By Leslie Stevens-Huffman

When it comes to managing a contingent workforce, one size doesn't fit all. Through trial and error, companies have created customized programs or modified off-the-rack models to achieve their first- generation objectives. But just when domestic staffing suppliers and expenditures seem firmly under control, companies face a new set of challenges, forcing them back to the drawing board.

Companies can adapt their current programs to meet emerging challenges by understanding the benefits and drawbacks inherent in each program structure and the possible variations.

Program Types

"Choosing the right model hinges on the company's environment, the immediate priorities and the sourcing model," says Brian Korsmeier, managing consultant for Archway Workforce Consulting. "When you get right down to it, most companies are not using a pure-play MSP/vendor-neutral management program supported by technology, but a hybrid variation that fits their specific needs."

While maximizing savings remains an evergreen objective, it's no longer a top priority, having been pushed aside by other key corporate concerns. According to data from Staffing Industry Analysts' "2009 Contingent Buyer Survey" and sources interviewed by Contingent Workforce Strategies magazine, the following are companies' current priorities:

1. Risk mitigation and compliance. Credit the financial oversight imposed by Sarbanes-Oxley and the increased scrutiny of 1099 workers by the IRS with catapulting this item to the top of companies' to-do lists. Forty-nine percent of companies plan to incorporate SOW consultants into their contingent program over the next two years, while 34 percent are considering the addition of a compliance vendor. Still others are seeking a way to corral elusive consultants who vacillate between the payrolls of staffing suppliers and ubiquitous consulting firms, skirting contingent pay programs and tenure limits.

Jason Ezratty, managing partner with Brightfield Strategies, summed up the risk mitigation challenge confronting companies: "Most companies are failing at the nuts and bolts of compliance because they don't know how to write an SOW or secure privacy through NDAs. In other cases, they are failing to protect intellectual property, patents or source code or are simply failing to use proper offboarding procedures to stop departing contingents from accessing company systems."

2. Contingent workforce planning. Before the widespread adoption of vendor management systems, companies rarely knew how many contingents were on assignment -- let alone why they were needed. Now, the data reveal a pressing need for holistic workforce planning as contingents account for nearly half of all workers in some professional segments and even higher percentages in labor-intensive or seasonal environments. Given the emergence of contingents as a strategic resource, 47 percent of companies plan to incorporate contingent workforce planning into their company's talent management process over the next two years.

"We're looking to be more strategic and not simply review how many times we've procured a contractor," says Steve Schulz, director of talent acquisition for Rockwell Collins. "We want to know what the right mix of employees should look like globally, where we can capitalize on available subject matter expertise and when using contractors makes more sense financially."

3. Global expansion. Only 21 percent of companies currently manage contingents through a comprehensive global program, but given the potential cost savings and the need for governance, an additional 44 percent have set their sites on expansion within the next two years.

It's important to establish the parameters for a global program before structuring a model," suggests Thomas Kaminsky, managing director for Crescendo Consulting Solutions LLC. Most VMS programs may be able to handle currency conversions, facilitate procure-to-pay transactions and connect financial data downstream, he says, "but legal compliance and complexity increases the further east you go, and not all staffing vendors or MSPs have the knowledge or relationships to facilitate a global program."

Each program type has its benefits and drawbacks, the importance of which will depend on the company's program goals. We've taken a close look at each program type and noted their strengths, weaknesses and attributes that could be either. We also discuss each with respect to companies' top three priorities.

Master Supplier

The model of choice for early program adopters, the master supplier model is still the optimal choice in selected situations.

"In a single location with high-volume needs, such as call centers or distribution facilities, having an on-premises master supplier that manages back-up or subvendors still makes a lot of sense, because they take on more of the line manager's responsibilities and offer customized service," says Korsmeier.

