The Future of Contingent Workforce Management - White Paper

The Future of Contingent Workforce Management

Sponsored by:

Christopher J. Dwyer Research Director Ardent Partners October 2013


©2013 Ardent Partners Ltd. www.ardentpartners.com

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REPORT SPONSORSHIP

The views and opinions in this report represent those of Ardent Partners at the time of publication. Sponsoring companies have had no measurable influence on the content and research in this report. The contents of this research report are the exclusive property of Ardent Partners. Please direct any comments or questions regarding our research sponsorship policy to Ardent’s Chief Research Officer, Andrew Bartolini at [email protected] and/or 617.752.1620.

Sponsor: DCR Workforce is a vendor-neutral contingent workforce management solutions to help clients maximize the contributions of their agency contractors, freelancers and project teams. We provide the guidance, hands on assistance and technology needed to achieve optimal results. Smart Track, our proprietary cloud-based talent management platform, assists in providing customizable VMS and MSP Solutions to manage, procure and analyze your talent with complete transparency, real-time control, high performance and decision-enabling business intelligence.

DCR Workforce is a certified minority and woman-owned company that has received numerous awards and recognitions for its commitment to support diversity businesses and minority employment. For more information, please visit the DCR website: www.dcrworkforce.com, and learn more about DCR on Facebook, LinkedIn, and Twitter

Contact:

Name: Debra Bergevine Title: Vice President, Marketing Tel: 508.380.4039 Email: [email protected] Link: www.dcrworkforce.com



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It’s no secret that organizations are increasingly relying-upon contract talent for a variety of critical roles, many of which have significant corporate ramifications. In managing a contemporary contingent-based workforce, executives across the globe must fine-tune their strategies to anticipate a future in which contract talent is an even bigger piece of the corporate puzzle, and look to a series of next-generation concepts and technologies to drive true value out of this complex category, all while building an effective (and deep) framework that supports all avenues of the contingent workforce umbrella.

Contingent Workforce Management: An Evolving Space

Contingent labor was once an understated component of the modern business, relegated to seasonal assistance or temporary fill-ins while full-time equivalents (FTEs) were on vacation or leave. While some organizations saw fantastic value in contract talent (mainly via independent contractors (ICs) hired for their specific skill sets), the category was not high on the radar screen of top-level executives. Procurement departments may have had a strategic eye on the category from a spend management perspective, but the industry was years away from transforming into a true enterprise force.

It wasn’t until the economic downturn of the last decade that contingent labor (also known as contract labor) began raising true corporate attention. Forced to “do more with less” and hesitant to make permanent investments, corporations turned to contract talent to fill critical needs across the organization. Although it took some time after the crisis for some companies to see an uptick in demand for their products and services, there was a global-wide requirement to prepare for the inevitable recovery and contract talent proved to be an ideal means of supporting that notion.

Soon after the economic downturn, a new concept arose: the contingent workforce umbrella. This “umbrella” encompassed the contemporary scope of contract talent, including:

Traditional temporary talent, sourced via staffing vendors, agencies and suppliers Complex contract talent, which is comprised of SOW-based projects, professional services,

consultants, etc. Independent contractors (ICs) Evolutionary concepts not seen in the past, such as “enterprise-workforce-as-a-service”

and total talent management

What was truly interesting about the contingent workforce umbrella was the fact that each “level” warranted its own specific capabilities, competencies and processes (as well as technologies). This forced organizations, with both light and heavy contract talent numbers within their total workforce, to expand their programs as a means of better managing the various complexities of this category, including spending, suppliers, performance, quality, effectiveness and various risks.



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Over the past few years, the use of the contingent workforce umbrella has dominated the contingent workforce management (CWM) industry. Companies that have “mastered” the art of traditional temporary talent management are now focused on the next great venture: the SOW, services and IC aspects of the umbrella. The evolving nature of the contingent workforce umbrella will form the veritable foundation of CWM programs of the future.

Current Considerations for Contingent Workforce Management

As detailed in the previous section, the contingent workforce umbrella is a powerful mechanism to both describe and manage the current continuum of contract talent. However, within that continuum exists a series of issues that nearly every organization using contingent labor and all of its contemporary forms (SOW, services, independent contractors (ICs), etc.) face. These issues include (but are not limited to):

