Hiring Exchange - A HotGigs blog

Axium / Chimes Files Bankruptcy

Axium / Ensemble / Chimes (The largest VMS player) files bankruptcy.

January 8th, Axium International, Inc. who is the parent company of Chimes Ensemble Group filed chapter 7 bankruptcy which has shaken the contract & contingent staffing industry.

Chimes clients included major players such as UnitedHealth Group, GM, Toyota Motor Company, Ford, Perot Systems, Morgan Stanley, Kaiser Permanente, AT&T, Bell South and many more are now scrambling to either find a replacement MSP/VMS or to bring their contract workforce management back inside the company – which is a daunting task. 

Many of the staffing vendors have been told that they won’t get paid for most of November and December 2007’s billable time – which leaves firms (and their consultants) in a really bad situation, not to mention the companies who have outsourced their entire contingent workforce management to Chimes.

This was a huge surprise to us in the staffing industry – and even to many of the Chimes employees who we work with everyday at major client accounts. Axium purchased Chimes from Computer Horizons in February of 2007 – so it hasn’t even been a year since the acquisition, which adds to the confusion, especially the inflated price of $80 million which had most of us in the industry scratching our heads. 

There is some speculation that the writers strike has a role to play in the downfall since Axium was a major player in payrolling the TV/movie industry which has all but been shut down since the beginning of the strike, however, the majority of people close to the business said it was mainly because of poor management and a complete failure of the integration of the Chimes business into the acquiring company, and a very paranoid set of lenders who jumped to swipe the bank accounts shutting the company down.

Most importantly, these companies will have to figure out how they’ll regain the confidence of their staffing suppliers, who are most likely not going to be happy losing 1-2 months of billable revenues (especially after they’ve been margin squeezed already), which could result in a large volume of contractors leaving their accounts with the pending loss of pay and future instability.

Some companies have reportedly converted the Chimes on-site program teams to their own full time employees – and are re-establishing direct vendor relationships with their vendors to return to their pre-outsourced state of internal and manual management.

Some staffing firms are excited about the collapse, with the prospect of working directly with their client managers again – and not having to deal with what they called bottleneck of the MSP/VMS program to fill contract positions, however, their excitement is tempered with trying to isolate the damage they may have suffered with any consultants currently engaged in the accounts.

For companies that are seeking VMS/MSP types of solutions – this will surely add another dimension to what strategy they select, and how they build their CWM strategy going forward. 

CONVERSATION:

• Does your company current work with any MSP/VMS partners?

• How does this affect your relationship with them?
• Where you considering an MSP/VMS in 2008?  (how would this effect your thinking?)

News Links:

LA Times

Staffing Industry Analysts

Talkin' bout your generation

Recruitnik has an interesting post on how, as a member of Generation X, she ends up bridging the gap between Boomers and Gen-Y candidates:

Boomers have a comfort level to ask me internet related questions without feeling out of touch. Asking “What is an avatar?” is not a silly question. It is valid to me but probably not to a millennial. To them it is obvious because I believe they were born with one assigned to them. Gen Y’s look at me as old enough to have a clue but more for validation or praise but definitely not about the technology.

Gen Y’ers (AKA Millennials) live in the 2.0 world. They don’t know life without cell phone, personal computers, the internet and information at your fingertips for all.

Allison Boyce, a sourcing manager at Deloitte Services and another Gen-X recruiter, weighed in with a more detailed assessment of Gen-Y candidates on ERE.net:

Generation Y candidates actually require a chance to have fun. They can't imagine all work and no play because they don't perceive that they need to work very hard. They have productivity tools, they are connected, and they are loaded with options that let them do whatever they please.

Boyce offers some practical advice to Boomer and Gen-X recruiters as to how to properly manage expectations in terms of salary, promotions and time off, all of which they feel entitled. She provides strategies for turning around the conversation, starting by acknowledging what's important to them -- time, money, promotions, and a sense of fun -- and then asking questions that serve to, in her words, "turn the conversation into something manageable and scalable".