Advantages

• Proactive recruitment practices facilitate rapid order fulfillment within the supplier's area of expertise.
• Customized service delivery and influence over the selection of on-site personnel.
• A single point of contact enhances accountability and communication.
• Companies are able to purchase turnkey staffing packages or leverage negotiations in geographic areas with sparse competition.

Disadvantages

• Model may not accommodate a large, diverse need for professional contingents.
• Vendors may charge higher markups or service fees to manage sub-suppliers.

Ratings Key
+ Program strength
- Program weakness
± Toss-up, standard requires modification

Variations
Master supplier as MSP. Master supplier also serves as an MSP and oversees suppliers in designated categories, offering a hybrid model that combines the best of both programs.

Single-location master supplier. Companies tuck master suppliers that service a single location under an MSP to extend their global reach or create a single point of contact.

Model operations: master supplier
+ Risk mitigation and compliance. Master suppliers create a framework for compliance through customized onboarding and offboarding processes and the ability to mitigate risk through a single contract or SLA. They may even supply sample NDAs or contingent agreements or allow companies to consult with their attorneys. Transferring independent contractors onto the payrolls of staffing firms may reduce risk and eliminate the need for a separate compliance vendor, but supplier technology and expertise may not accommodate SOW consultants and freelancers may resist the change.

+ Contingent workforce planning. While enterprise-wide planning requires a collaborative effort and should involve the company's workforce strategy owner, master suppliers may assist companies by identifying opportunities to augment current staff or substitute contingents for full-time employees by leveraging abundant resources, lower labor costs or workflow design.

± Global expansion. Companies may be restricted by a master supplier's global footprint, lack of expertise or limited strategic partnerships and technology.

Self-Managed Programs

The original model, self-managed programs continue to be a viable option for companies with ample resources.

"A self-managed program is the ideal model for companies that want to maintain control," says Kaminsky. "It's important to have that conversation, because outsourcing contingent program management will fail if the culture won't support it."

Advantages

• Strategic alignment among the company's goals, culture and contingent labor.
• Direct communication with suppliers and unencumbered decision-making.
• Long-term program continuity and low failure rates.
• Predictable program costs.

Disadvantages

• Limited access to external pay and bill data and industry intelligence.
• Time expended coordinating multiple vendors.
• Resources cannot be easily redeployed during downturns.
• Lack of internal expertise in specialized fields such as IT or engineering.

Variations
Interim programs. "Some companies are hiring MSPs to set up their contingent workforce program, with the idea that the MSP will hand over the operating manual in three years," says Ezratty. "Companies believe a self-managed program will be more cost effective in the long run."

Model operations: self-managed programs
+ Risk mitigation and compliance. Companies are fully responsible for risk analysis and policy development, while using several staffing firms may necessitate multiple contracts and contingent agreements, making oversight cumbersome. On the plus side, in-house program managers have the ability to articulate protective rules to line managers and the authority to enforce compliance and exercise control over independent contractors.

± Contingent workforce planning. Internal staff may lack the data to analyze contingent supply or the expertise to compare the financial ramifications of hiring contingents vs. full-time employees. Advantageously, managers have complete access to company data and an insider's view of the culture, political climate and competitive pressures which are considerations during the strategic planning process.

- Global expansion. Assuming the company has global operations, expansion could be achieved by leveraging the company's infrastructure and resources but managing diverse regulations and a large vendor pool may overburden in-house teams.

Managed Service Providers

Nearly half of companies have implemented MSPs to lower costs and facilitate global expansion.

Advantages

• Single point of contact and unbiased management of staffing vendors.
• Companies cite reduced time in filling contingent requisitions.
• Large vendor pools enable rapid response to unanticipated needs and large projects.
• Access to industry pricing and wage data.
• Configuration flexibility accommodates vendor changes, independent contractors or the addition of risk compliance firms.

