Contingent Workforce Management – The Business Case Conundrum

What is the right level of detail required to gain executive endorsement for your Contingent Workforce Management project?
We help clients with all sorts of initiatives around Talent Management, including designing and implementing their Contingent Workforce Management Model.  A typical project initiative usually requires an initial business case, to be approved by senior management – especially if project resources and funding are required.

The conundrum for a Contingent Workforce Management review project is:

The effort to baseline current state can be greater than what is required to prepare a compelling business case to move forward.  We may end up needing a business case to develop the business case!
How do we baseline current state when most contingent worker data is hidden and distributed across an organisation?  And, how accurate and granular should the current state data be?
Most organisations who have decided that they need to review their contingent workforce management strategy, realise that they just don’t know their risk exposure or the total cost of their contingent workforce.  Would you be able to answer your CEO if he or she asks “what is our total spend on consultancies and contract labour hire?”  Typically, there is no one place to manage this and to provide a clear, global lens.  So you probably already have a pretty good hunch that the organisation is not managing its contingent workforce effectively.

Where to start?

Usually the top three business drivers for a contingent workforce management review are:

• Achieve cost efficiencies
• Reduce and manage risk
• Gain visibility of the total contingent workforce

Once you are clear on the business drivers that any proposed solution must meet, you need to define the level of information you are going to gather in order to baseline current state.

Base-lining current costs

Usually to get a project up, achieving cost savings is required.  But, how much time and effort is required to identify and cost every single contingent worker in the organization?  Can you gather a sample of data, and use this to extrapolate an overall cost analysis?  What percentage of the contingent workforce needs to be included to be reasonably representative of the whole?
Some points to consider:

• Who are the key decision makers?  What are their expectations in terms of level of detail required?
• Who are the other stakeholders involved?  If you decide on an “80-20” approach, how will you socialize this with those very detail-oriented stakeholders, such as Finance and Legal?  You will need to manage this.
• How will the business managers react?  What else is going on for them right now?  You do not want to upset the business by poking around trying to find information about their contingent workers, unless you really need to.  People don’t like change, and you don’t want to create resistance to your project before you have even had a chance to gain senior management endorsement, let alone develop a change management and communication strategy.

Usually it is too hard and frankly, a waste of time, to develop a highly detailed and complete base line.  We recommend working towards a representative baseline.  Where data is missing, we build it out based on clearly defined assumptions.  Just make sure you manage expectations of the senior stakeholders and that you are able to justify your assumptions.

Leverage Current Risk for your business case

Whilst cost is an obvious lever for gaining project endorsement, identifying current risk is also very powerful.  If you are able to identify a sample of “risky” practices or contingent worker engagements, then this can really support your business case.  Some risky practices include:

• Engaging direct contractors – how do you know that they are managing statutory charges and insurances appropriately?  Your organization may be liable for unpaid payroll tax and superannuation should you be audited;
• The long-tenured contingent worker – those who have contracted to your organization for more than two years may represent potential co-employment risk.  Some companies we have worked with have had instances of contractors working for them for over 10 years;
• Failure to ensure that the contingent worker has maintained appropriate licenses to perform their job.  This can expose your organisation to workers compensation issues should there be any related workplace injuries;
• Failure to ensure that the contingent worker maintains current working rights.  The fine for engaging illegal workers can be up to $66,000 per worker;
• Has your organization provided training and development to contingent workers?  Are they being invited to employee functions such as Christmas celebrations, or other company events?  Are there instances where contingent workers are being treated as employees?
• Non-standard engagement contracts that leave your organisation exposed.

The Case for Visibility of the Contingent Workforce

I have already established that visibility of the contingent workforce, or in fact lack of visibility, is an issue for many organisations.  If it wasn’t, this article would be redundant!
Contingent workforce visibility can be achieved through implementing technology, such as a Vendor Management Solution.   Most likely this would be included in your solution proposal.  Visibility of the contingent workforce enables you to understand and then manage the associated costs and risks.
And yet visibility can provide so much more:

• The opportunity to optimize your blended workforce – by defining which roles are candidates for contingent workers, and which ones are designated as permanent
• Ability to utilize your contingent labour more effectively – by re-using them on other projects as required
• Agility to respond to changes in your market.  Usually when organisations need to cut costs, training is the first to go, followed by contractors.  Full visibility of your contingent workforce enables you to make better informed decisions as to which workers (or which talent) are critical and which ones are expendable.

At first glance, developing a business case to review and redesign your Contingent Workforce Management strategy can feel a little bit like “how to eat an elephant”, or as one client has put it “like trying to move a huge boulder”.  Assessing the needs of your stakeholders, taking a pragmatic approach and socializing this with the decision makers along the way, can turn that boulder into a rock (it still may be a largish rock, but certainly not a boulder!).
Final thoughts – I am often intrigued at what drives an organisation to change, especially when we are talking about potentially unmanaged risk and costs.  Some organisations are reactive and respond when something goes wrong, and others are more proactive.  I will write about this in my next blog posting.