[Video] - What Needs to Change with the Contingent Workforce

For the average company, contingent workers make up about a third of the entire workforce, according to the Sierra-Cedar 2020 HR Systems Survey. Yet, they are often forgotten or deprioritized from our HR systems and processes.

To better understand this part of the workforce, we had a casual chat with the always lively and insightful Erika Novak, who has over 15 years of experience in contingent workforce management at companies such as LinkedIn, eBay, and Brightfield Strategies.



Key Insights

  1. HR needs to prioritize contingent labor in order to understand how work is getting done within their organization. In prior generations, one could argue only employees accomplished work, but now that has changed with a third of a typical company’s workforce including external workers. To understand true labor costs, quality of work, operational efficiency, HR leaders need to examine their total workforce.

  2. Contingent Workforce Business Partners (CWBP) can be a key new role to facilitate contingent labor hiring for managers. Separate from HR Business Partners (HRBP), CWBPs can provide a procurement perspective on issues like compliance and supplier relationships. Leads can make the case for a CWBP position by calculating the total headcount of non-employee workers and seeing how much support staff is available for them. If the ratio is wildly off, then it may justify the need for this role.

  3. Staffing suppliers should be treated as strategic partners, not as commodities. Talent quality goes down if you are working with dozens of different suppliers for a single role. The market gets flooded and the candidate gets turned off when you’re treating talent like any commodity out there. 24-hour deadlines only further contribute to this commoditization that forces suppliers to find anyone rather than finding the right talent.

  4. In times of crisis, CW Program Leads need to prioritize communication and the health/safety of the non-employee workforce. Contingent workers are often forgotten from crisis response programs, so it’s the CW Lead’s job to advocate for this group and provide them honest communication about what will happen to their role. The Lead should also share resources between internal groups and with external parties as well so that everyone has what they need to survive the crisis. Lastly, they should take the learnings from this crisis and prepare for the next one. That could mean ensuring the CW Program Lead has a seat at the table when it comes to emergency planning.

  5. Strong communication at the junior role level can be the foundation for a close vendor-client relationship. Organizations often prioritize senior communication, but it’s the junior roles that will be the first on the phone to help solve your talent needs or help you in any crisis. Building close relationships here can serve as a foundation for the enterprise to succeed. Another way is to be transparent about your business goals to the best of your ability so that the supplier knows the ‘why’ behind your talent needs.


Full Transcript Below:

Saad Asad: Should we be rethinking our approach to how we're managing contingent workers?

Specifically, why should, amongst all the other things that an HR person may be considering such as remote onboarding, budget cuts, etc., why should contingent workforce management be among an HR leader's top priorities?

Erika Novak: So I think about what HR is responsible for, and first of all, it's the people. It's the human capital, and how they're advising the business. Their job is to support what the company is doing strategically.

Part of that is understanding how work is actually getting done. And so when I think about the quality of work, org management, what the cost is, looking at different talent channels, operations, communications, all of the things that they are already doing, they're just missing a group now.

The world has shifted a lot more towards the non-employee, whether that's that individual talent or vendors or outsourcing. Generally, people say 80% of operating costs are labor. But that usually is only for employees, so what does that number change to when you actually consider the contingent workforce? It's a priority because so much work is shifting to non-employees.

Saad Asad: So it's just part of the natural organization of HR to support the people better, working for their business or their enterprise. And when it comes to organizing this, how should HR manage this workforce?

Perhaps the HR Business Partners help maintain the contingent workforce? Or is it a new role emerging? Contingent Workforce Business Partners? What do you think is like the best way to manage and support this type of program?

Erika: Novak: I'm a big fan of the Contingent Workforce Business Partner role. This type of work could evolve to fall underneath the HR business partner practice. But today, and historically, a lot of HRBPs have shied away from this group. Some are under the myth of co-employment, “Oh, I should only focus on employees, not a non-employee, it will look like it's mixed.”

But when I see the Contingent Workforce Business Partner job descriptions and their roles, and I've met people who are in that role, they're arming the HRBPs. They are doing a lot of the work that HR generalists or specialists are doing for them. They play a unique role because they bring some of the procurement factors that HR generally doesn't see. So I think it's a great spot to start because it blends the skills.

