4 Steps to Creating a Solid Business Case for Contingent Workforce

The nature of work is changing rapidly today and with the amount of disruption innovation happening across all industries, organisations need to become more agile so that they are able to manage the different situations that come their way effectively. Building a Contingent Workforce that is flexible is one of the ways to achieve agility but there are some factors to consider before you dive into this project.

During the recently concluded Contingent Workforce Conference in Sydney, delegates from different industries came together to discuss the various steps for building a robust business case to engage a Contingent Workforce.  The following steps are by no means exhaustive, but they do offer an excellent starting point for anyone who is looking to create a decision-making framework for hiring Contingent workers.

Step 1: Deciding what should be Contingent-ised

When deciding whether to hire a contingent resource or a permanent member of staff, have a look at the points in the infographics for a start. These will help you identify the key areas of your business and assist you in tailoring your workforce solutions to suit the needs of your organisation.
Do note that this is not an exhaustive list but it can assist you to develop business rules that will take the guesswork out of the process and allow you to generate repeatable quality results.
For example, IT projects may be focused on skill availability and duration as variables when deciding whether a contingent resource or permanent staff would be suitable. Whereas Finance may consider duration and whether the resource is to be hired for a strategic or tactical project as its major factors in the decision-making process.
Many times these decisions are affected by cost. So here’s a tip when comparing the cost of a permanent vs. a contingent resource – divide the full-time annual permanent staff’s remuneration by 220 (number of work days in Australia) and this gives you an equivalent daily rate for a Contingent Worker (inclusive of public holidays, annual leave & sick leave). For example, if the permanent resource costs $150K, it means the contract equivalent would be about $700 per day.  Any additional payment over this amount will be a premium to cover variability of work. The question to ask, then, is who should be paying this premium.

Step 2: Developing metrics to measure success

If you can measure it, you can improve it. Developing objective metrics that are connected to your business drivers (business drivers are defined as values that are critical to the success of the business strategy) is key to helping you identify areas in need of improvement so as to ensure the success of your Contingent Function.
There are generally two types of metrics:

  • Lead metric – this is a predictive metric that is input oriented. For example, in relation to health and safety, the lead metric may be % of all Contingent workers who have undertaken Occupational Health & Safety (OH&S) training.
  • Lag metric – this is the historical measurement of desired goals. For example, the number of OH&S incidents last month.

You can use the “line of sight” methodology (see diagram below) to develop these metrics. It provides a clear picture of the different business drivers and allows you to connect the desired outcomes to the relevant metrics. This ensures that you are measuring what is important to the business and doing it in an objective, reasonable manner.

Step 3: Developing Statement of Work (SOW) Brief

If you think that the Gig Workforce hasn’t got any legs, then you will need to master preparing great SOW briefs.
The SOW brief is a document created to ensure that you get fit for purpose skills for your contingent projects. It is important that the SOW document specifies exactly what is wanted when it is needed by and how much it should cost.
The infographic below is an outline of the key elements for a comprehensive SOW brief. It includes information on who should complete it and why this person should be doing it. Having this document in place will enable you to align the expectations of the organisation with the person/vendor completing the work.

Step 4: Management Best Practices

Now that you have had your Contingent Workforce programme up and running for some time, you might be wondering what more you can do to increase your return on investment (ROI). Reviewing your current processes, identifying issues, and best practices would be a great way to start.
Some of the issues and best practices as discussed by the conference delegates can be found in the diagram below. If you identify with most of the items listed in the “Current” box, then there is significant room for improvement.
So to help you increase your ROI, it might be worthwhile to engage specialists agencies who can assist you in aligning your contract management processes and ensuring that your Contingent Workforce is engaged, properly on-boarded, paid accurately and that your organisation risks are minimised. By having your all contractors centrally managed, you can readily change the shape, number, type, location, skills, and cost of your workforce to take advantage of any market conditions.
There is no one-size-fits-all answer to your Contingent Workforce needs and it really depends on the industry your organisation operates in and your business drivers. But I hope these steps did at least provide you a place to start. If you have any questions or comments, please feel free to leave them in the section below. Looking forward to hearing your thoughts.
Image: Shutterstock 

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