Make or buy: the role of outsourcing the management of contingent labor. Many organizations face a common dilemma in regards to their growing contingent workforce: manage the spend, suppliers, capabilities and greater program in-house, or, outsource the management of this critical category to a third-party provider, such as a Managed Service Provider (MSP)? For companies that choose to manage its CWM program in-house, difficulties can crop up in the form of mismanagement of certain labor types (specifically independent contractors and their associated risks of federal audits, misclassification and co-employment; without robust processes, there is often a lack of visibility into classification risks) and a lack of visibility into the more complex aspects of the contingent workforce, such as SOW-based projects and services. Even organizations currently outsourcing the management of contract talent to an MSP are not driving the full value of these outsourced services, as some enterprises will focus on the MSP’s capabilities in managing traditional temporary labor in lieu of tackling complex talent.

o Although outsourcing the management of contract talent may not be an option for all enterprises, there are a variety of benefits to letting an MSP, Vendor Management Systems (VMS) or hybrid solution handle the day-to-day operations of contingent workforce management. Automated processes will be fully-linked for maximum visibility and effectiveness, while the expertise inherent with an outsourced services provider can help tackle even the most complex of issues (including misclassifications or audits related to independent contractor engagement).

o In-house programs are best-suited for those organizations that have a small contingent workforce, including those organizations that don’t regularly utilize SOW-based talent or professional services (including ICs). When companies blend in the management of the varied components of the contingent workforce umbrella, the inherent complexities can sometimes prove to be outside the expertise of an in-house program.



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Reach of the program. Whether or not CWM is outsourced, some enterprises struggle with the “reach” of their program. How far should the program extend? Are all suppliers of contract talent currently captured within the program, not just staffing agencies? Are all inherent risks addressed by the program’s capabilities? Can the program effectively seize control of SOW-based projects and services across the entire organization for maximum CWM visibility? The reach of a CWM program is just as critical as its capabilities and competencies.

Limitations of data…and intelligence. Intelligence has become a hot “buzzword” within the contingent workforce management stratosphere, and rightfully so. With CWM becoming increasingly complex in recent years, data and the business intelligence it can support has risen as the most valuable component of any contract talent management program. Data into current spending, suppliers, projects, associated expenses, contractors and other avenues provide a perfect picture into the future of contract talent utilization. Contingent labor is actively increasing year-over-year within the average enterprise, and any information, or intelligence, about what this program or category could look like a year (or more) from now is a valuable asset in greater corporate planning.

Where to automate? One of the primary pressure-points of any CWM program is the overarching notion of automation. Which processes are ripe for technology enhancement? How can technology (i.e. VMS) address all of the needs of the current program? Automation will always be a center of focus, since classic processes, such as staffing supplier management and requisition-development, are often the first areas to be addressed by new technology. However, as the contingent workforce management umbrella continues to evolve, automation must be a factor in meeting the needs of complex contract talent management; aspects such as SOW project management, independent contractor compliance, identity management, payment triggers, milestone-tracking, etc.

Who owns the program? In the greater “game” of contingent workforce management, many teams find themselves with more “coaches” than “players.” Various units, such as procurement, human resources, operations and finance, all have a hand in managing the typical contingent workforce management program providing their specific expertise: procurement is adept at managing the complexities of SOW and services, HR brings an air of talent management to the program, . But, too many leaders can take away from the focus and effectiveness of the program. When critical decisions are to be made, who has the final call?

Contingent Workforce Management: The Future State

There may be no other space in business today quite like the contract talent industry. Not only is the utilization of contingent labor increasing year-to-year, this is a category that can have major



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ramifications across all functional areas, business units, and corporate divisions. Not surprisingly, Ardent Partners believes that the future of contingent workforce will take many shapes.

The Next Generation of VMS Technology

The interesting thing about contemporary contingent workforce management is the technological support that can enhance all facets of the modern CWM program by automating key capabilities, providing data and insights, and actively managing the more nuanced components of the contingent workforce umbrella. Within this technological realm, VMS solutions are actively preparing for the “next generation” of the CWM industry through a variety of new and different attributes.

VMS technology, originally designed years ago as an offshoot of e-procurement, served as a consolidator and manager of the wide variety of staffing suppliers / vendors within the typical organization’s CWM program. These solutions evolved over time to automate and support requisition management and contract talent spend management. In the future of the contingent workforce industry, VMS technology will still be a prominent means of centralizing, automating, managing and support key functional processes within the average CWM program. However, there are aspects to CWM that VMS solutions will revolutionize, including:

Simple reporting to deep-dive / actionable analytics. Running simple reports with spend or supplier insights, are often an everyday part of leveraging VMS solutions in day-to-day contingent workforce management. However, having the capability to not only drill-down and deep-dive, but to have true intelligence to anticipate future demand of contract talent, is a differentiator that positions these platforms well in the future.