I've seen it done a couple of different ways, one is the CWBP has a direct line to that business similar to what a category manager and HRBP does; they're aligned around a particular industry where they can bring their knowledge.

And another way I’ve seen it done: they're partnering with their HRBP. The HRBP still relies and has the advisor role to the head of business. But they're arming the HRBP with data, their insights, their recommendations and most importantly the other talent channels, that they should be thinking. Most HRBPs think of recruitment, employees, and here's how it goes. And CWBPs shed light on the other side that could fill what the business is looking to accomplish.

It should stay under HR. I think it could work under Procurement, but yet again, you'd want some folks who have more of the HR perspective, helping aid the Procurement department. Whoever owns it, how you build that role, needs to help arm the other side of the other org.

Saad Asad: In your experience, how often does a Contingent Workforce Program Manager fall within HR/Talent Acquisition versus Procurement or other departments?

Erika Novak: It's about 50/50. I think you see a little bit sometimes it can fall under IT or legal, but genuinely speaking, it's either HR or Procurement, depending on the industry, and where it started. Again, I think it fits nicely under either.

Where we're starting to see some change is that HR is beginning to take more ownership, which has become increasingly important when it comes to natural disasters such as COVID-19. So I start to see it leaning towards the HR group.

Saad Asad: Going back to CWBPs, how do you justify that type of role to senior leadership? That we need business partners that focus on the contingent workforce?

Erika Novak: Yeah, headcount is always tricky to get so having a good business case is key to it. The first thing you can do is get a tally of all of the non-employees, not just the contractors, but your full scope of non-employees broken down by type and location, that's genuinely very powerful because that’s thousands of people typically. You have a large enterprise company. It's likely five, 10, 15 thousand and the actual composition changes every day. So that sometimes speaks to it.

Something else that work well is if you're able to see what the employees are, and just do a ratio count. How many HR people are responsible for supporting how many employees you have? Usually see like 1:50, maybe 1:100, depending on what's going on.

And then do the same thing with how many people are responsible for contingent on that. You usually see this massive spread, and that makes sense a little bit, because the amount of activities are different.

But, often, when you start to say, for employees it's 1:50, for non-employees it's 1:6000. That starts to turn heads, and when you're able to do it by location, you can say, "Hey, maybe it's 1:6000, "let's make it better, 1:2000."

But of that, someone is sitting in California, and they're also responsible for the APAC region. Now there's no way they can know all the local nuances and regulations and do things in the same time zone.

And so, it starts to make sense, "Hey, do we need more people on this function? "Where should they be sitting? "How do they support?" And then you start layering on the compliance rules. So in California AB5 has become really important, are we taking care of that? When you start layering that together, you can talk about efficiency gain.

So HR generally is a supporting role job because we don't make money for the company. It's to help save something, save time, increase quality, or whatnot.

And when you talk about what a CWBP could potentially do. There are various different roles and projects they can work on. But a lot of it's going to be about efficiency, advice, increasing quality. And then it starts to make much sense to people who are responsible for headcount.

Saad Asad: That makes sense. Break out the calculator, and then you probably also have to figure out how many of those contingent workers, extended workers, you have across the entire world as well. That can be difficult and that's another discussion, but you need to get that headcount.

What's one thing you think needs to change now with contingent workforce programs? What's something that's grinding your gears, is outdated, and just needs to go as soon as possible?

Erika Novak: A lot of CW programs are designed for catching bad behavior, instead of reinforcing better behaviors. A couple of those ideas are, staffing suppliers are treated interchangeably. It's a commodity. There's always going to be another one. I think the latest that we heard was there are 20,000 staffing suppliers.

And so it's straightforward for programs to say, "If you don't play ball, if you don't play by my rules, then there's someone else who's hoping to take your spot." And in big branding, it's very easy to get a tad bit arrogant, right? It's more helpful to you, or to me to have my brand name and whatnot.

But I think that's silly because what you hear a lot internally too is, "Let's not call people vendors, they're suppliers." You buy a candy bar from a vendor, but you partner with suppliers. But then it doesn't go beyond that because, to me, partners and suppliers know each other, work with each other, and communicate. It's not just a one-directional relationship.