Penelope Trunk  offers a different insight into the inner workings of Gen-Y'ers: that they are in fact, inherently  conservative in their lifestyle and approach to their careers:

Gen Y are really hard workers. They have been working harder in school than any preceding generation. And the pace that they sift and synthesize information puts the skills of their elders to shame. So why complain about the demands of this generation? They are great at work and they want to have work that is meaningful and challenging.

And this is exactly what everyone else wants from their work as well. These demands are not new. It’s just new to hear them from an entry-level worker. But in fact, it’s reasonable and fundamentally conservative since these are the values this generation has been taught to live by.

The jury is still out as to whether we are facing a labor shortage in the coming years. If the most dire predictions prove to be true, then Gen-Y will be increasingly in the driver's seat in terms of how companies attract talent. And even should those predictions prove to be overblown, the Gen-Y work style will increasingly dominate the workplace, and -- given the continued growth in the contingent workforce -- the staffing and consulting industry as well.

A new approach to managing preferred vendors

Guest post by Joe Golemo

One large local financial institution recently decided to dramatically revamp their preferred IT vendor list. They had issued an RFP to about 60 vendors and after 7 to 8 months of cogitating, decided to significantly reduce the number of preferred vendors -– in fact the number on the new list is exactly 12 –- 5 on the first tier and 7 on the second tier for each region of the country!

Word has it the IT organization put this plan in place for some very specific reasons:

• Develop common pricing for each position – a smaller number of vendors is easier to manage, but its even easier still when you issue a rate sheet to the vendors as this company did.
• Eliminate pass-throughs – why pay gross margin to two vendors when you don’t have to?
• Assure each preferred vendor does enough business to reach the higher levels of the revenue-based discount schedule. 

Here is how the process is supposed to work:

1. The Hiring Manager enters a position description into the VMS system.  If he receives at least five resumes from the first tier vendors and at least one person is qualified, the hiring manager must hire one of these consultants.  If the Hiring Manager doesn’t get five resumes or gets five from the first tier and none are truly qualified for the position, he must go to the second tier.  However, when goes to the second tier, the first tier vendor gets a dink in the helmet and with enough dings, the submitting vendors are in danger of being thrown off the list.
    
2. In order to enforce the no pass-through rule, hiring managers cannot even speak with IT firm that are not on the approved list.  If one of the approved firms is approached by a hiring manager or by an unapproved consulting firm with a pass-through deal, they are required to inform procurement about the situation so the hiring manager can be reprimanded.  If they don’t, they risk being thrown off the list.  If procurement finds out they did a pass-through anyway, they will be thrown off the list.
    
3. BTW, Account Executives (AEs) from the approved vendors are encouraged to create an on-site office and to meet directly with each hiring manager in order to understand specific and on-going needs, etc.  None of that “all communication must go through the central VMS system” for this company.  Although in this case, the AEs might welcome this rule as the volume of openings is overwhelming.  This company told the preferreds they will receive hundreds of openings per month!!  Over 400 consultants rolled off during the first few months of this new system due to their policy limit of 12-months of billable time per consultant.
4. The preferred vendors are evaluated every week and the many metrics are closely watched.  The first tier firms must have a placement for every three resumes submitted.  And, most of their consultants must be W-2 employees – they can only have a low percentage of 1099.
5. This is definitely a higher volume, lower margin approach and clearly, there are great long-term rewards for performing and following the rules and great risk for the opposite.

What do you think of this approach?  Will the IT department's stated goals be met?  Or is this whole thing just an excuse to make it so difficult to find local talent that IT managers decide to take the work offshore, as the rumor mill states?  Let me know what you think -- leave me a comment below, or email me.

