CWS 3.0: April 5, 2011 - Vol. 3.9

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Feature: Clear Expectations

Contingent workforce managers want to know what metrics they need to be tracking in their programs. How will they know when their providers are performing at their best or when managers are responding promptly?

Peter Drucker once said, "Checking the results of a decision against its expectations shows executives what their strengths are, where they need to improve, and where they lack knowledge or information."This quote illustrates one of the many purposes for metrics and data. A company may actually be saving money, but aren't sure how they'll know when the outcome matches the expectation. Developing a strong set of metrics to gauge the performance of your CW program can help guide your program to better results and can help in establishing clearer expectations and experiences among all parties involved in the program.

Research analysts at Staffing Industry Analysts strongly believe that all CW program metrics and measurements can be put into four discrete buckets: quality, efficiency, risk, and cost. 

  • Quality: of candidates, of program, of billing accuracy
  • Efficiency: of candidate submissions and onboarding
  • Cost: of talent, of program tools and resources
  • Risk: of various losses resulting from imperfect compliance

In what order those areas are important really varies by company and by initiative. I often work with companies that are more focused on quality and less the cost. Most often, these are pharmaceutical firms or financial institutions where the quality of the services can be paramount and the mitigation of risk can have a direct impact on the overall corporate objectives. At the same time, manufacturing companies and logistics organizations are often ruthlessly focused on bottom-line cost and efficiency.

In 2009, SIA pulled together a program benchmarking advisory committee. This committee was comprised of several of the most sophisticated contingent workforce managers as well as staffing providers to develop a set of metrics that would accurately determine program health and opportunities to improve. The objective was to focus on actual usable metrics and less on opinion, gut estimates and anecdotal evidence.

Having a metrics program helps you see how your program is working. Many program owners assume their programs are working, saying either: 1) I know my program is working because no one is complaining or 2)I know my program is working because I track 150+ service-level agreements. Both of these approaches are misguided, if not technically wrong .But they miss out on the fundamental purpose of the metrics. Instead, start with a simple question: "what is the purpose of your program?" In other words, what is the fundamental problem you are trying to solve?

To paraphrase Peter Drucker, the purpose of a contingent worker program is not to save money -- or to mitigate risk or to reduce invoice count. The purpose of a contingent worker program is to make sure your company has the right access to the right contingent talent at the right time and for the right price. Within that fundamental objective, of course, could be secondary goals such as saving money or managing exposure or increasing efficiency, but only to the extent these secondary objectives do not interfere with the fundamental goal. Tracking savings is pointless if your hiring managers can't operate because the contingent didn't show up as required or was unqualified relative to the position requirements.

In addition to ensuring what you're tracking is meaningful to your primary and secondary goals, your metrics set should meet the following criteria:

* Actionable -- There should be a clear understanding of what the metric tracks and how deviations translate to their actions. You should know what to do, if it goes up, down, stays flat or is far off your intended target..

* Common interpretation -- the metric should be easily understood by people in your organization, free of jargon.

* Transparent and simple -- the metric calculation should be as simple as possible, with inputs available in transparent.

* Accessible, accurate data - the data should be easily or relatively easily acquired from a trustworthy source. 

A metric set is perfect if it meets all of these criteria.

So what would those metrics be? The complete answer is beyond the scope of this article, but for the sake of brevity, here I describe a proposed metric set for one of the four critical areas: Quality.

One of the difficulties in measuring quality is that quality means different things to different people. But there are several dimensions to quality in contingent labor, quality of hire, quality of service, quality program, etc.

So we've broken out quality into a few sub-metrics, the first of which is retention.

Some recommended retention metrics include:

a) Total number of CW assignments of any type or any duration

b) Total number of CW assignments started within the period

c) Total number of CW assignments completed or terminated for any reason within the period

d) Number of assignments terminated due to CW performance by engagement managers (EM) prior to the scheduled end-date (include performance-related terminations even if after termination the position was "backfilled" by another CW. Do not include assignments that were terminated because the work or project was completed prior to the expected end-date.)

e) Number of assignments terminated by CW prior to scheduled end-date (include all early terminations by CW, even if the assignment was terminated only one day prior to the scheduled end-date. Do not include assignments that were terminated because the work or project was completed prior to the expected end-date.)

Another quality subset is simple: customer satisfaction. Just how satisfied are your hiring managers with the services? We propose measuring this using the following:

a) Number of CW assignments that an engagement manager would re-engage a CW as a CW, if able (When calculating the number of assignments, please be sure not to include any assignments that were terminated early because of CW performance issues)

b) Number of CW assignments that an engagement manager would hire a former CW as an employee, if able (this is a close calculation to conversion ratio)

c) Conversion ratio -- the percentage of contingent workers converted to full-time employee status (Try before you buy)

Finally we look to hiring manager satisfaction with the overall program. For this, we recommend using a net promoter score methodology. As we recommend for all of our CWS Council members, we decided to use a Net Promoter Score methodology to gauge CW program satisfaction.

Developed by Satmetrix, Bain & Co., and Fred Reichheld, the concept was first introduced through Reichheld's book The Ultimate Question, and SIA has recommended companies use the NPS scoring methodology as the standard for measuring and improving customer loyalty and satisfaction for several years.

Put simply, NPS is a single value representing how good of an experience a customer has. It is derived from survey results to a single question, "How likely would you be to recommend our contingent workforce program to a friend or colleague? (rated on a scale of 0 -10)" Those awarding scores of 9 or 10 are considered "Promoters." Those scoring 6 or less are considered "Detractors." NPS is calculated as: Percent Promoters -  Percent Detractors = NPS Percent.

The conservative definition of Detractor typically yields low NPS values (e.g. 5 - 10). Even leading brands with strong reputations would consider an NPS of 70 percent to be very high. You can find more information on Net Promoter Scores at: www.netpromoter.com.

a) Engagement Manager Net Promoter Score of CW program services

b) Staffing Supplier Net Promoter Score of CW program services

c) Contingent worker Net Promoter Score of CW program services -- this is important so you can clearly manage the CW experience.

Obviously the list of metric sets can go on, and will include the other three program dimensions -- Risk, Cost and Efficiency. But by starting with quality and making sure you track the experience of your hiring managers, contingent workers, and suppliers, you will best be able to assure long-term success -- not just for your program, but for your career as well.

Bryan T. Peña is VP of contingent workforce strategies and research at Staffing Industry Analysts. He can be reached at bpena@staffingindustry.com

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