Full management of SOW-based projects and services. Industry professionals have begun to understand the relative significance of complex contract talent, which includes SOW-based projects, professional services and contractors. These items can cause headaches for even the most hardline procurement executives because the reach of these projects can extend into nearly every functional unit across the enterprise, making the ability to track and manage them a massive undertaking. Aspects such as milestone-tracking, delivery date performance, payment triggers, and qualitative capabilities are on the horizon. And while some VMS offerings tout their ability to manage SOW and services in this fashion, a fantastic indicator of the future is when this general capability is commonplace in all CWM-related technology.

Integration with talent management systems and processes. As the industry is currently learning, talent is a key component of the future of contingent workforce management. And with talent becoming just as crucial a factor as cost or quality in this arena, it’s important for technology platforms to support the talent management aspects of the future CWM program. Capabilities will be developed for easily tapping into “already-



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known” talent, as well as social media platforms integrated deep within existing technologies (and programs) to find and retain new talent.

Talent’s Role in the Future of CWM

Corporate projects often utilize contractors and other freelancer-type temporary talent due to their unique and varied skill sets and industry-specific expertise. It is often said that, within the greater CWM industry, independent contractors are the “highest level of talent available.” With this in mind, organizations must reevaluate their talent engagement and management strategies to ensure that their programs in the future run on the fuel of top-tier talent at nearly every contracted position. CWM will no longer be a simple game of finding, hiring and utilizing contract labor; it will become an arena that, over the next five years, will experience a seismic shift to a talent-led program…and this is where next-generation talent engagement and other nuanced strategies (such as a reliance on social media) will come to the forefront:

Developing more than just a talent pool. When most organizations think of a “talent pool,” they picture a simple list of names from which they can pull talent when specific needs arise. However, the talent pool of the future will evolve into a multifaceted network that not only includes “already known talent,” such as retirees, alumni and past contractors, but also communicates regular insights and updates (i.e. dates, locations, assignments, etc.) into upcoming and ongoing projects. This capability will help identify projects that align with specific talent within the pool and generate a means for communicating and engaging with this talent, which brings us to…

Social media as a strategy for engaging talent. Although the advent of social media as an effective business is no longer the new kid on the block, the fact is that social networks are a largely untapped channel to engage contract talent. By leveraging Twitter, LinkedIn, Facebook, and other social media/business platforms, organizations can ensure that they are regularly-linked to new talent that may align effectively with their corporate project needs.

Managing the evolving concept of “enterprise-workforce-as-a-service,” also known as eWaaS. Talent is currently engaged from a variety of outside sources, but not always centrally-managed and tracked in a robust manner. The concept of eWaaS entails deriving talent from online labor marketplaces and online staffing suppliers. These nascent portals may be an ideal means to source contract workers and services for both high-leverage and low-wage positions, but activity on this front is not often centralized. The VMS of the future will help mitigate risks on this front, including managing rogue spending, ensuring compliance to internal and federal policies, and properly aligning talent generated from online sources to high-priority enterprise projects.



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Intelligence and the Next Wave of Analytics

Enterprises across the globe consistently look for a “leading edge” in their operations, and this driving force applies to all enterprise functions. Within the contingent workforce management world, end-user programs typically yearn for valuable intelligence which they can use to evaluate their processes, understand the ramifications of contract talent, and build a proper future viewpoint that can serve as the basis of total planning, forecasting and budgeting.

The notion of intelligence truly revolves around the concept of a “next wave” of analytics and reporting (Note that some of the following capabilities are available in select offerings but are not yet widely available). As discussed earlier in this report, simple reporting and data extraction serves a more traditional functional purpose rather than a truly strategic one. The CWM program of the future requires the next wave of analytics that will include capabilities that can effectively:

Pinpoint the moment a contract talent-led project misses a milestone or is in risk of going over budget. SOW and services are dominating the current CWM landscape; there is no reason to think that this will change in the future. Projects linked to contract talent often have significant corporate ramifications (technology deployments, fiscal or tax deadlines, etc.), so untracked milestones and missed delivery dates not only throw off the course of these projects, but can also wreak havoc on enterprise-level goals and objectives and associated budgets. Next-generation analytics will address these issues by providing real-time updates and alerts, while providing execs and managers with a full dashboard of all corporate projects tied to contract talent.

Drive a 360-degree view of all aspects of the contingent workforce umbrella. Social media networking, talent pools, staffing agencies, SOW-led projects, professional and recurring services…the contemporary CWM umbrella is quite complex, so much so that even the most trained eyes cannot dig deep enough to know what’s going on across the enterprise. The next wave of analytics must provide intelligence into every component of contingent workforce management and allow program managers the ability to track spend, suppliers, services, projects, milestones, delivery dates, risk assessments and compliance control aspects.