--Joe Golemo

Joe Golemo is vice-president of business development at Charter Solutions, a Minneapolis systems integration firm, and a seasoned business development and management executive with more than 25 years of IT industry experience.  He has been a manager and vice president in companies such as IBM, BORN, Connect Computer Company, and is.com, starting as an IBM engineer. He has a BS in chemical engineering and an MBA in finance and strategic planning and currently serves as board chair for Starbase Minnesota, a not-for-profit organization whose mission is to get disadvantaged youth interested in science, math and technology.

Xerox/Jobs2 Web case study: The Chad digs deeper

Chad Sowash follows up on our recently-released case study on Xerox's SEO efforts with Jobs2Web. He has a conversation with a knowledgeable Xerox insider, "a friend of mine who we’ll just call Dave" on tbe benefits of career site optimization via Jobs2Web:

Chad: How were they able to implement SEO changes without getting your ATS provider involved?

Dave: The Jobs2Web team created a optimized site which they maintain, optimize with Xerox job content, and provide the correct links back to our ATS for proper job seeker application and tracking. Also remember, all new sites have to gain favor with the search engines and become “trusted”, which took some time with the new optimized site, but the results are really showing now.

Chad: Big question, what differences are you seeing when using SEO versus traditional job boards?

Dave: SEO has provided more relevant candidates, where we have noted job boards providing more irrelevant candidates, which equates into more work and lower efficiencies for our recruiting staff. We have adopted SEO to reduce reliance on job boards, provide more relevant candidates, and improve efficiencies. Through our research, here at Xerox, we were finding job postings on job boards just wasn’t bringing in the right candidates, which wasted our recruiters time and pushed us further toward the relevance model of SEO.

Read the entire interview at Chad's blog.

Road rules: Minneapolis Recruiting Roadshow recap

On Friday July 20th, more than 100 HR and Recruiting professionals from both companies and staffing firms showed up at Best Buy headquarters in Richfield, MN to attend a half-day Minneapolis Recruiting Unconference (and apparently costing Steven Rothberg, CEO of CollegeRecruiter.com five bucks).This event was the initial stop of a Recruiting Roadshow under the auspices of Recruiting.com.

The theme of "Intergenerational Recruiting", and included presentations from keynote speaker John Sumser on changing workforce demographics; Steven Rothberg on recruiting on social networks like Facebook and MySpace; and Doug Berg and Nicole St. Martin of HotGigs on incorporating Web 2.0 techniques to transform underperforming career sites into candidate magnets. Additionally, there was a panel on blogging, including myself, JobDig President/COO Toby Dayton, Derrick Moe of SelectMetrix and Josh Kahn of Accenture HR Services. Lunch was graciously provided by Don Ramer of Arbita.

Photos of the event can be found here. Our fearless "Cruise Director" Paul De Bettingnies has more details at his blog, MN Headhunter/Nerd Search, as does his "wingman" Nicole St. Martin (who may have single-handedly saved Paul from a nervous breakdown), and newbie MN blogger Katie Tierney.

Kudos to all who worked hard to make this a great event. Let's do it again soon, and make it a full day (so we won't have to talk so fast!).

Are your job titles hurting your recruiting?

The answer: definitely. To find out how, read "Wouldn't you love a job as a P2 Fld Comp Sup?" by our own Doug Berg, currently on the front page at ERE.net.

Do you hire with your head?

You might think you do, but until you've read Lou Adler's book Hire With Your Head you will discover what you are missing, and how to fine tune your recruiting strategy.

I've been in recruiting for over 18 years now, and there are only one or two authors or speakers that still grab my attention, and Lou is one of them.  In my opinion, nobody has organized the art of recruiting into such a mind grabbing yet practical approach like Lou has.  It's changed my recruiting behaviors and resulted in dramatically different results.  There are "aha" moments on nearly every page for both beginner and veteran recruiters alike.

Anyone in recruiting (especially in the agency or staffing side of the business) should read and digest this rare new book - which will help you serve your clients and managers better than you can imagine, and help you to work with candidates in ways that you hadn't thought of before.

