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Direct Sourcing & your contingent workforce: 5 big decisions to make when designing your program

Aug 19, 2019

They go by many different titles: contingent workers, gig employees, freelancers, contractors, but regardless of naming, they all serve the same purpose: providing organizations with flexible, skilled staffing solutions to help them quickly respond to market changes and demands.

In the past it was very common for organizations to source their contingent labor through a staffing or recruiting company. For a flat fee or a percentage of each workers’ pay, the recruiter would vet resumes, qualify workers, negotiate pay rates, and manage all payroll and compliance for that worker. In return, the client received timely access to skilled consultants and workers and was glad to outsource the process to their trusted suppliers.

In an effort to save money, better manage talent, and regain control over their recruits, companies have become increasingly more comfortable taking on some or all of the contingent worker engagement process for simple or frequent openings within their organizations. The practice of engaging contingent workers directly is known as direct sourcing and while it is true that direct sourcing can save companies money, the opposite can also be true if the company doesn’t have the proper resources in place or a formal program to manage the process. This post will address some of the challenges with direct sourcing, as well as five key decisions companies need to make when establishing their own direct sourcing program.

It’s important to note, direct sourcing programs don’t have to be an all-or-nothing approach. In fact, many companies use direct sourcing for routine or frequently engaged contingent worker requirements and still use an outside staffing agency to manage complex roles, executive positions and other senior company positions.

Whichever route you choose, below are some considerations to help enhance your program:


Making Direct Sourcing Work for You
According to the World Economic Forum there is a world-wide shortage of skilled workers, which makes the process of sourcing and recruiting talent that much harder for companies, particularly ones with global operations. Having a program in place that gives you immediate access to a pool of skilled, proven workers has many obvious benefits, not the least of which is a reduction in ongoing recruiting fees and shorter down-times.

It’s no surprise that technology has made direct sourcing easier than ever. Social networking makes reconnecting with your former contingent workers (alumni) simple: job openings for contingent workers can be posted for free on a company’s Intranet, their public-facing website, or more widely through online job and social media websites.

As with any online presence, companies must consider the brand image they’re putting forward. Employer and company branding is just as important for contingent workers as it is for traditional employee recruitment efforts and the two need to be complementary as well as truthful.

One of the first steps everyone takes when considering an organization for a future contract/engagement is to perform online research about the client. Websites such as Glassdoor indirectly keep companies honest by allowing past and present workers across all levels to rate their experience with the organization. Companies with frequent turnover or a low rating are viewed less favorably, for obvious reasons. Having and maintaining a strong workplace brand can be very advantageous for companies recruiting in highly competitive industries and can be the differentiator for a contingent worker contemplating multiple offers from potential client suitors.

Chances are you already know that one of the best sources for recruiting new talent comes from existing and former employees whose own personal and professional networks expand your company’s reach well beyond traditional recruiting sources. Employees, contingent workers, and alumni who already have a positive work experience with your company are more likely to recommend highly-qualified candidates since the referral has a direct impact on their reputation at the company. A side benefit of this is that internal referrals tend to start out with a higher level of trust than unknown candidates which can make the interview process faster and easier.


Designing Your Own Direct Sourcing Program
The best direct sourcing programs usually complement other recruiting practices rather than replace them altogether. And programs can vary greatly based on the individual company’s needs and available internal and external resources.

Below is an overview of the five big decisions companies must make when designing their own direct sourcing program, from the informal to the fully-developed:

A comparison of designed direct sourcing programs from informal to fully-developed

Informal programs are usually managed by a hiring manager who sources contingent workers directly and often at a higher rate card than necessary. This can happen when the hiring manager has a particular candidate in mind and is more interested in quickly getting a resource in place, rather than opening the direct sourcing process to competition and potentially lowering the rate of pay for the selected contingent worker.

Most often though, a direct sourcing program model will involve some kind of internal recruitment team and an applicant tracking system (ATS) of some sort to manage candidates and an approved rate card. It’s important that whatever model you choose there is some structure to it and discussion around the five big decisions. Otherwise your direct sourcing program may end up costing you more time and money than if you had continued to outsource to an external staffing vendor.

For all models, using a third-party service provider to manage the paperwork for your directly sourced contract workforce will help mitigate risk and make your job easier. A good provider:

• Will manage contract administration.
• Be knowledgeable in the latest payroll, benefits and employee/contractor status regulations.
• Can recommend process improvements,
• Ensure compliance and meet submission deadlines to government agencies.