Staffing suppliers are responsible for making you successful. If you don't have partnerships with suppliers, you have the most over-engineered program in the world. You have all these support people, you have all these systems, and you can’t actually fill roles. And so the staffing suppliers, they're people, and there should be a relationship.

The other part to that is antiquated program rules. So the idea is now that we have these systems, we can create operations, that we want to make people do whatever we want.

But a lot of it actually encourages bad behavior. For example, requiring all resumes must be submitted within 24 hours to be considered. You're telling your staffing supplier, take short cuts, or they have to change their business model.

So now we are outsourcing to another country, and following the same model, where they're sourcing and pushing a bunch of resumes back, but no one's done that screen. No one talked to the person. No one's done the check that the resume matches the person because they're trying to meet this deadline. If they aren't, they're dinged for it.

Everyone knows the manager that says, "I need someone immediately, yesterday." So speed speed speed, but it's the speed-to-quality ratio in it too. And so I'm a big opponent of saying, "Within three days, submit your candidates."

That way you have time. If the right person couldn't make a call in one day you're not saying, "No, never mind, you're not going to be counted because you couldn't make a meeting when you didn't know it was coming."

Give people the chance to have the phone conversation, make sure it's a mutual interest, and then submit her. You're going to get a lot fewer resumes, but higher quality resumes.

The other thing is that supplier volumes in programs are crazy. I know programs that have hundreds of staffing suppliers, and there's no way you have the req count, to feed those hundreds of suppliers as well. I was a big believer that if you could have eight to 10 reqs, at any given time, then the supplier is generally going to be happy, the recruiters are going to be happy.

But if you have programs where it's one or two, per quarter, per year whatnot, they're not excited to work with your program, and your recruiters de-prioritize your program. Because they don't think they can get a fill.

It is important to know how your suppliers make money and how their recruiters get paid because then you understand how your req is prioritized.

Third issue is the idea of tiering, I think it has gotten people lazy. We categorize suppliers and then we tier them, and then just push a button it sends out to them. But when I think about the candidate experience, if you send a req' to 25 suppliers, the top candidates are getting hit by all those 25 suppliers.

You're flooding the market. Then that candidate is saying, "I don't want to talk to you guys anymore, there's too many." Or, they say great, they play the suppliers off each other. So you assume there's going to be an 85 dollar bill, right? But one person said 90, one person 92, hence, he can go with 92, instead of 85.

And then the idea that you want to encourage the recruiter to work with you, so you have a one in 25 shot chance of filling that req’ and it's a hard one, are you going to spend time on that? No.

What we did at LinkedIn, we'd send it to no more than three to five suppliers, you gave them a 20% chance to fill the req', and that motivated people, they could see the signs.

It needs to be about talent enablement, and letting the staffing suppliers do their job well. Because right now I think, we're forcing them down an efficiency funnel, that lacks quality.

Saad Asad: It’s interesting because we are treating talent like this commodity, in the same way that Walmart sources, paper, other types of product, you have to get it right then, right now.

If you don't, we'll throw you out and find another vendor that serves it, but it doesn't seem like an appropriate way to be managing and supporting talent, that is one of your highest costs and assets.

Switching gears, if you were still in the contingent workforce management role, what would be top of mind for you during this crisis? What tactically would you be thinking about doing within your program and working with others to accomplish right now?

Erika Novak: Yeah, it's a good question. A couple of my buddies are in this spot right now, and they're working incredibly hard. They're doing some fantastic things. Easy for me to say, here's what I would do, not being in that position today. But, I think one of the biggest things is to be an advocate and influencer.

Most contingency plans, you guys will have seen, different webinars coming up like, "How to include contingent in your contingency plans." And it's spot on, most of them are only about employees, or most of them are only about people who have emails only.

With the relationship that you've hopefully built within your programs, with HR, with Procurement, with IT, with security, involve yourself. Most people, and not in the wrong way, not in that, like, they're trying to do it on purpose, but it's just about employees.