I would encourage you to get a copy of this new version of Lou's book and keep it close by as a reference guide, as you'll re-read it many times over the weeks, months, and years to come.

Hire With Your Head: Using Performance-Based Hiring to Build Great Teams

This up-to-date and fully revised edition of Hire With Your Head features an in-depth look at the biggest changes in the hiring arena since the introduction of the personal computer.  Social networking sites, such as ZoomInfo, LinkedIn, MySpace, and others have eliminated any secrecy in hiring and recruiting.

Full of invaluable tips and helpful exercises, as well as useful checklists and revealing benchmarks, Hire With Your Head is the indispensable, hands-on guide every manager needs to hire the right person every time.

Get your copy today

Cheers,

Doug

Doug Berg is the co-founder of HotGigs and current Chief Gigster.

Free webinar: Minimizing your co-employment risks

You are cordially invited to join us this Thursday, June 21st at 2pm CDT for a HotGigs-sponsored webinar conducted by workforce expert Elaine Taylor, entitled "Contingent Workforce Management: minimizing your co-employment risks".

With the contract workforce growing at a rapid rate, now is the time to pay attention to the risks of co-employment. At this webinar you will learn why co-employment risk is becoming a hot topic, and why employers need to implement best practices in this area.

Elaine Taylor, contingent workforce management industry expert, will discuss minimizing your co-employment risks. Elaine is a subject matter expert in the area of contingent workforce management (CWM). She consults with Fortune 500 companies to help them develop CWM strategies that effectively reduce the cost of their temporary labor resources, while minimizing "employee misclassification" risk and introducing business process best practices.

Co-employment/employee misclassification topics will include :

• Length of stay (Why limit the amount of time?)
• Who controls the contractors pay rate?
• Top 10 mistakes employers make.
• What about the IRS 20 Factor test? Does that still apply?
• Checking for appropriate insurance and incorporation.
• Non-employment agreements – what purpose do they serve?
• Who controls where, when, how work is performed.

Join us this Thursday, June 21st, 2007 at 2pm CDT. There's no cost, so register now and mark your calendar. For more information, call HotGigs at 952.697.2923.

You can read Elaine's previous posts on Contingent Workforce Management and risk mitigation here, here and here.

Achieving 100% user adoption of your CWM strategy

On Thursday, June 21st, from 2:00 - 3:00 PM CDT, HotGigs is presenting a webinar featuring Elaine Taylor, a nationally known subject matter expert in the area of contingent workforce management (CWM). She will be presenting on the specific topic of minimizing your co-employment risks, a highly relevant topic to every company that makes use of contract workers. Registration is free.

Elaine has authored a number of guest posts for our HiringExchange blog, previously covering topics such as the ROI of soft cost management, hidden costs of contingent staffing, and identifying and mitigating workforce risk. In her current post, she addresses CWM success factors.

---

Client companies that are just beginning to develop their CWM strategy often ask me:

What is the most critical element of a successful CWM program?

They generally expect me to respond with "reducing bill rates" or "mitigating risk" or "reengineering convoluted and costly business processes"; but invariably, my answer is:

Achieving 100% adoption of your program by the managers who engage contingent workers.

Why is adoption so critical? Because, if you stop to think about it, you can design and implement a strategy for reducing bill rates, for mitigating risk, for saving soft costs by streamlining business processes...but if very few managers comply with your program, your measurable results will be negligible.

For example, in order to achieve an executive mandate for "expense reduction", the Procurement Department of one of my clients undertook a year-long RFP project that resulted in the selection of five primary staffing suppliers who contracted for specific bill rates that the Procurement Department assured the CFO would result in a 23% cost savings over the next year. Needless to say, the executive sponsor was very enthusiastic. But a full eighteen months after the rollout of the five primary suppliers, only two percent of the company’s contingent staffing spend was going through these five suppliers. Only 2%! So after wasting a year (and many man-hours) on the RFP, they had achieved virtually no cost savings at all...and they were forced to start from square one with developing a strategy that would satisfy the executive mandate.

