Contract Talent Management

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					         The State of
    Contract Talent Management
                                      and the Role of HR




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                       Human Capital Institute   |   January 2009
                                     Table of Contents                                                            About this Research
                                     About this Research ................................................i        This research was conducted between August
                                                                                                                  and December 2008. A survey of 35 items
                                     Introduction.............................................................3
                                                                                                                  was distributed to approximately 20,000 HCI
                                     The Importance of Contract Talent                                            members (one senior manager per organization).
                                     (As a Component of the U.S. Workforce) .............5                        356 full and partial surveys were received,
                                                                                                                  including 319 complete and partial surveys
                                     Who is Responsible for Contract Talent
                                     Management in Organizations? ............................7                   from 319 different organizations. The survey
   For the great majority
                                                                                                                  results form the basis of this research and are
      of organizations we
                                     Contract Talent Sourcing .......................................9            summarized in this paper. In addition, in-depth
surveyed, contract talent
management is seen as a                                                                                           interviews were conducted from among survey
                                     How Organizations Manage Their Contract
strategic activity that can          Talent Program......................................................11       respondents; quotes and statements from several
enhance competitiveness                                                                                           are included (anonymously) in the report. To
         and profitability.          Contract Talent Management as Strategy .........15                           round out the primary research described above,
                                                                                                                  HCI researchers reviewed recent, on-topic work
                                     Conclusions:
                                     A Contract Talent Perspective .............................18                from a variety of sources, including white papers,
                                                                                                                  articles, books, interviews and case studies, many
                                     Appendix A:                                                                  of which are cited in the report and all of which
                                     About the Research Partners ...............................19
                                                                                                                  are referenced in HCI’s Contract Talent Research
                                     Appendix B:                                                                  Practice Area (to which interested readers are
                                     Respondent Demographics.................................22                   referred for additional reading and online events).




                              i   The State of Contract Talent Management and the Role of HR
                                 Introduction
                                                                                                         The Benefits of Contract Work
                                 Today’s employment marketplace consists of a
                                 diverse composition of labor and talent from a                          While contract work involves risks and draw-
                                 wide variety of sources. Among them is a group                          backs for employers and contractors, it is
                                 collectively known as “contracted talent” or the                        the benefits that are driving the growth in
                                 “contingent workforce.” This group includes                             this segment of the overall workforce.
                                 contractors, consultants, freelancers, temporary
                                                                                                         Employers:
                                 help, interim executives and others who are not
  “We employ temporary                                                                                   • Flexibility (to staff up and down quickly
                                 part of an organization’s full-time or part-time
      workers for a whole                                                                                  according to requirements)
   range of positions and        workforce.
      projects. We’ve got                                                                                • Lower wage costs (agility and flexibility to
                                 Contingent work has continually evolved since                             engage talent only for the period needed)
  temps as administrative
                                 its inception. The 1950s temp who filled in for
   assistants and we have                                                                                • Lower benefits, insurance and
    very senior IT people,       emergencies and maternity leave has given way
                                                                                                           health costs
    working on some very         to today’s skilled professional who may lead
 important projects, who         projects, serve in a critical technical capacity                        • Potential to mitigate layoffs in economic
 are on contract. We also        on a team, or even act as an interim CEO.                                 downturns; the contract workforce pro-
   offshore a lot of our IT      Indeed, the use of professionals and highly                               vides a buffer
    and claims processing        skilled technicians as short-term workers has
   work. If I had to guess,      been the fastest-growing sector in the contract                         Workers:
 I would say about 30-40         and temporary staffing industry over the past                           • Earnings (hourly rates are normally
percent of our worldwide         few years. The commercial and light industrial                            higher than equivalent salaries for full-
    workforce is on some                                                                                   time workers doing the same or
                                 sectors, which once accounted for the bulk of
         kind of contract.”                                                                                similar work)
                                 temporary and contingent jobs in the U.S., has
              —Recruiter,        been overtaken by the needs of the knowledge                            • Tax benefits (contractors may be able
       global IT company         and services sector for professionals and skilled                         to write off)
                                 technicians, who now account for more than half
                                                                                                         • Flexibility
                                 of the overall temporary job count in the U.S.2
                                 As such, the “contingent workforce” is more                             • Variety of work
                                 appropriately described today as a “contract                            • Quality of work (successful contractors
                                 workforce” (see sidebar next page). Today, skilled                        can choose the projects that interest
                                 contractors, whether independent or attached to                           them most)
                                 a firm, provide the bulk of temporary labor in U.S.
                                 organizations.

