If you were tasked with answering the CEOs questions about your organisation’s usage of contingent or non-employee workers, how would you respond?
The engagement of non-employee workers in today’s workforce is huge. And it’s growing. And when I say ‘it’s growing’ I mean across most industries. And way beyond IT related roles that have traditionally been the centre of the ‘contractor’ worker population in the majority of organisations.
Yet still today, HR business leaders, hiring managers, leadership team members and Procurement can be left quaking in their boots about having to report to their CEO on the value, cost, risk profile, and ROI of the organisation’s contingent workers.
Because they’re not engaging, managing, analysing and reporting on – that is to say, strategically addressing – these workers. So they’re left feeling exposed. Just as the business is in this scenario.
So… if you’re reading this and a sick feeling is creeping up on you about who, how, where and what is going on with the non-employee workers in your business, then I politely suggest you read on…
First Step: What Motivates your CEO?
Prepare yourself, by getting a handle on what motivates your CEO. Not only in respect of your people, but also in a general sense. Then you’ll be armed with the right intel to keep him/her satisfied that your drivers are their drivers. The CEOs questions may factor in the following issues:
Is there evidence that you’ve reaped commercial value from your investment in these workers? How are you reporting on that?
A key way to determine the ROI from contingent workers is to compare the timeframes, costs and output with your FTEs. This will also enable you to determine the benchmarks upon which your contingent workers will be measured. Consider issues such as:
- Was the project delivered on time, or within the timeframe you expected?
- What was the actual cost of this worker/s? Direct, training, management time, time of other staff invested
- Did the quality of work stack up against that of your FTEs? Was it better? Worse?
- What non-financial benefits were realised? Like skills acquisition, satisfied customers
- Consider time-to-productivity – typically a major benefit to the organisation when engaging non-employee workers
2. Cost containment:
If you’re showing the CEO that your headcount is actually dropping (via attrition, on-demand hiring), you’re speaking the same language
Commercial and otherwise (see point 1). This will depend on the rate you’re paying the workers, vendor margins, whether there’s consistency in these costs and how the supply chain is managed. It will also depend on how you’re monitoring the non-financial (or indirect) value to your business
4. Zero or Low Risk:
Have you factored in all the risks associated with a contingent workforce? And if your approach to managing them isn’t strategic, how are you going to prove that the business isn’t exposed?
5. Output & Productivity:
Akin to point 1, comparing (where possible) to FTEs is a start, as is knowing project benchmarks for your industry
The CEOs questions about contingent workers in your organisation, will be very straightforward. They want real data, most often, straight away. So knowing what drives them, is imperative.
Second Step: Be Well-Versed on the Value of Contingent Workers
Here are just a few to have in your kitbag:
- Access to specialist, quality skills on an as-needs basis: having the business agility to engage quality talent who are active participants in the on-demand economy – skills you otherwise couldn’t afford to bring into the business on a permanent basis
- Far less management time spent on overseeing talent, salary negotiations, performance evaluations. The relationship is more pragmatic
- Decreased cost: wages, payroll tax, other non-wage costs
- A boost in competitiveness & market standing through the speed and flexibility of engaging these workers
- Reduce headcount whilst maintaining business continuity
- Employee and dismissal obligations are self-governed
No doubt the CEOs questions will factor in contingent worker value to your business. Knowing their direct and indirect value, will add weight to their standing in the CEOs eyes.
Third Step: Be Well-Versed on the Risks of Contingent Workers
Similarly, some of the more obvious risks you’re likely to be aware of…
- The risk of co-employment: where a worker’s entitlements are deemed responsible by two or more employers’
- Loss of IP
- Statutory compliance & obligations
- Overpaying when not managed strategically or through an external, centralised vendor
Fourth Step: Establish an Auditing Process for Non-Employee Workers
Here’s a look at the various elements involved in auditing the non-employee workers in your business: asking yourself these questions, and taking action on where the gaps lie in your business, will give you, and your CEO, a comprehensive handle on usage of contingent workers in your business.
This is by no means exhaustive, but if approached with due diligence, will provide you with enough valuable information to engage your CEO in the conversation.
How are we using them?
- Have we audited current usage?
- Can we report on that?
Cost of usage:
- Is the management, payment and reporting of contingent workers centralised and standardised across the supply chain?
- Is rogue hiring is an issue?
- Is there a loss of IP? And at what cost to the business?
- How is the output and commercial ROI of our investment in these workers being measured?
- How long have they been with the business? Are they accountable?
- Is there real value in having these workers in our business? Do we have a choice?
- Are we re-engaging the ‘known’, quality contingent workers? Or are these skills and our IP walking out the door at contract’s end?
- Do we have any gauge as to how our contingent workers are being managed – are we at risk of co-employment?
- What are our legislative obligations?
- How do we remove risk from our relationship with contingent workers?
- Are the relevant protections in place for our IP and other confidential business information?
Finally…what’s a better solution?
How do we remove risk, gain greatest value from these workers, measure them, and report on their contribution to our business? How can I answer my CEOs questions about contingent workers with strategic rigour?
No surprise my recommendation is to engage a business like CXC. Because this is what we’ve been doing successfully for over 27 years.
THE CXC APPROACH TO CONTINGENT WORKFORCE AUDIT & MANAGEMENT
Our approach to auditing our client’s non-employee workers, is incredibly robust: it needs to be if we are to deliver the strategic management of these workers in a way that is suited to the industry, and culture of the client’s organisation.
Our enterprise approach to contingent workforce auditing starts at implementation phase, where we audit all contingent workers and client sites. This includes all relevant data such as start date, proposed end date, location, cost centre, role, hiring manager, source, pay rate, on-costs and margins.
We also incorporate checks of the contingent workforce to ensure the critical contractors are highlighted and a risk management framework is applied. This framework ensures we understand the major risks, likelihood of recurrence and mitigation strategies.
We also have an internal Project Management Office, Legal & Compliance and Client Services Teams who conduct audits of our client operations ensuring that we deliver the most transparent insight into their contingent workforce.
And finally, if you really want your CEO to buy into the strategic management of your contingent workers, tell them about this:
- Operational compliance process – this occurs on a day-to-day basis. We’re one of the few suppliers in the industry that has a dedicated operational compliance team in place with five staff. This team sets all internal policy requirements for the business and proactively ensures that all aspects of these policies are adhered to in the operational process of working with clients.
- Risk Management Program – we work closely with PriceWaterhouseCoopers (PwC) who provide an externally verified basis for our client policies and procedures. These policies and procedures are reviewed on a regular basis and adjusted for the changing nature of compliance and regulatory regimes in Australia and New Zealand.
- External certification/audit requirements – we undergo external audit and certification requirements of individual clients on a case-by-case basis. Due to the fact there is no established industry standard audit or certification with which firms in the industry can align themselves, this requirements-based approach is the most common (though industry bodies are currently piloting programs to this end).
Hopefully these insights provide you with a framework, upon which you can establish a strategic management platform for your contingent workforce. It’s a complex process. But it’s also one that can deliver incredible material benefits to your organisation from the very early stages. And, one that will definitely appease the concerns of your CEO.