Provide a vision of the “future” through deep forecasting. The future of CWM takes a page from the Chief Financial Officer’s playbook in utilizing the intelligence gleaned from analytics to accurately plan and forecast for the future. Deep knowledge of current contract talent (which, of course, revolves around the contingent workforce umbrella) can go a long way in understanding attributes of the program weeks, months or years from now, allowing program managers to build more accurate budgets and tackle projects that can benefit the greater organization. For example, forecasting utilization of contract talent 12 months out can help corporate executives align the right resources (both financial and talent-wise).



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Summary and Recommendations

The future of the contingent workforce industry hinges on a variety of aspects, including the value of intelligence, the benefits of outsourcing versus an in-house program, and the concept of talent as the primary focal point of the forward-looking CWM program. The following items should be of major consideration for any organization that wants to take their program into a new and improved archetype:

Understand the benefits (and challenges) of an outsourced model and identify the specific areas that require expertise and automation. The interesting thing about the contingent workforce industry is the many complexities that play into the contemporary CWM program, from analytics and identity management to talent management and requisition development. The modern program can benefit from outside expertise and automation through a holistic series of technology-supported processes and consistent guidance on managing SOW-based projects and services.

Make “talent” the focus of the next-generation program. The CWM programs of old were typically focused on cost reductions or cost savings, without prioritizing the notion of talent or effectiveness of temporary labor. Now, with the contingent workforce umbrella encompassing the full spectrum of contract labor and bleeding into critical corporate projects, talent management becomes a crucial component of the next-gen CWM program. Organizations must develop deeper talent pools and effective means of networking within those pools to effectively align talent with enterprise labor and project needs.

Develop a 360-degree view of CWM data and the ability to analyze and use it. “Data” doesn’t become “intelligence” until it’s truly actionable and can reinforce educated decision-making. The CWM programs of the future will be concerned about the ramifications of contract talent across the greater organization…making intelligence a critical component of any program. Organizations must ensure that data can be utilized or leveraged in greater corporate budgeting, forecasting or planning to help determine future contract talent demand and align the proper resources to upcoming projects or initiatives.



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ABOUT ARDENT PARTNERS

Ardent Partners is a Boston-based research and advisory firm focused on defining and advancing, the accounts payable, procurement, and supply management strategies, processes, and technologies that drive business value and accelerate organizational transformation within the enterprise. Ardent also publishes the CPO Rising and Payables Place websites. Register for access to Ardent Partners research at ardentpartners.com/newsletter-registration/.

ABOUT THE AUTHOR

Christopher J. Dwyer, Research Director and VP of Operations, Ardent Partners

Christopher J. Dwyer is considered a premier thought leader in the world of supply management and a renowned expert in contingent workforce management, travel and expense management, and meetings/events management. He is the preeminent source of thought leadership in these areas and evangelizes the evolution of complex spend management. Over the last eight years, Christopher has written hundreds of research reports and interviewed, advised, and benchmarked thousands of end-

user professionals and executives in regards to their complex spend management operations. Christopher joins Ardent from the Aberdeen Group, where he spent more than seven years tracking the progression of complex category spend management strategies and solutions while helping to educate the global market. At Aberdeen, Christopher led Aberdeen’s Global Supply Management practice and oversaw and contributed to the company’s coverage of procurement, strategic sourcing, spend analysis, ePayables (accounts payable automation) and supplier management.

Christopher leads Ardent’s coverage of complex spend management, including the evolution of contingent workforce management, T&E expense management, and all other complex categories of spend and provides research and advice so that end-user organizations can enhance their capabilities and competencies and make the smart decisions that will ultimately improve their performance. He welcomes your comments at [email protected], on LinkedIn (www.linkedin.com/in/christopherjdwyer), or Twitter (@cjd_ardent).

Industry Standard “Fine Print:” The information contained herein has been obtained from sources believed to be reliable. Ardent Partners, Ltd. disclaims all warranties as to the accuracy, completeness or adequacy of such information. Ardent Partners, Ltd. shall have no liability for errors, omissions, or inadequacies in the information contained herein or for interpretations thereof. The contents expressed herein represent Ardent Partners’ best analysis at the time and are subject to change without notice.

© 2013 Ardent Partners, Ltd. All rights reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. Solution providers and consultancies should take special note that Ardent Partners reserves the right to seek legal remedies including injunctions, impoundment, destruction, damages, and fees for any copyright infringement (which includes but is not limited to usage of any Ardent Partners content in company collateral, presentations, and websites) in accordance with the laws of the Commonwealth of Massachusetts and the United States.

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The Future of Contingent Workforce Management - White Paper