It's your job to be the advocate for non-employees, and say, "How does that affect them? "Is this applicable to contractors "versus outsourced workers? "How do we communicate with folks who don't have emails "and maybe just badge access? "Do we know their vendors?"

But, influence the group, advocate them and take on the work. Now the cool thing is, again, from some of my former peers, they're doing precisely that, but it's a chance to act as an authentic influencer, and then become part of the larger team, which I think contingent leaders want to do more and more of. I can't stress enough, use your voice, because most folks aren't.

The second part is being honest and direct and empathetic in your communication. Almost everyone wants to know, "Do I still have my job? Am I still going to work? Am I still getting paid?" Give them their answers, respond, and be direct, and treat them as adults. It's tough to give bad news, but it's even worse to receive bad news that's sugar-coated. Or is kind of vague, or leaves me wanting.

Third, as contingent workforce practitioners, we have many resources in our hands, that some people don't. So when I think about the different classifications, whether it's contractors, or freelancers, or small businesses, or outsourcers, or consultants or whatnot. Everyone's trying to figure out what's going on with the CARES act. Everyone's trying to figure out what's going on with small business loans.

And there are lots of articles out there, so, while you're giving them information, be a source to them, push data, push resources out for them to look and check. So it's not just about emergency notification, but you're arming them with, "We still care about you, "here's how you can get help."

The fourth would just be plan for next time. So I know getting a hold of everyone is incredibly difficult, if they don't have an @ company domain email.

How do you get a hold of everyone? It usually is manual. You're going through your procurement systems, "Who's that vendor account manager? Do they know? Have they left the company?" It is kind of a cluster, right? What would you do better for next time? How do we make sure it's that much easier?

At least make sure you’re on the project team, the emergency response team, you’re now part of it. Start there. Then what's my communication plan of getting hold of all these people because there will be something next. And so those are the four things that I would do if I were in that position.

Saad Asad: So advocating for the non-employee workforce, making sure that you're communicating with empathy, being a resource to both sides within the organization and outside, and lastly planning for next time.

So I'm going to go to Q&A: Have you heard the term contingent RPO especially concerning direct sourcing? And where do you see the contingent direct sourcing initiative heading with the huge increase in available talent?

Erika Novak: Contingent RPO is still kind of being defined when I think about direct sourcing, contingent RPO, and the difference in suppliers and services that are in that space. I still see there's some gray area because everyone is trying to figure out who wins and where enough companies have said “yes,” that everyone follows that model.

It’s a little ill-defined, but the staffing companies can supply talent for your contractors as well as your in-house workforce. I think there's something very good to that. It will depend on the company. When we think about LinkedIn, we had our entire internal staffing team, and, being who LinkedIn was, we would never outsource the employee side.

But I know some companies who do, So I think it's going to grow. Still, I think it'll be something that's going to show over the test of time.

Then, as companies get bigger and bigger and bigger, I can see them potentially moving it from that RPO back to in-house, as they recognize they want to take a little bit more control over their brand, their messaging, and the experience.

Saad Asad: And just for those in the audience who may not know what Direct Sourcing is, Erika could you just give a rough overview of what it is?

Erika Novak: Direct Sourcing is using the company's resources, so their ATS and their brand to create a talent pool. So instead of sending information out to staffing suppliers, they start with their talent pool to see if they can fill it faster first. And usually at a cheaper price

Then they recognize, "Can I?", "Can I not?" and then they'll push it up to the staffing suppliers. So it's a way of really trying to get a little efficiency but more about cost of knowing we already have them here, let's go there, the mark-up will be lower. And if we can't find someone within the known pool, then we'll push it out and ask for external help.

Saad Asad: Next question from Steve, "When you define 'contingent' are you including all non-employee types, including statements of work, consulting and outsourcing services. If you can, can you talk about best practices and getting those categories into the remit of the CWBP?"

Erika Novak: Ah, great question! I love it because I think the term 'contingent' is used differently across teams. And that's okay I guess we're still working out.

But you're precisely right Steve when I talk about contingent. I'm talking about the entire non-employee workforce, contractors, freelancers, small businesses, the outsourced resources, anyone that's providing a service for your company, that is not of your company, I think just fall underneath that category.

