Three managers within the same department of the same company identify a requirement to hire a project manager simultaneously. The first manager spends about $5,000 and fills the vacancy in approximately 60 days. The second spends about $15,000 and fills the job in 20 days. The third manager fills the position in a week and spends about $24,000 spread out over the course of six months. Is this story possible? How could it be? The reality is, this could happen in just about any major corporation today. Here’s how:
- The first manager called HR, spent $5,000 on a newspaper ad and a posting on some Internet job boards, and maybe even got a few candidates from a job fair.
- The second manager called the same recruiting firm that placed him at the firm six months ago and paid a 20% contingency fee on a starting salary of $75,000 ($75,000 x 20% = $15,000).
- The third manager went to his favorite staff augmentation firm and hired a contractor at $75 per hour, which is roughly a $25 per hour margin on a fully burdened salary of $75,000. Over six months, the margin will amount to roughly $24,000 (1040 hours x $25).
It might be intriguing that within the same department of the same company three completely different processes were used to accomplish the same goal. But the more provocative question is, which of these scenarios produced the best result? If you ask the participants in each of the scenarios you will most likely get different answers. HR might tell you the first scenario was best because it was most cost effective. The manager who paid the 20% fee will tell you that, while the cost was more, the quality of hire is better and the job was filled in a third of the time. The third manager will most likely say that they needed the person yesterday, and with a freeze on headcount the staff augmentation model was the only option available. But in the end it is almost impossible to tell which process produced the best result because they are not being managed or measured consistently. In most companies, HR owns the process to add new headcount and the Procurement function owns the vendor relationships and the process for temporary and contract labor. The headhunters, meanwhile, are trying their hardest to avoid being “owned” by anyone ó and are usually being reigned in by either HR, procurement, or both. So why would a company have HR manage the acquisition of full-time labor and Procurement manage the acquisition of temporary labor? I remember that part of my very first job in Personnel fifteen years ago was to keep track of the temp agencies and call them whenever a manager had to backfill for a secretary who was taking a vacation. I was even responsible for approving the timesheets and reconciling the billing. But with the technology boom of the 1990s, the demand for contingent labor exploded and it became impossible for HR to keep up. It was only natural for Procurement to manage this activity, given their experience in negotiations, contract management, vendor relations, etc. So what’s the problem? The problem is Procurement has very little experience managing and tracking people. After all, that is what HR department is for, right? Companies are spending hundreds of million dollars on contingent labor, but if you ask them to give you a breakdown of their contingent staff ó including their skills and the projects they are working on ó you would most likely get a blank stare. In the recent economic downturn CFOs have been mandating that business unit leaders significantly cut their contingent labor budgets. The most common approach has been to conduct a manual-driven, time-consuming inventory of all contractors on board and determine where cuts should be made. Our elementary school phone chain announcing school closings is a more efficient operation! Why should this process be any different from when an organization cuts headcount and implements a reduction in force ó a process that HR departments perfected in the recession of the late 1980s and again in our recent turmoil? The main reason for this disparity is that the recruiting software and HRIS tools available to HR were designed to manage people, while the tools available to procurement were designed to manage vendor profiles, contracts, and invoices. Well, the good news is that we have started to see a major trend in the rapid emergence of vendor management solutions. Companies with vendor-neutral products, such as nextSource, White Amber, and IQNavigator, have developed robust tools to manage everything from putting a requirement out to bid to time capture and consolidated billing. There are also tools provided by the large staffing firms such as Manpower’s UltraSource and Spherion’s Enthusian. Many of these tools have some applicant tracking ability, but they are not nearly as powerful as the traditional recruiting software solutions. At the same time, the companies that are providing recruiting software to the HR community are beginning to offer agency management functionality, though not nearly as extensive as the vendor management tools. I believe this creates an incredible opportunity to bring the Human Resources and Procurement recruiting processes together by integrating these tools into a single talent acquisition portal, where all recruiting activity can be measured and evaluated consistently. Imagine you are a hiring manager and you log onto the portal.
- You have access to statistics, data, and other content that help you decide the most efficient and effective sources based on your need.
- If you desire you can simply send the requirement through the approval chain and have your HR/recruiting department handle it.
- You may decide that due to headcount constraints you will need a contingent worker. You can identify a select few or broadcast the opening to all approved vendors for bid.
- If you expect the headcount situation to clear up, you can specify that you will require a temp-to-hire option and what your terms will be.
- You might want to target candidates from a competitor, so you distribute the requirement to the most appropriate contingency or retained search firms.
- You can even decide to shop it to all three avenues and see who can meet your need first.
- Let’s get really daring and suggest that you may want to explore any internal employees who could fit the bill before going external, so you search your “bench” or the “available list” first. Maybe you even have access to the succession planning system and can identify high potential female and minority employees and offer them a promotion.
The underlying systems and applications would be relatively transparent to the hiring manager, even though they might be interacting with an applicant tracking system, a vendor management system, an HRIS system, or all three, through the same portal. With the evolution of XML standards and the efforts of the HR-XML Consortium, developing this type of integration has become quite feasible. As the economic slump continues to linger, the challenge of getting the project budget approved remains. But by creating a vision for a comprehensive talent acquisition platform that includes contingent labor, your ability to calculate and demonstrate ROI will be enhanced exponentially. According to a recent white paper published by nextSource: “The estimated cost of human capital is nearly 10% of the GDP, or $200 billion to $300 billion. Of this, $80 billion to $140 billion is spent on ‘contingent’ workers, or free agents in all sectors, including contract workers, consultants, on-call workers, office temps, and hourly blue-collar workers.” The savings that can be demonstrated by better managing the contingent workforce alone could cost justify the entire initiative. Oh, and did I tell you that some of the vendor management tools don’t really cost anything, because their revenue model is to take a small percentage of the transactions from the suppliers? So, if the vendor management solution project can stand on its own, why bother integrating it with the internal recruiting system? Because by bringing these disparate processes back together and measuring them within a single environment, we can set up our internal recruiting function just like one of the agencies accessible through the portal. If implemented properly, our HR/recruiting department can now be measured and compared to the third party agencies consistently based on cost, time, and quality. We can easily implement a chargeback model for allocating the costs of the recruiting function to the business. Perhaps we will find that our internal recruiting department is not very cost effective, so we can focus our HR professionals on internal employee movement and development and outsource the rest. Maybe the internal recruiters are better and more cost effective and we can finally start to reduce those nagging agency fees. Or maybe we will find out where each agency, either internal or third party, performs best and leverage them when and where appropriate. One thing is for sure, we will never know until the tools are in place to accurately and consistently measure the results.