That's one example of the "why" of "achieving 100% user adoption".

The "how" involves two primary factors:

1. Design your program for adoptability and adaptability
2. Line up executive support

Design Your Program for Adoptability and Adaptability

In real estate, the mantra is “location, location, location.” In CWM it is, “adoption, adoption, adoption.” No matter how much tender loving care you invest in the design of your CWM strategy, your efforts will be a waste of time and resources if only a limited number of managers comply with the requirements of your CWM program.

And, of course, virtually every organization has its entrepreneurs who want to do things their own way and not be hampered by bureaucratic, meaningless processes. (Who can blame them?!) While the goal of CWM is first and foremost to save money and to protect the company, those end results will not be achieved if managers focus their time and energy on figuring out ways to bypass the program.

To achieve 100% adoption – and to avoid "management by exception" – you must design and implement a CWM program that meets your clients'  needs 100% of the time. (NOTE: This is not the same thing as “giving them everything they want".)

Here are the four strategies that I consistently recommend:

a) Simplify the user’s life. Reengineer and streamline business processes with the goal of reducing the manager’s administrative burden rather than complicating it with low-reward, convoluted processes.

b) First and foremost, consider the users’ needs. Choose a supplier model that ensures client satisfaction.

c) Use a "carrot and a stick" approach. Market the benefits of using corporate contracted suppliers; but put “teeth” in your program for those who will “resist out of principle." (Once they understand the risks and costs they personally assume by working outside the official guidelines, managers are likely to become enthusiastic supporters of a well-designed CWM program.)

d) Listen to what the users say. Incorporate a formal feedback loop that ensures the continual process improvements inherent in any successful program.

And even when you do all these things, don’t be surprised if you still encounter a hard- fought battle to “win the hearts and minds” of your user community. Achieving 100% user adoption is never easy!

Line Up Executive Support

The second-most important factor in the rapid, successful adoption of your new CWM program is executive-level sponsorship. You must enlist the support of not one executive...but of all the executives who are key stakeholders:

a) SVP, Human Resources
b) Assistant General Counsel
c) CFO
d) Chief Procurement Officer
e) CIO (very important because within most corporations, IT spends – by far – the greatest sum on contingent workers/contractors/professional services)

While most executives will put their clout behind cost-saving measures, few of them are fully up to speed on the potentially significant soft costs savings associated with risk mitigation (specifically, "misclassification of employees"), and with eliminating business process redundancies and inefficiencies. Make certain you are fully conversant on these issues; then make it a priority to educate your executive supporters.

A word of caution on executive support: In my experience, I’ve almost always found it easy to get an executive to commit their support after I’ve given a compelling presentation on all the reasons a comprehensive CWM strategy will benefit the corporation.  But receiving a verbal commitment is different than convincing an executive to put some “teeth” behind their words. Once the CWM program is rolled out and the business units begin listing their thousand creative reasons (as they invariably do!) why the new rules shouldn’t apply to them, your executive support begins to wobble … and then takes an uncontrolled face-plant right into the tank! And who can blame the executive: the business units are the revenue producers for the company. If the executives can be convinced by their subordinates that your CWM Program will – in any way – slow down or curtail production (and thereby, the generation of revenue), no one in their right mind would support it.

Which leads us back to the most important element of CWM program design:

You must design and implement a CWM program that meets your clients’ needs 100% of the time.

--Elaine

Elaine Taylor is a subject matter expert in the area of contingent workforce management (CWM). She consults with Fortune 500 companies to help them develop CWM strategies that effectively reduce the cost of their temporary labor resources (by as much as 22%), while minimizing "employee misclassification" risk and introducing business process best practices.  She has published broadly in the area of CWM, including co-authoring HR.com's Vendor Management System Buyer's Guide. Former and current clients include Charles Schwab & Co., Inc., Entergy Corporation, American Family Insurance, Ryder Transportation & Logistics, Northrop Grumman and Sutter Health.

