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HR Takes Charge of Contingent Staffing

It's not always been HR's job, but unles HR manages its organization's use of temporary workers, it runs the risk of serious legal, financial, and security problems.

August 7, 2002
Related Topics: Contingent Staffing, Latest News

With all the workplace issues that HR has to juggle, the hiring and managementof contingent workers might be low on the list. Why worry about temps, who arehere today, gone tomorrow, and as expendable as paper clips? They’re hardly asimportant as the hiring, training, and compensation of a cadre of regularemployees.

That’s one school of thought. But some HR professionals realize that tempsaren’t quite so trivial. In their view, it’s critical to have a clearconcept of how temps are hired, managed, and released. A company that usescontingent workers but doesn’t track them can find itself on shaky legal,financial, and security ground:

  • Microsoft Corporation agreed to a $97 million settlement in 2000 to end along court battle with its "permatemps" -- contingent workers who were hiredfor years at a time by the software company, allegedly in an attempt to avoidpaying them for health benefits, pensions, and employee stock-purchase plans.

  • A Minneapolis company that makes medical devices estimated that itsoutlay for contingent workers was No. 9 on a list of its 10 largestexpenditures. Once the company began to track its actual spending with itiliti,a company that provides Web-based workforce procurement and management software,it found that the cost of contingent workers actually ranked No. 2.

  • Another company’s records showed that 1,200 security badges had beenissued to IT contractors, but the company had only 400 temps in its workforce.That meant that 800 active security badges were in the hands of people who could"come in and do what they wanted," although they no longer worked at thesite, says Chad Wells, vice president of marketing and business development foritiliti, which is based in Edina, Minnesota.

HR’s role in contingent staffing
How does HR fit into all this? That depends on the organization involved. Inmany large companies, procurement hires contingent workers. IT groups also domuch of their own contingent hiring, given the specialized nature of the work.

But there are organizations in which procurement isn’t responsible, andneither is HR, says Bill Rothenbach, vice president and service director inSyndicated Research Group’s human capital strategies service. "Sometimesthere’s a distrust of HR that makes line managers unwilling to bring it intothe process," he says.

"It’s extremely difficult for anyone except finance to know what’s being spent on contractual workers."

And in some companies, HR has no interest in being involved, even though theinterviewing and "hiring" process of temps is more akin to HR thanprocurement.

That’s been the experience of Gene Zaino, CEO of Contractors Resources. Hiscompany provides administrative and business management services for independentcontractors and acts as the third-party employer of record for the companiesthat engage them. "HR says, ‘We don’t do [contingent or consultant hiring]-- that’s procurement,’ " he says. "We’d love to pull HR in. We thinkit would be of tremendous value to the organization."

HR absolutely should be in the business of managing contingent workers ifthose workers make up a regular, significant part of an organization’sstaffing, says Linda Merritt, human resources strategic planning director forAT&T.

"It’s a workforce capability management issue," she says. Contingentstaffing "becomes a place where capabilities are housed. If you can’t seeinto it, you don’t know if it’s being managed well.

"You might want to see some people re-employed in your organization [afteran assignment ends]," she says. "But if the only person who knows about themis a local line manager, or procurement, who just got them paid but doesn’tknow about their skill sets," HR can’t begin to make that decision.

Part of the problem lies in business systems that don’t talk to each other,or don’t collect the same sets of information. Procurement cares only aboutmaking sure that contingent workers get paid. It doesn’t have to collectinformation about their performance or skills. But there are ways around that,Merritt says. "It’s HR’s responsibility to reach out to procurement, tofind ways to get the data you need, and they don’t. You can access it throughsome IT solutions."

And what if hiring managers are hiring as they see fit, and no one is keepingtabs on them? That’s where the problems begin.

The contingent mess
Without oversight, contingent staffing becomes "a hidden cost to anorganization," Rothenbach says. "It’s extremely difficult for anyoneexcept finance to know what’s being spent on contractual workers."

It’s possible for companies to lose track of how many temps they actuallyhave, says Ed Remus, vice president of procurement for NextSource, ahuman-capital management software company based in New York City. Remuspreviously worked as senior procurement manager for Lucent Technologies.

While Remus was at Lucent, the company had more than 7,000 temporary ITemployees, but because of the way they were hired, the day-to-day head count wasnearly impossible to gauge.

"There was no one place we could go and find that out," he says. "Theway we had to get information on contingent workforces was to send letters ande-mails to all the VPs, who farmed the letters down to the project managers,saying, ‘OK, how many do we have today?’ It was a difficult thing." And,Remus adds, Lucent’s problem isn’t unique. "I see it now with a lot of ourcustomers."

Without some set of controls, line managers use certain staffing companiesbecause they’ve developed a good relationship with them, or believe they’regetting a good price (whether they really are or not). Companies have noopportunity to save money through price comparison and competition, volumediscounts, or other negotiating strategies.

That was the situation when Gary Anderson joined Carlson Companies, Inc. Theprivately held marketing, travel, and hospitality giant owns more than 745hotels, among them the Radisson chain, and has a restaurant empire that includesTGI Friday’s. It employs more than 188,000 people worldwide, but its temporaryworkforce generally runs "in the hundreds," he says.

Anderson, who is now the manager of contract labor in Carlson corporateprocurement, initially was hired to deal with contingent staffing in IT.