                                 The contract component of the workforce is                           workforce would experience 54 percent growth
                                 important and becoming more so. According                            (cumulative) through 2012, more than double
                                 to the U.S. Bureau of Labor Statistics, four out                     the rate of expected growth for the overall
                                 of five organizations in the United States use                       workforce.4 As contract work becomes a more
                                 contract talent. Contract talent, as broadly                         popular choice among all age groups in the
                                 defined above, already accounts for at least                         workforce (especially Generation X and early
                                 one-quarter of the country’s workforce and is                        Baby Boomers) and as its importance to the
                                 growing at two to three times the rate of the                        overall economy grows, it is becoming critical for
                                 traditional workforce.3 The U.S. Bureau of Labor                     organizations to have a contract talent strategy
                                 Statistics projected in 2006 that the contingent                     and plan.


                                 1
                                   Dr. Katherine Jones, The Interim Executive, August 2008
                                 2
                                   Ibid.
                                 3
                                   Angela Clinton, U.S. Bureau of Labor Statistics: “Contingent Work, the Wave of the Future,” 2007.
                                 4
                                   Ibid.



                          3   The State of Contract Talent Management and the Role of HR
        Defining Contingent Work
        The term “contingent work” was first coined by Audrey Freedman, at a 1985 conference on employ-
        ment security, to describe the management technique of employing workers only when there was an
        immediate and direct demand for their services.

        Within a few years of its initial usage, however, the term came to be applied to a wide range of
        employment practices including some part-time work (non-1099), temporary help service employ-
        ment, employee leasing, self-employment, contracting out, employment in the business services
        sector, and home-based work.

        Cary L. Cooper and Ronald J. Burke in their book, The New World of Work,3 write:

        “In one sense, the term ‘contingent’ has been associated with employment arrangements which
        operate on a ‘conditional’ or ‘as-needed’ basis.”

        To focus on the transitory nature of the employment relationship and to identify a common underly-
        ing characteristic with which to classify workers, the Bureau of Labor Statistics in their Monthly Labor
        Review (1989) article, titled “On the definition of ‘contingent work’,” developed the following con-
        ceptual definition of contingent work:

        “Contingent workers are persons who do not expect their jobs to last or who reported
        that their jobs are temporary.”

        As Audrey Freeman’s quote implies, an important characteristic of “contingency” is a lack of attach-
        ment between the worker and employer. Despite the gradual change in the composition of the
        contingent workforce, away from low-skilled “temps” toward highly skilled contractors, this has not
        changed over the past two decades.

        Thus, the “contract workforce” and the “contingent workforce” are more or less synonymous terms.
        In this paper, we refer to a “contract workforce,” as it has become a better description of both the
        composition of this workforce and the type of work it is performing.


       The reasons for hiring contract workers are            objectives. Unfortunately—for a range of
       similar to those driving every other major             reasons we will explore in this paper—this is not
       workplace initiative: talent shortages, increased      yet the case in most firms.
       global competition, technology and the need
       to respond quickly to an ever-changing market          To better understand the state of contract
       environment. A well-implemented contract               talent management in organizations today, and
       workforce management program can allow an              in particular, the role of Human Resources (HR)
       organization to tap into a flexible talent base        and Talent Management (TM) professionals
       and adjust the workforce to match new skill            in contract talent management, the Human
       requirements and workload changes, while at            Capital Institute partnered with Allegis
       the same time controlling costs and risks.             Group Services, TAPFIN, MBO Partners, IQ
                                                              Navigator, the Guidant Group and Fieldglass
       To succeed today, most organizations depend            (see appendix A for company descriptions)
       on their ability to attract the contract talent they   to conduct a survey on, interviews about and
       need. To succeed in the future, organizations          background research into these questions.
       will need to do so at the right price, in the          The resulting paper is intended to aid HR and
       right numbers and in alignment with corporate          TM leaders in developing their contract talent
                                                              strategies and plans.