Disadvantages

• MSPs may not supply ample support or take a cookie-cutter approach to service, warns Korsmeier. They often fail to adjust their delivery model to fit the company culture or satisfy the unique needs of line managers. Debbie Merritt, senior manager commodity management for Rockwell Collins, recommends formal training sessions, so MSP program managers understand their roles and the environment prior to implementation.
• Renegade spend. Some niche suppliers may decline to participate, yet continue to service loyal managers. Companies cite IT and marketing managers as frequent holdouts, who believe they have unique needs and require extra coaxing.
• Arms-distance relationship with staffing firms, although some companies have abandoned this practice noting the advantages of direct vendor communication.
• Single pay models carry inherent risk that necessitates an in-depth assessment.

Variations
MSP with vendor-neutral technology. Allowing suppliers equal access to requisitions reduced back-door selling at Rockwell Collins, Merritt asserts, while her colleague Schulz says the company's MSP keeps vendors on their toes and provides the best talent at the best price. But initially, line managers overstated job requirements or sought increased security by accepting candidates priced above rate card ceilings.

"The vendor-neutral model only works when you trust the market or need additional suppliers," notes Korsmeier. "If you have doubts, it's better to go with a hybrid solution."

MSP with tiered suppliers. When an MSP uses customer-selected tiered suppliers, it offers outsourced program management and the security of vendor relationships. Supplier trust is vital; 47 percent of companies currently use tiered suppliers and 79 percent have an approved list. To satisfy diverse needs, creative companies have designed the ultimate hybrid: using tiered suppliers for some categories while vendors compete in others.

"IT contingents are procured on a vendor-neutral basis to maximize cost savings," says Vaughn Williams III, category manager at San Diego Gas & Electric. "The balance of our contingent staff comes from first-tier suppliers. In the administrative category, we have a primary minority vendor to help us meet our diversity objectives and a back-up supplier. Renegade spend is still a challenge, even after three years, but this configuration saved us 45 percent on our total expenditures in the first year and reduced time-to-fill by an average of two weeks."

Model Operations: MSP
± Risk mitigation and compliance. Program managers are capable of following regimens and procedures, but they may lack the savvy to help companies identify potential risks or implement new policies. When Rockwell Collins capped assignment lengths to manage co-employment risk, managers initially resisted the change.

"We requested an MSP program director, who could have conversations with line managers around our new co-employment policies," says Merritt. "We needed someone at a high level who could articulate the reasons behind our strategy and address manager concerns."

± Contingent workforce planning. Outsourcing the day-to-day management of contingents allows companies to play a strategic role and analyze data, but they may receive little assistance from MSP program managers who lack experience with contingent strategy development, workflow analysis or workforce design.

+ Global expansion. Companies can ride the coattails of large, globally positioned MSPs by leveraging their strategic partnerships and knowledge of country regulations. Schulz recommends leading off global expansion with an easy win, like Canada, which is similar to the United States, and then adding one country at a time.

Tailoring Tips

Companies and experts concur that tailoring an existing program is more economical and less disruptive than starting over and fortunately, most MSPs and staffing suppliers are willing to make adjustments. But even minor adaptations require effective change management and experts unanimously warn against the idea of using a "big bang" roll-out to implement program changes.

"Start the change process by identifying every possible objective and then narrow the list to the top three or four," suggests Kaminsky. "No model will satisfy every need and realistically, companies will face trade-offs."

Anticipate the future to the greatest extent possible when altering your program so additional changes don't require a complete makeover.

Run a pilot to test and tweak program modifications before implementation. Over-communicate successes to gain supporters and bolster manager confidence during trial runs.

And don't decide on a VMS or in-house technology until you've settled on a program structure, warns Korsmeier. Remember: Technology isn't the solution -- it enables the solution.

"Program refinement is an ongoing process; if something isn't working, companies shouldn't hesitate to make changes," says Merritt.

Leslie Stevens-Huffman is a freelance writer in Southern California who has 20 years' experience in the staffing industry. She can be reached at lesliestevens@cox.net.