"There were the normal things you’d find: maverick buying, paying toomuch, contracts not in place." Also, staffing companies did not consistentlyrun criminal and educational background checks. To top things off, Carlson wasusing 144 different staffing companies. So despite its size, the company had noleverage with its vendors. Quality, both of the staffing companies and the tempsthey supplied, also was an issue. Anderson points out that Carlson’s problemswere not unique. He hears plenty of similar stories from his procurementcolleagues.

Other firms wind up with a temp-management mess because of mergers andacquisitions, says Chris Mortonson, chief sales officer for Fieldglass, anothersoftware technology company that has a Web-based application to help companiesprocure and manage their contingent workforces. In one company that Fieldglassworked with, "there were multiple business units with different purchasingprocesses, different HR management rules, and no consistent job descriptionsacross the company or the business units," he says. "There was no commondefinition of recruiters or procurement, and disparity on what staffingcompanies were used to hire, even in the same organization. The rates varied,and the quality of the workers varied."

Contingent chaos, in short.

Setting up controls
The first thing a company has to do is assess how much it uses contingentworkers. Remus recommends a look at accounts-payable records first. Sometimesthat’s the only central repository of information about contingent hiring.

Some accounting systems have coding that makes the information easy to find.If the payables list isn’t long, "you can eyeball lists of providers.Staffing jumps right out at HR. And if you see lots of payments to individuals[who might be independent contractors], that’s a red flag," he says.

Once HR knows the extent of the organization’s use of contingent workers,it can work with procurement, finance, and hiring managers to develop a process.Anderson said he began by going to staff meetings of various work groups andcollecting information there. How many workers were being hired? How long didthey stay? Who did the hiring?

Once the patterns are apparent, the organization (perhaps led by a strategicHR professional, as Merritt suggests) can start to create some parameters forcontingent hiring. It can decide which vendors to use, on the basis of cost,expertise, and track record, for example. It can determine how long assignmentswill be, in order to avoid any co-employment problems such as those encounteredby Microsoft. It can establish payment limits that can be exceeded only withapproval from someone above the hiring manager’s level.

As it has in other areas of HR, technology has made contingent workforcemanagement a lot easier. In addition to itiliti, Fieldglass, and NextSource,Chimes, eLabor, CascadeWorks, and other companies all have software suites thatmanage contingent staffing from the employer end. More and more staffingcompanies are introducing systems of their own, and many of them are formingpartnerships with the software companies mentioned above.

Most of the systems include instantaneous e-requisitions that greatly speedup the hiring process. These systems can be set up so that only requisitionsthat fit the guidelines established by HR or procurement can be sent out tostaffing companies.

Once the organization has chosen a process for contingent hiring, it’scrucial to get the hiring managers to go along with it. No one is going to firehiring managers for doing an end-run around the new process, but it’s a wasteof time and money if they don’t use it.

"It’s an education process, and it takes excellent communication,"Anderson says. "You tell the [hiring managers] over and over what you’redoing, and you get their buy-in to the process."

What works best, he says, is to create and present a process that shows themwhy it’s in their best interest to use it. "Does it remove work? Lowercosts? Remove hassles? What are the deliverables? When you show them that,people get on board," he says.

Remus agrees. "You’ve got to have something that the users see as avalue-add. If they see it as a nuisance, or as work, you’re not going to getthem to use it."

He recommends selling the new process not only by emphasizing its ease ofuse, but also by telling the managers, frankly, what risks the company runs bynot standardizing and managing the process: higher costs, possible lawsuits, andmore. "We’ve found it’s not something you jam down people’s throats. Yousay, ‘Here are the risks, and it won’t upset your apple cart to do it thisway.’ "

With technology, the process really can be faster, easier, and cheaper,Anderson says. And when a technology solution is in place, HR or procurement isout of the day-to-day decision-making, and won’t become a bottleneck for thehiring manager who needs a temp right now.

In the case of Carlson, implementing itiliti’s system meant that thecompany reduced its list of IT vendors from 144 to 9. Every contract is reviewedat 90 days or at termination so that the company can determine if the vendor andthe worker it supplied were up to snuff. Anderson stresses that technology isjust a tool, however. "The processes have to be in place first."

Help from the staffing companies
HR and procurement also have allies on the other end of the process, saysJoanie Moran, director of operations for the southern division of Adecco. Forstarters, companies such as Adecco can help firms analyze theircontingent-staffing history. "Sometimes they don’t even know how many peoplethey’re using. They might think it’s 10, and it’s 40," says JoyceRussell, senior vice president of Adecco’s southern division.

"They might think they have a formal process, but it’s not as formal asHR thinks, or the supervisors have gotten a little lax when it comes torequisitions," Moran says. "On their own, they’ll requisition 10 people HRdoesn’t know about."

Once a staffing agency knows an organization’s processes, it can serve as afriendly enforcer. "When we come back and say, ‘You’re not on the approved[hiring manager] list; do you want us to call HR?’ they say, ‘No, no,’ "Moran relates. They go back to the process, she says. The order gets approved ina timely way, but there’s been a reminder that there are guidelines, andsomeone other than HR is keeping an eye on it. "We play the gatekeeper in thatprocess."

Workforce, March 2002, pp. 50-56 -- Subscribe Now!


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