HotGigs' Doug Berg in BusinessWeek and the New York Times

In the past week, HotGigs has garnered some significant media attention. Last Monday, BusinessWeek.com published an interview with HotGigs founder Doug Berg. The main topic was the rise of contract workers as a significant segment of the US workforce. An excerpt from the Q & A:

Why are companies turning more attention to contingent staffing strategies?

They're finding the use of contractors makes it easier to rapidly expand when business is growing, and to shift resources as the business changes.

What are your predictions for the future?

In the next 10 years, we're going to see even more use of the contingent workforce. This shift has already begun in IT-heavy organizations. We have specific examples of companies that predominantly were only at a 90-10 mix (meaning 90% full-time employees, 10% contract), moving to more like a 60-40 mix—60% being full-time employees, 40% being contract consultants and offshoring. That's a dramatic shift, and these are national, 10,000-plus employee organizations across the U.S. Contingent workforces just give them much more flexibility.

You can read the entire interview here.

This morning, HotGigs was mentioned in an article in the New York Times on sites like TheLadders.com and HotGigs that charge candidates a membership fee for access to some portion of their specialized jobs. Doug's comment can be found at the end of the article (in fact, he literally has the last word).

Both articles are linked in our News Archive on HotGigs.com.

Do you re-recruit past applicants?

I continue to be amazed when speaking with hiring companies as to how few of them will search their current applicant tracking systems for previous candidates when starting a new job search.

In some cases, companies have literally tens of thousands of previous applicants in their ATS that they have spent thousands of advertising dollars to acquire, but they don’t re-access them for future searches. When I ask most recruiters "Do you mine your current ATS when starting a new search?" they mostly respond with "No…"

The common process when new jobs come into the recruiting group is to get them out to the job boards
– and spend more money – or burn up your job posting allocations to try and drive new candidates to
apply, and only process applicants as they come in.

Here are some of the reasons that companies we've spoken with don't pursue previous applicants:

1. Most ATS systems have horrible candidate searching abilities.

a) The keyword searching functions in most applicant tracking systems are rudimentary at best and don't support even the most basic capabilities. Recruiters come to find that pinpointing a candidate who came into the system within the past year and has a specific skill and/or education level may not even be possible – so they just give up.

2. The assumption that previous applicants were bad.

a) Most recruiters think that any previous applicants must all have been turned down for positions, and are therefore are bad candidates. This couldn't be further from the truth. 80% or more candidates aren't considered for certain positions because they didn't match a particular set of job requirements, which could mean they didn't have the specific skills, or were over/under qualified for that particular job only.

b) Also, many great candidates are on and off the market so quickly that most larger companies just couldn't get them through their hiring cycle fast enough – and lose out on hiring those great candidates. This shouldn't mean that you stop marketing to those candidates however! Candidates' situations can change rapidly within just months of taking new positions at different companies, and a tap on the shoulder down the road would impress the daylights out of a top candidate - that is, if companies were to take a more strategic approach in communicating with these candidates.

3. Searching, matching, and communicating with candidates is hard work.

a) Even if a recruiter was able to search and find a list of possible candidates, going through the process of building a list of candidates for a job, building an email introduction/catch up message, and sending it out to candidates can take a lot of time, which most recruiters frankly just don't have. That's why they just post new positions, and assume that the job boards will have all the currently active candidates in the
market apply for their jobs - but unfortunately those active candidates are applying to everyone else's jobs at the same time.

b) Most ATS systems don't have the ability to build group lists of certain candidate types – so building ongoing marketing lists within the ATS to quickly broadcast a certain type of job or position is very difficult.

c) In some cases – candidates won't want any future calls or communication from a hiring company – but the ATS makes it hard to flag candidates (or enter notes) regarding avoiding future communication.