For more information on direct sourcing and setting up a program, check out our free white paper: How to Optimize Costs with Directly Sourced Contractors.
DOWNLOAD WHITE PAPER

Alex MacKenzie
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Alex MacKenzie
Account Executive
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Related Insights

Direct sourcing: Steps to launching an effective program. Contingent workforce insights

It’s a new era of talent acquisition. As candidates continue to drive the current workforce environment, organizations are turning to a more agile approach when competing to engage contingent workers. And they have unprecedented access to do so, with a current talent pool of 42 million independent workers in the U.S. alone.

As the gig economy continues to grow, it's critical that recruitment professionals are aware of the proper sourcing and engagement strategies for this workforce. As such, many employers are moving away from traditional hiring models and turning to a direct sourcing approach in combination with, or instead of, third party staffing vendors for the acquisition of skilled workers.

Direct sourcing occurs when an organization identifies candidates for a position using their own resources, choosing to perform recruiting and onboarding functions internally.

Is direct sourcing right for you? Below is an actionable approach to identifying whether or not direct sourcing is right for your organization and how to start designing a program that works for you.


Is your organization prepared for direct sourcing?
Depending on your organization’s needs and current hiring structures, it’s important to recognize that direct sourcing isn’t always the best option in every situation. First, it's critical to assess whether your organization is prepared for a direct sourcing program. Here’s how you can identify whether you're ready:

•  Your organization already has forecasting and workforce planning in place.
•  You’re planning to recruit large numbers of contingent workers with similar skill sets.
•  You require cost-effective supplier efficiency.
•  You’re looking to control and capitalize on your employer brand.
•  You suspect you’re spending too much on recruitment costs and require visibility into where dollars are being spent.


How can your organization benefit from direct sourcing?
Direct sourcing can provide many cost savings benefits, but the opposite can also be true if employers don't have the proper resources in place or a formal program to manage the process.


However, organizations that get it right will experience:
•  Control over employer branding
•  Reduced costs and time to hire
•  Decrease in risk
•  Increased efficiency
•  Higher retention rates and worker loyalty
•  Increased ability to engage niche talent
•  Flexibility to hire on a project-by-project basis


Once you’re ready to move forward with direct sourcing, here’s how to launch an effective program:
Step 1.
Set organizational goals (and resourcing)
Great programs start with a set of clear and achievable goals, supported by a resourcing plan that provides all of the people and technology required to achieve success. When setting program goals, an organization should pick two or three of the ones below as the principal focus of their program.  Which goals are most important to you?

•  Better access to talent
•  Save money
•  Increase transparency & control
•  Improve contractor experience
•  Independence from vendors
•  Maintain control of employer branding
•  Manage risk 

Step 2.
Experience Design: The source of participation
Building a community of engaged contractors and future employees is not easy – it requires very intentional thinking from the talent’s perspective about the experience and benefits of participation. Poor experience design and inconsistent participation incentives will mean your program is unlikely to resonate with contractors, and those that do join, will tend to fall off quickly.

Employers can off-set this by leveraging a process based on experience design. This includes analyzing your organization’s current needs and environment, followed by development of participant personas and crafting relevant value propositions at each phase of the relationship lifecycle. 

Step 3.
Fundamental Program architecture
In tandem with the experience design process, every program needs to define its fundamental structure and policy decisions that will govern day to day operations. We define this as the people, process, policy and technology elements of your direct sourcing program.  Identifying and addressing these components is fundamental to its success, however; many organizations approach these decisions in an ad-hoc way, as opposed to part of a larger design and outcome driven initiative.

Step 4
A successful program will take into consideration these five major decisions:
1.  Payroll management model
2. Sourcing format
3. Rate management card
4. Onboarding requirements
5. Governance/KPIs

Once your organization has completed the necessary workforce planning, you may have decided direct sourcing isn’t the best strategy for you right now. However, insights gleaned from your research can still help improve your current program, so it’s important to reconnect with your MSP to review their objectives and metrics of success and how they align with your organization’s current and future goals.


If your organization is interested in learning more about the benefits of direct sourcing, download our free whitepaper: How to Optimize Costs with Directly Sourced Contractors:
DOWNLOAD WHITE PAPER



Contingent Workforce Management

Direct sourcing: 3 Steps to designing your program for contract talent

Even the best talent organizations can struggle when it comes to launching an enterprise-wide direct sourcing program. Although most efforts are well founded, some businesses may struggle with the assumption that informal direct sourcing activities can scale up easily (they don’t!), and fail to consider program participation dynamics from the talent’s point of view.

Launching an effective direct sourcing program will allow your organization to build a community of engaged talent, thereby lowering the cost of acquisition and increasing contractor performance while on assignment.

