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Maximize the Return on Temp Staff Investments

November 1, 1999
Related Topics: Contingent Staffing, Featured Article
Human resources professionals are currently facing the tightest labor market in 25 years. As a result, many are turning to alternative solutions such as contingent staffing to meet their short- and long-term staffing needs.

Although contingent workers can be hired directly, most companies turn to a third-party supplier such as a temporary staffing company that will recruit, screen, select, place and manage the temporary worker while on assignment. This allows the company to use the temporary only for the time needed, while eliminating payroll, worker’s compensation and benefit expenses and responsibility, as well as related administrative costs.

The American Staffing Association (formerly the National Association of Temporary Staffing and Services) estimates that 90 percent of companies currently use temporary staffing to augment their full-time regular workforce. In 1998, ASA reported that U.S. companies spent $72 billion on temporary staffing services, driving average daily temporary staffing employment to 2.9 million. According to the Bureau of Labor Statistics, employment of temporary workers is expected to increase 53 percent—nearly 1.4 million jobs—from 1996 to 2006, making the temporary staffing industry one of the fastest growing in the economy.

As temporary staffing becomes a more permanent solution for many organizations, HR professionals have looked for ways to better optimize this resource and improve the return on their investment. As a result, best practices have evolved around the use of contingent staffing, and can be segmented into the following categories:

Strategic Staffing Plans
When temporary staffing was initially introduced many years ago, companies turned to staffing services only for last-minute, emergency-based needs. A clerical or "secretarial" worker would be brought in to cover the phones or fill in on a short-term basis for a regular employee during vacation or maternity leave.

Today, companies have expanded their use of contingent staffing to include temporary lawyers, software engineers, editors, accountants and other professionals who have a significant impact on the organization and its internal and external customers. The volume and frequency of using temporary workers has also increased significantly, and in some companies—particularly during peak project periods—temporary workers can represent up to 40 or 50 percent of the total workforce.

Best-practice companies use temporary workers to manage business peaks and valleys and also to augment their staffing plan in other ways:

  • To bridge the labor gap by using temporary workers to fill existing open positions until regular hires are made.
  • To source and screen potential regular hires.
  • To address retention issues in high-turnover areas (call centers, for example) by developing a temporary-staffing model with short-term expectations.

Best-practice companies strive to anticipate their temporary-staffing needs, approach this resource strategically, and incorporate the contingent staffing solution into their overall staffing plans. This involves the following:

  • Determining in advance the likely ebb and flow of business and projects and based on anticipated need, establishing the volume and skill set of temporary workers required for the designated planning period, (which is typically quarterly and annually.)
  • Creating a budget for temporary spending.
  • Establishing management information reports that monitor spending and other key data.

Contingent Staffing Models
There are numerous contingent-staffing models being used in organizations today, and the pendulum has swung back and forth between a couple of basic models.

At one time, companies relied on multiple staffing services, believing there was value in having more suppliers to choose from. This meant placing an order or orders for temporary workers with several services. Typically the service that came in first (often with the lowest rate) would win out.

Companies eventually realized this wasn’t an efficient system because the company contact person had to manage multiple services, spend time explaining their requirements to each service, and juggle different bill rates, invoicing methods, etc. This, in turn, led to a more single-source approach that involved working with one primary supplier and several backup services.

Although this approach saved time and on the surface appeared more efficient, companies found that one service couldn’t always perform well in every skill area. One service might be strong in technical staffing, but weak in accounting; another might have expertise in light industrial, but be very weak in office automation.

Best-practice companies have started moving away from the single vendor approach, and they’ve started to focus on finding the best service in their location in each specialty area. When companies use a high volume of temporary workers (high is a relative term, but typically refers to 20 or more temporary workers onsite at any given time), they might elect to work with a primary supplier that will establish strategic partnerships with other specialty services.

The primary service functions as the single point of contact for the company, but it may forward orders to other suppliers when necessary. Client invoices will often be submitted through the primary service, as will management reports that detail client activity. This allows the company to access temporary staff from multiple services with different areas of expertise without having to manage multiple vendor relationships.

In some cases, the primary vendor is located onsite at the client location. This arrangement is typically referred to as a "vendor-on-premise" program, "resident management" program or "onsite management" program, and is usually reserved for very high-volume accounts (approximately 50 temporary workers onsite at any given time). It further removes the client from the day-to-day management of the temporary workers, which frees up time for the HR staff. It also has the added benefit of clearly establishing the temporary service as the employer, eliminating potential legal issues.

It’s important to work with a staffing service that has a history of success in managing onsite programs. Best-practice companies use an organized and structured approach to selecting a staffing service, and they apply thorough due-diligence practices before committing to a long-term relationship.

Vendor Assessment and Selection
Temporary services differ in how they’re structured, how they operate and what features and benefits they offer both their clients and temporary workers. Best practice companies identify their specific needs before initiating the buying process.

When companies use a high volume of temporary workers, the best approach is to identify the selection criteria (one example might be that the service can provide second-shift workers and be staffed to handle issues that come up during that shift).

Once identified, these factors can be incorporated into a request for proposal (an RFP) or a request for quotation (an RFQ.) These phrases are used interchangeably and serve to solicit information from a select number of temporary services. HR will typically do some research upfront to identify qualified services in the area.

Best-practice companies consider the following points when seeking out a service partner:

  • The qualifications of the management team that runs the organization and their tenure with the organization (service levels suffer with high turnover).
  • The length of time the company has been in business and their client references.
  • Involvement and membership with the American Staffing Association, which establishes the ethical standards in the industry.
  • The recruiting, training, compensation, benefits and retention programs the service offers their temporary workers.
  • The performance record of placements, replacements, cancellations, completed assignments, etc. (Best-practice services track this information.)
  • The services’ ability to fill last-minute positions, and after-hour capabilities.
  • Insurance coverage for temporary workers (i.e. worker’s compensation, liability insurance, and so on).
  • The service’s technological savvy and capability to support internal and external systems.

Contingent Workforce Management
Managing the contingent workforce involves working closely with the staffing service to communicate expectations and issues. But equally important to the process is having a structured set of guidelines in place for the organization to follow when using temporary help.

Best-practice companies ensure the following human resource policies and practices are in place to support the blended-workforce strategy, and will often post them on the company intranet:

  • Guidelines for ordering and managing temporary workers (some companies may require the manager to complete an online assessment form to determine if they need a temporary worker as opposed to a full-time, regular hire).
  • Policies that keep the company out of trouble legally (limiting the amount of time a temporary worker can be onsite to avoid being perceived as an employee, management guidelines, and so on).
  • Metrics and systems to monitor productivity, quality and internal customer satisfaction.
  • Written policies in employee handbooks that exclude temporary workers from benefit programs, stock options, etc.
  • Guidelines that state if, when and how temporary workers can apply for full-time, regular positions.

Vendor Management
Best-practice companies have a model in place for managing all of their vendor relationships, and they apply these systems and standards to their temporary-help services, as well. These model characteristics include:

  • A set of vendor purchasing criteria designed to meet the organization’s particular set of needs and values.
  • A defined set of outcomes established for the vendor.
  • A formal organizational strategy for managing the vendor.
  • A system for monitoring and reporting vendor performance.
  • A system for comparing vendor performance to industry benchmarks.
  • A process for reviewing vendor performance and establishing continuous improvement plans.

Workforce, November 1999, Vol. 78, No. 11, pp. 58-60.

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