By Subadhra R. Sriram
In the early '90s, the vendor management software industry started out as one-off custom software development projects for large companies that lacked qualified IT workers thanks to the Y2K bug hiring frenzy. The industry has a come long way since then and has demonstrated its value proposition -- over and over again in numerous case studies -- beyond the basics of automating and making more efficient the contingent worker recruitment process. Today, the VMS industry enables companies to achieve the sort of things they once could only dream about.
And an excellent case in point is Nationwide Mutual Insurance Co., a private company based in Columbus, Ohio. The company is part of the Nationwide Group of Cos., which offers diversified insurance and financial services. Its mission is to recruit, develop and retain a diverse and talented workforce -- both traditional and contingent. Nationwide relies on its VMS for a range of capabilities, from automating its $200 million contingent workforce program to personnel planning to rate intelligence.
It all began in 2005, when the company decided to centralize the process of acquiring contingent resources. The idea was to deploy a single VMS so that overall measurements were possible, easily available and consistent across all skill sets and functions. Charles Ritter, Nationwide's director of enterprise resource management, led a team that sought a VMS provider that could promise the scale needed for centralization and growth, a clear path to future enhancements, and the ability to deliver features specific to the company's needs. Peopleclick Authoria was selected as Nationwide's VMS provider.
Initially, the VMS was just a procurement tool for acquiring IT contractors. Fast forward to today. "Our contingent resources could be sitting in India, or in Scottsdale, Ariz., or Des Moines, Iowa. We still manage the tool and the process centrally from Columbus. We have actually achieved our goal and objective of managing it centrally as one team," says Ritter.
Now the system is a management tool that provides extensive reporting. Currently, the financial services provider's contingent worker approach involves using more global providers and its strategy is to consolidate to a single supplier or fewer suppliers within a business unit. To that end, Peopleclick Authoria makes available all kinds of billing rates and supplier intelligence, enabling Nationwide to make smart business decisions.
"The tool is really helping us hone our overall workforce management as well," says Janis Glick, manager of external resources. Take, for example, a business unit that needs additional resources, but the hiring manager is not sure how to proceed. The VMS data can reveal critical information, such as the composition of the unit's workforce. If the hiring manager learns that 60 percent of the business unit is contractors and 40 percent is full-time employees, for example, he or she can start to think about workforce balance, and consider whether the unit is too dependent on contingents. Should the unit utilize more employees, she might consider. Apart from workforce planning, the VMS business intelligence helps with individual unit policy, says Glick.
Moreover, the VMS is also used for managing the headcount of statement of work consulting workers once procured. (See box.) Ritter admits, however, that the tool's functionality regarding procuring SOWs is not as robust as he would like it to be. Still, most companies, even those with mature contingent workforce programs, are still a ways away from having their VMS handle the management of SOW resources.
The Back Story
Ritter and Glick are part of a 15-member team that runs the contingent workforce program at Nationwide. Referred to as the external resource team, it is divided into three groups: One group handles consulting, including SOW; another involves IT staff augmentation and contractors; and the third supervises temporary flexible staffing that involves non-technical roles like clerical and administrative workers.
All communications between internal clients, suppliers and the VMS provider are managed by the external resource team. In 2005, just when talks of centralizing the program were under way, Ritter and his team took a broad view of who needed to be included in the discussion. They knew that successful change required the buy-in of those who would be giving up direct control of all things contingent, yet would have to use the new system on a day-to-day basis. So they made their case to the leaders of the individual organizations.
Seeking buy-in from a broad range of leaders in the company is a strategy that change management experts say is the key to success. Business unit leaders can pave the way and provide ongoing reinforcement in ironing out the inevitable chinks in the path toward a preferred supplier program and VMS usage. In spite of all the groundwork laid by the external resource team, managing clients' expectations around utilization of preferred suppliers continues to be the single biggest challenge.
"I have a supplier I want to bring in" is a common manager refrain. Glick responds with a firm no, and talks about the overall value of the program as opposed to a one-off relationship with a supplier. "It comes down to establishing your value," says Glick. She urges them to use the CW program and talks them through any issues. "They end up saying âââ€š¬ËÅ“okay, I'll try it.' They then go through the program and find a worker within a week and talk about how the process was both easy and great," says Glick.
In fact, Glick has taken the customer buy-in process a step further. For starters, the legal department had working relationships with suppliers and was not happy about the CW program team taking over. "They seemed to know what they needed. So I asked them to bring their suppliers into the program and we set them up to manage their space," says Glick.
So the legal department posts its own requisitions and continues to work directly with the concerned suppliers, while the external resources team gets involved if any issues crop up. Glick and her team also keep contracts current and inform the legal department and its vendors of tool enhancements. The legal staffing vendors are still held accountable to meeting the guidelines and expectations of the CW program. "It's a great way to expand the program as well as usage of the tool," says Glick.
The tool also helps Nationwide maintain compliance. Though the VMS doesn't necessarily track contracts, it does ensure that the managers only engage vendors that are set up in the tool. Any request to add a vendor comes through Glick's group, which makes sure that all the terms of the master supplier agreement have been met.
Of course gaining the support of your internal stakeholders is essential, but approval from the top is what gives a CW program authority. Luckily for Ritter and Glick, C-level support has never been an issue. "I think the more you establish your value, the more they expect of you," Glick says. "And they are continually raising the bar on us every year."