Here’s how to do it:


The approach
All best-in-class programs are designed with a three-part approach. This approach involves a cross-functional team of key client representatives and supporting team members. When preparing your direct sourcing program, components should include: Client goals, experience of the candidate, and program architecture. Although change management is fundamental, it will require its own dedicated work stream.


Step 1.
Setting Client Goals (and resourcing)
Great programs start with a set of clear and achievable goals, supported by a resourcing plan that provides all of the people and technology required to achieve success. When setting program goals, an organization should pick two or three of the ones below as the principal focus of their program.  Which goals are most important to you?

• Better access to talent
• Save money
• Increase transparency & control
• Improve contractor experience
• Independence from vendors
• Manage risk


Step 2.

Experience Design: The source of participation
Building a community of engaged contractors and future employees is not easy – it requires very intentional thinking from the talent’s perspective about the experience and benefits of participation. Poor experience design and inconsistent participation incentives will mean your program is unlikely to resonate with contractors, and those that do join, will tend to fall off quickly.

Business owners can off-set this by leveraging a process based on experience design. This includes analyzing your organization’s current needs and environment, followed by development of participant personas and crafting relevant value propositions at each phase of the relationship lifecycle.


Step 3. 
Fundamental Program architecture 
In tandem with the experience design process, every program needs to define its fundamental structure and policy decisions that will govern day to day operations. We define this as the people, process, policy and technology elements of your direct sourcing program.  Identifying and addressing these components is fundamental to its success, however; many organizations approach these decisions in an ad-hoc way, as opposed to part of a larger design and outcome driven initiative.


A successful program will take into consideration these 5 major decisions:

• Payroll management model
• Sourcing format
• Rate management card
• Onboarding requirements
• Governance/KPIs

Building a strong direct sourcing program can be as easy, or difficult as you make it - it all depends on your goals and approach. A basic program will offer a clear framework for Onboarding and managing your contingent workers safely over the engagement lifecycle. Want more information on designing your direct sourcing program?  Download our free white paper: How to Optimize Costs with Directly Sourced Contractors: 

Contingent Workforce Management

Direct sourcing: Designing a program that works for you

They go by many different titles: contingent workers, gig employees, freelancers, consultants and contractors, but regardless of naming, they all serve the same purpose in providing organizations with flexible, skilled staffing solutions to help employers quickly respond to market changes and demands.

In an effort to save on cost, better manage talent and regain control over their recruits, organizations have become increasingly more comfortable taking on some or all of the contingent worker engagement process for simple or frequent openings within their organizations.

The practice of engaging contingent workers directly is known as direct sourcing, and while it's true that direct sourcing can save organizations money, the opposite can also be true if the company doesn’t have the proper resources in place or a formal program to manage the process.


Making Direct Sourcing Work for You
According to the World Economic Forum there is a world-wide shortage of skilled workers which makes the process of sourcing and recruiting talent that much harder. Having a program in place that gives you immediate access to a pool of skilled, proven workers has many obvious benefits, not the least of which is a reduction in ongoing recruiting fees and shorter down-times.


Designing Your Own Direct Sourcing Program
The best direct sourcing programs usually complement other recruiting practices rather than replace them altogether. And programs can vary greatly based on the individual organization’s needs and available internal and external resources.

Below is an overview of the five big decisions companies must make when designing their own direct sourcing program, from the informal to the fully-developed:


Informal programs are usually managed by a hiring manager who sources contingent workers directly and often at a higher rate card than necessary. This can happen when the hiring manager has a particular candidate in mind and is more interested in quickly getting a resource in place, rather than opening the direct sourcing process to competition and potentially lowering the rate of pay for the selected contingent worker.

Most often, however, a direct sourcing program model will involve some kind of internal recruitment team, an applicant tracking system (ATS) to manage candidates and an approved rate card.

It’s important that whatever model you choose, there is some structure to it and discussion around the five big decisions. Otherwise your direct sourcing program may end up costing you more time and money than if you had continued to outsource to an external staffing vendor.

For all models, using a third-party service provider to manage the paperwork for your directly sourced contract workforce will help mitigate risk and make your job easier. A good provider:

• Will manage contract administration,
• be knowledgeable in the latest payroll, benefits and employee/contractor status regulations,
• can recommend process improvements,
• ensure compliance and meet submission deadlines to government agencies.

If your organization is considering adding a direct sourcing program to your talent acquisition strategy or would like to learn more about complimenting your current model, download our free whitepaper: How to Optimize Costs with Directly Sourced Contractors

Contingent Workforce Management

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