnerships will become even more critical. By understanding the needs of the new contingent workforce buyer and building solutions tailored to these demanding clients, providers can ensure long term success and turn away business that doesn’t fit. We’ve come a long way from the days that I believed I could source materials and people the same way. Thanks for bearing with me.

Bryan Peña, a former procurement manager, is vice president, contingent workforce strategies and research, at Staffing Industry Analysts. He can be reached at bpena@staffingindustry.com

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