4. Companies are afraid to look desperate if reaching out to candidates.

a) Most companies think that re-recruiting candidates for certain jobs might make them look desperate (which most of them are...but like to hide it) which would turn off candidates.

This couldn't be further from the truth. Most candidates are impressed with companies that actually remember them, and inform them frequently about opportunities at their company. The best companies not only communicate job information, but updates on their employment culture via newsletters and important updates within the company – which could be easily communicated to their candidate community.

How re-recruiting can recapture previous candidates.

The irony is, I think most candidates assume if they’ve applied one time to any company, that they are "on file" with that company, and should there be future interest in them – then the company will call (even though we know that companies aren't using their ATS in this way.)

This will certainly prevent them from applying for future positions – and to assume they will remember your company months or years from now – and revisit your career site to search for jobs and re-apply isn't a good assumption.

However, should a previous candidate get an email from your company with a matching job 10 months after they applied – inviting them to re-apply for a new position, and things aren’t going well with the company they decided to take their current job with instead of yours, bingo – you are now on top of your re-recruiting game, and leveraging your past applicants to become future candidates and employees with your company.

--Doug

ROI of Soft Cost Management

If you read my last post, I mentioned that when I ask company managers if they're interested in reducing expenses in this category, I often hear, "Not really." But as I've learned, they're usually saying that because they haven't taken time to understand what the term "soft cost" - as related to contingent workforce - really means. And they don't realize how much money bleeds out of the company's bottom line as a direct result of poor fiscal management in this area.

I said last time that a good cost management strategy for contingent staffing incorporates controls on all three categories of cost: hard costs, risk avoidance and soft costs. The first two are relatively easy to define. Soft costs, though, need some definition.

I classify soft costs as the difficult-to-quantify but nonetheless very real dollars spent in acquiring, administering and terminating a contingent workforce. This includes the often-overlooked costs inherent in dealing with contingent workers, such as the time managers spend in making sure new workers "learn the ropes" and are "brought up to speed." The process inefficiencies and redundancies associated with this are generally a significant corporate expense.

So...how do you understand the soft costs your company's incurring for its contingent workforce? When I start this exercise with clients I usually give them a spreadsheet with a list of 100 different "tasks" that their employees perform for each contingent worker who provides services to their company. The tasks are broken into categories relevant to the acquisition, administration and disposition of contingent workers:

• Profiling and sourcing
• Evaluation and matching
• Onboarding and orientation
• Timesheet and invoice authorization
• Assignment administration and budget management
• Offboarding and document archival
• Contracts management and compliance
• Maverick spend management
• Payment and reconciliation
• Staffing supplier relationship management and dispute resolution

For some companies, we do an analysis of actual costs, working with hiring managers to quantify the amount of time each employee spends on each task. From there, it's easy to calculate the actual cost to the company.

For most of my clients, though, it's not necessary. Simply seeing the list laid out in black and white convinces them of the great potential for wasting time and money. The list is also a great place to find "low-hanging fruit," i.e., obvious inefficiencies or redundancies that can be streamlined or even eliminated with relatively little pain but tremendous impact on the bottom line.

For example, I reviewed the list with one client, VP of a Global 2000 company, and we immediately saw inefficiencies in invoicing. She worked with the company's accounts payable department to establish a semi-monthly invoicing cycle. Instead of submitting individual invoices according to the staffing firms' schedules, suppliers began submitting aggregate invoices-based on pre-approved "billable time records") twice each month.

When she reviewed the results of the first payment cycle after the new procedure was rolled out, the VP was thrilled to discover that the newly streamlined process had saved her department 25 man-days. 25 man-days, and that was just on the first invoicing cycle!

"It was as if my overtaxed department finally got the two additional headcount I've been begging for forever!" she told me happily. And this, of course, was only a single component of a multi-faceted cost reduction strategy.

