The question of where a company’s contingent workforce program should reside is one that continues to be asked – Procurement or HR? – Which is better? If there were an easy answer the question would not pop up so frequently, nor would companies like mine find themselves working with both groups depending on the client. Companies would choose the right one; if there is a clear option that is better, smart people will gravitate to it. The truth is that both models can work and both models have their downsides. The truth is also that wherever you “house” your program, you want to be sure that it involves people from all constituencies – procurement, HR and your internal clients. Bringing together the strengths and guarding against the weaknesses of each will help ensure that your program is the most successful it can be. And don’t forget about your suppliers. A program cannot succeed if it doesn’t attract great staffing partners who are committed to quality and developing a good business relationship. Make sure your program attracts and rewards good suppliers and great performance.
What are those strengths? What are the reasons to choose one or the other? Well clearly, procurement’s experience in process engineering and cost savings is a valid draw and depending on the type of program you have and the typical contingent workers that you are looking for sometimes these savings can be significant. If you have a particularly unwieldy process or significant issues with vendor management, their expertise in structuring for efficiency can be a huge boon. Cost savings through real dollars and reduced time and effort are worthy goals and nothing to be taken lightly!
HR has some equally compelling reasons on their side. HR professionals understand the nuances of the hiring process, the human element involved. They understand how to interview and evaluate candidates and they are frequently closer to the internal customer and more aligned with their goals. HR professionals often have a better understanding of the true costs of the current labor market and what is needed to attract the best candidates; not just salary but benefits and other soft offers. These can make a difference when attracting and retaining both contingent consultants and permanent employees.
Let’s talk a little about the internal customer, the “hiring manager.” For your program to truly succeed they need to be satisfied. Cost savings are useful unless they get in the way of hiring the talent needed. If rate restrictions mean it takes longer to hire the best person because the salary market has changed, it may wipe out any savings and more. Missing project deadlines is much more costly than a higher rate for a talented individual and when managers have the budget to pay market rates and are prohibited, it can breed resentment with the program. Process efficiencies are also great unless they result in prohibitions on the type of communication that the manager wants and needs to have with their staffing partners. This is especially important in the IT, Engineering and Scientific spaces, where the skills and experience needed for positions are very specialized and communication to describe the nuances of what a manager is looking for in a consultant can be critical. Again, saving is great and everyone is on board until it seriously conflicts with a mission critical goal. Whether your program is managed out of Procurement, HR or some other department (!), make sure you know your internal customer and you are really meeting their needs while also saving the firm money.
Finally, what about rates? Who does a better job of controlling them? Well, again, the answer in my opinion is both groups bring a certain expertise and knowledge to the question and so, again, you want to be sure and take advantage of both of their strengths and guard against the pitfalls. HR professionals often seem more comfortable with negotiating mark ups and holding strong on the percentage and top rate as a way of controlling cost. This is ok with labor categories where the price differential for various candidates is very narrow, i.e., clerical positions where all of the candidates would accept between $14-16 per hour. In IT though, for example, one web developer might cost $100 while another might be $60, leaving room for greater cost savings at times while conversely at others creating a situation where it may be harder to attract the right person.
Procurement of course is experienced in negotiating contracts and setting up rate cards that can significantly control costs, especially if you have never had a program in place before. However, these negotiated rates can easily become a trap that prevents your program from delivering the talent your company needs since they often pertain to multiple years of a contract and don’t reflect how quickly market rates can change. This is especially true in the IT and Engineering labor pools where unemployment remains lower than the national average and is nonexistent in many job categories.
What can you do to counteract this? Well, take the best of all worlds, wherever you decide to run your program from. Make sure that Procurement, HR and end users are all involved in setting the parameters and processes. It is possible to achieve efficiencies in both time and money while still catering to your internal users. You just need to make sure there is continued communication between all parties and a commitment to including everyone’s needs and viewpoints to make it happen. Flexibility in how you negotiate and change or override rates to address market fluctuations is also a good idea. Also, make sure that your rates and procedures are fair to your suppliers and don’t drive them away with unsustainable rates or margins that don’t allow them to make money.
Build a program that is responsive and utilizes the best that each department in your company has to offer. That way you can choose Procurement or HR with confidence because no matter where your program resides, it will be more successful if everyone is involved.
President and CEO