It's again; it's how I'm getting work done. If I've outsourced my cafeteria, I know, for example, 'Bon Appetit’ has about 400 different resources, so they're always going to own that function. But they have about 400 folks who are interchangeably having badge access, on and off every day. I want to be aware of that, right?

If I'm in a more kind of core business, and there's focus on QA testing, then I'm going to have to give them system access. Usually, there's going to be an email. They're going to have network access to a system. But I want to know who they are, what they're doing, how they perform, how much it costs me, right?

And I think the second part to the question was about bringing it into the Contingent Workforce Business Partner realm. It starts with data. How are you able to see these? Most contract-lifecycle management tools - it's all about the contract and executing, but not always about the people.

And mapping contracts to dollars to people can be really tough. HR needs to have visibility of all of that non-employee and then be able to see, compared to the employees, understand what the work is getting done.

Because then you're ready to say, for operations, or compliance, or for things that were the data analysis, here's how we're treating outsourced workers versus small businesses. Or here's what we want to look at for contractors versus employees. But putting them all together and being able to segment them out is incredibly essential to the work that you're doing.

Saad Asad: Great. Another question, this one is from Evelyn: "How do you encourage a tight partnership between client and vendor? By the client sharing forecast data to enable pipelining, planning for CW talent needs?

Erika Novak: I'll say this, you start from the ground level up. All your suppliers are going to want that executive touchpoint. And they want to make sure that they've seen and they know their name or whatnot. When you're thinking about a tight partnership, think about the people doing the work on the ground with them.

So that could be your procurement people, that could be your HR, that could be your MSP, people who are supporting your CW, but when I think about that partnership, it's everyone knowing each other.

So I used to tease my team, explicitly staffing suppliers, so I used to tease my team and say, "If they're on our core list, then I expect you to know their first name, last name, are they married, are they afraid of grasshoppers, and what type of ice cream they like."

Because it's about that person, they're the ones who are going to pick up the phone, they're the one who is going to take a text message, they're the ones who are going to go the extra mile when things are going on. And so it starts there, right?

You might think about other teams. Now I see, oh great! We're very friendly with these folks, we know them by the first name, and I lean in. So I think it goes bottom - up, and that also helps with the top-down as well.

So on the top part, you're exactly right, you can't always share everything with them, and contingents are the hardest thing to forecast unless you genuinely have seasonal work.

And usually seasonal work generally is more about contracting. Outsource can sometimes be harder to predict. But if you're able to share company vision and mission, if you're able to share some of the goals that you're working with, again, keep confidential information inside.

When you're ready to show what you guys are reaching for, whether it's within an org, on your team, or across the company, staffing suppliers are now able to relate that back to their recruiting strategies.

So when you say, "Ah, I need all these Python developers. "Oh, they're building internal applications, "here's what's important, 'cause here how it meets "their internal milestones." They take that information back and sell the candidate on why it's refreshing to work for your company. Or how this affects the company's goal mission.

In the end of the day, most people just want to provide impact and value. Anyone that I've ever interviewed, I've asked, "Why are you interviewing? What are you interested in? I want to provide impact in my company, or their company. I want to be working at something that provides value.” So when you connect the top side to the staffing supplier to the candidate that helps the relationship and the quality of candidate that comes in.

Saad Asad: Got it. We have one more question: What's the best educational tactic you've seen employed to evangelize CW programs to internal managers? How can we best show contingent labor value to those who are new to this type of talent.?

Erika Novak: Data. Most people are surprised by how many contingent workers there are. And then by org and role. What are these guys doing? Many people have different misconceptions about, "Oh, contractors only work on 'this' or We only deal with this."

If you have the data that shows headcount, locations, the number of suppliers, then you start to understand the scope and the breadth. We may be working on multiple projects of the same thing.

If you're able to show that in a clean, concise way in one or two slides, that starts to open the door because people will say, "I didn't know that. How did that affect them?"

And you can layer on compliance, regulations, operations, time-to-fill. You go from there with what you have in your head but start with that. The one to two slides on those things, it usually opens the door.

Saad Asad: Thank you all for joining. Connect with Erika and Utmost on LinkedIn to stay up-to-date. 

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