Automation can provide significant soft cost savings (and also reduce wear and tear on your employees). For example, HotGigs' StaffingCentral does as its name suggests: Consolidates all your dealings with all your suppliers into a centralized console. From there, you can compare bill rates, analyze the costs of different skills and understand what you're really paying for services from your preferred suppliers. It's definitely worth checking out.

Understanding these costs is the first step to containing them. Build a spreadsheet of your own, and you'll be surprised at how much these "negligible" expenses are costing you.

--Elaine

Elaine Taylor is a subject matter expert in the area of contingent workforce management (CWM). She consults with Fortune 500 companies to help them develop CWM strategies that effectively reduce the cost of their temporary labor resources (by as much as 22%), while minimizing "employee misclassification" risk and introducing business process best practices.  She has published broadly in the area of CWM, including co-authoring HR.com's Vendor Management System Buyer's Guide. Former and current clients include Charles Schwab & Co., Inc., Entergy Corporation, American Family Insurance, Ryder Transportation & Logistics, Northrop Grumman and Sutter Health.

Offshoring follow-up

Hi. I'm Joe Golemo, with systems integrator Charter Solutions, and I spend quite a bit of my time advising companies on IT management and operations strategy. I wrote a post about offshore outsourcing and whether it's still cost-effective, mentioned by my friend Doug Berg in this blog. It provoked some interesting commentary and I thought I'd spend this post responding.

Some of the feedback suggested that I'm against offshoring and that I haven't looked beyond India for examples. At the risk of splitting hairs, there are a few things I’d like to point out.

The argument I was making was not “it no longer makes sense to outsource, companies should bring all their IT work back in-house." Rather, it was “just because they’ve been doing it for 5-10 years doesn't mean it still makes sense. Companies should re-evaluate major decisions like this every year to make sure they still make sense, financial or otherwise.”

And, interestingly, it’s not just me questioning the value of outsourcing (BTW, the opinions expressed are mine and not Charter Solutions' ;-). Doug certainly shares that opinion in his post. And an article in CIO Insight suggests that “outsourcing does not save money.”

In this article, CIO Insight surveyed IT executives and discovered that:

"...dissatisfaction with outsourcing vendors is widespread, yet most of the 401 IT executives who took our survey blame their own companies most of all for the disappointing performance of their vendors. Though outsourcing is directly responsible for layoffs, it's not as disruptive as it was last year.” 

This chart from the story sums it up the best:

Note that in Section 2.2, large companies believe they are reducing costs via IT outsourcing, whereas small and medium companies do not. In Section 2.3, domestic outsourcing firms take it in the shorts.  And, in Section 2.4, more than 50 percent of all firms say offshore firms can save them money. In my opinion, to be conclusive a lot more than 50 percent should feel they're saving money.

As far as I'm concerned, the apparent confusion in the market about the true value of outsourcing vs. insourcing vs. nearsourcing, etc., drives home my original point: You can't make assumptions about this stuff. Just because it made financial sense five years ago doesn't mean it still makes sense.

Companies must perform a new cost/benefit analysis of their sourcing plans on a routine basis to be assured they are actually receiving the originally projected benefits. That ensures they're likely to continue receiving those benefits in the future.

In short, there are too many company-specific issues involved with outsourcing to assess any benefits...unless you do a company-specific assessment.

Opinions?

Thanks--

--Joe Golemo

Joe Golemo is vice-president of business development at Charter Solutions, a Minneapolis systems integration firm, and a seasoned business development and management executive with more than 25 years of IT industry experience.  He has been a manager and vice president in companies such as IBM, BORN, Connect Computer Company, and is.com, starting as an IBM engineer. He has a BS in chemical engineering and an MBA in finance and strategic planning and currently serves as board chair for Starbase Minnesota, a not-for-profit organization whose mission is to get disadvantaged youth interested in science, math and technology.