At the other end, especially in the initial stages, staffing suppliers have viewed the VMS with great suspicion. There are those that feel that not only does the VMS eat into their pricing, but the tool also prevents them from having regular face-to-face communications with hiring managers.
"The introduction of the VMS has introduced an element of commoditization" to the CW process, Ritter says. But you still have to manage the relationship with suppliers. So the external resources team, on its part, meets daily with representatives of its 34 suppliers. But what helps are the clear expectations that are set for them. Ironically, that's where the VMS is of great assistance. The data within the tool help managers recognize which suppliers within the program are best equipped to meet their specific needs.
The way the program is set up, the suppliers are divided into two groups: preferred suppliers and strategic suppliers. The preferred suppliers provide all the company's generalized staffing needs. The strategic suppliers are the big staffing agencies that operate globally and provide a range of skill sets worldwide. The preferred suppliers are measured by a standard scorecard, the others by a more customized one where queries involving project delays and offshore/onshore resource ratios have to be answered.
The standard scoring template does recognize that all suppliers are not equal. Therefore, the company does not evaluate vendors on the number of submissions. Instead, it measures them against the opportunities given to them. Glick says that she cannot compare a supplier that makes 100 or so placements with a local niche provider. Often the niche firm could get a perfect score, while the larger supplier is doing more for the organization in terms of volume and favorable pricing. The value that the supplier is providing has to be part of the overall assessment. The company also considers the supplier's operations in its rankings and gives equal weight to all metrics.
Nationwide's ruling philosophy is that everything is equally important and the metrics all tie into one another. Tracking "metrics is the only way you can effectively manage turnover. Without them it becomes a âââ€š¬ËÅ“he said, you said, she said scenario,'" says Ritter. The team's objective here is ensure that the internal stakeholders get what they need. If there is an issue that a metric highlights, the matter is taken up immediately with the suppliers. "We are not going to wait six months and go, oh by the way, your billing rates are too high," says Ritter.
So the external resources management team has daily conversations with suppliers. Face-to-face discussions help remove any misgivings or clarify any doubts that they may have. "The answer lies in being clear, consistent and honest," says Glick. It also helps that the suppliers have easy access to the external resource management team. The same suppliers are also trained on how the VMS works and what the rules of engagement are.
Supplier management has helped the Nationwide CW program team eliminate worker quality issues. Concerns such as quality, finding the right resources, pricing are all non-issues today, says Ritter. This happy state of affairs has a lot to do with the VMS, claim both Ritter and Glick.
"[With] a program our size -- we couldn't possibly be doing it without a VMS tool," says Ritter. The VMS provides reporting, a most obvious advantage. The tool supplies metrics that allow corporations to manage the CW program as a business.
As far as Nationwide is concerned, the VMS is a tool for all seasons. A recent customer satisfaction survey -- the first of its kind in the company -- revealed that the VMS tool is highly accepted. People found using the tool to be easy and quick. Further, the CW program is well-established. But Ritter and Glick don't want to rest on their laurels. They hope to continue to expand the program within the Nationwide Group of Cos. in the United States and abroad.
Tips for Program Buy-in
It's been an eight-year association. And as Nationwide's contingent workforce program matured, so has its reliance deepened on the Peopleclick Authoria VMS tool. "Our solution has kept up with their business needs as well as the [CW] space in general," says James Pierce, VP, Strategic Solutions, Peopleclick Authoria.
There are those that believe that Peopleclick Authoria has taken the VMS to the next level, predicting workforce requirements and patterns over a longer time cycle. But it's the ability of the tool to serve the client in a customized fashion that has experts calling it the next-generation VMS.
Peopleclick Authoria is owned by Bedford Funding. Peopleclick's merger with Authoria has allowed the VMS tool to tap the new company's performance and compensation management expertise. "It helps us because if you have been in the space long enough, you can do some rationalization on an hourly rate that an FTE would be compensated, and that can help drive you toward what a reasonable [temp] rate within a marketplace would be," says Pierce.
Beyond talent, the VMS can manage the process by which a company can acquire just about anything -- be it paper, office supplies or travel services. This is identified as services procurement and there is a great demand for it. Peopleclick Authoria does provide Nationwide with services procurement solutions involving divergent human capital needs.
In response to why Peopleclick Authoria's statement of work function is not as robust as Nationwide would like, Pierce says that the space is maturing and they are looking at adding functionality to allow for greater flexibility. But where the tool wins is with its scoring functionality in the area of business reporting and analytics.
Suppliers traditionally have resented vendor management systems, but the scoring system provides suppliers with a firm understanding of their performance. In addition, suppliers can also track how they perform against their peers. And that is all possible thanks to VMS data. "We have empowered them to be successful in self-managing their program," says Pierce.
Nationwide's CW program is supplier-funded, and the company earns discounts via early payments and volume of spend with suppliers: Per its vendor agreements, Nationwide gets a discount on the bill rate if it pays its suppliers within a short-defined window of time.
Going forward, Nationwide plans to bring its healthcare workers under the aegis of its program. Currently, the tool, which is Web-based, houses all of the company's offshore resources as well. A recent contract renewal with Peopleclick Authoria indicates that it is going to remain Nationwide's tool of choice for the next few years.
What to Ask When Choosing a VMS Provider