4   The State of Contract Talent Management and the Role of HR
                                The Importance of Contract Talent
                                (As a Component of the U.S. Workforce)
                                As the importance of specific skills to the overall                As for the future, a full 85 percent of respondents
                                economy increases, so does the popularity of                       (Figure 2) believe that their use of contractors
                                contract work – both for hiring organizations and                  will remain about the same or grow over the next
    “The HR department          workers. The staffing industry has doubled since                   three years as opposed to just 15 percent who
    of a company should         2003, from about a $60 billion a year to a $120+                   believe it will decrease.
be involved in managing
                                billion a year industry today. Before the current
     contingent workers                                                                            From the employer perspective, the main
                                economic downturn, many analysts expected it
         if those workers                                                                          reason for the growth in the contract workforce
                                to surpass $200 billion by the end of the decade.5
      make up a regular,                                                                           is flexibility. The contract workforce can be
    significant part of an      It is not surprising then that more than
                                90 percent of the 319 organizations surveyed                       rapidly expanded in times of growth and quickly
 organization’s staffing.”
                                for this study use contract talent. Moreover, 34                   reduced when needed. Teams can be built,
       —Linda Merritt,          percent say that their use of contract talent has                  dismantled and reconstructed around different
  HR Strategic Planning         increased or increased dramatically in the past                    needs as opportunities grow in new areas and
    Director for AT&T.5         three years, while fewer than 20 percent report a                  decline in others.
                                decrease (Figure 1).


                               Figure 1.
                               Over the last three years, my organization’s use of contract talent has:
                                                                                                      25%        50%       75%             n    percent

                                    Decreased substantially                                                                               13      4%

                                    Decreased                                                                                             49      15%

                                    Remained about the same                                                                               147     46%

                                    Increased                                                                                             90      28%

                                    Increased substantially                                                                               20      6%

                                n=319


                               Figure 2.
                               Over the next three years, my organization’s use of contract talent will likely:
                                                                                                      25%       50%       75%         n         percent

                                    Decrease substantially                                                                            8           3%

                                    Decrease                                                                                         40          13%

                                    Remain about the same                                                                            169         53%

                                    Increase                                                                                         83          26%

                                    Increase substantially                                                                           19           6%

                                n=319

                                5
                                    Marshall Goldsmith, Business Week Magazine, May 23, 2007: The Contingent Workforce.




                         5   The State of Contract Talent Management and the Role of HR
                                    As one of our survey respondents said:                            The contract workforce is vital to the U.S.
                                   “By engaging contract workers, organizations are                   economy in terms of its current and projected
                                   able to be agile and save costs. The contingent                    size but also because of the type of work it
                                   workforce acts as a variable workforce for                         performs. Already, more than half of all contract
                                   companies to select from to perform specific                       work falls into the professional and highly skilled
                                   projects or complete specialized projects.”                        categories and, according to our respondents,
                                                                                                      these components are growing as a percentage
                                   From the worker’s perspective, contracting has                     of the overall contingent workforce (Figure 3).
                                   several advantages. Flexibility in work schedules,                 Regarding the U.S. workforce as a whole, the
     “Since I’ve been here,
                                   a choice of projects, more money on an hourly                      U.S. Department of Labor projects a 68 percent
  HR, Procurement, Legal
                                   basis, and the potential to achieve actual                         increase in the use of white-collar contract labor
  and business units work
                                   job security increasingly outweigh company-                        through 2015.6
       together to manage
   contractors and temps.          sponsored benefits and the illusion of job
    … this is working well,        security. Contract work is also an increasingly
  better than in any other         attractive option for retirement-aged Baby
company I’ve worked for.           Boomers. As Gene Zaino, President and CEO
   HR is trying to measure         of MBO Partners says, “Baby Boomers are
       the best sources for        foregoing traditional retirement in favor of
     contractors and we’re         continuing to work on a contract basis.”
        trying to track their
 performance versus cost
 over time. We work with
 the legal department to
 make sure we follow the
rules around contractors,          Figure 3.
     procurement is mainly
                                   In my organization, contract talent includes:
       responsible for cost
   issues and the business                                                                              25%     50%      75%             n      percent
      units determine what
                                       Specialists doing technical work                                                                 255       80%
 they need. This year, we
      [HR] started working             Professionals providing consulting, legal,
                                                                                                                                        231       72%
    with the business units            or other expertise
  to project demand for a              Senior managers and executives who help                                                          46        14%
             year ahead …”             lead the organization

                                       Other (specify)*                                                                                 47        15%
—Director of Recruiting,
    large construction/
       engineering firm            n=319




                                   6
                                       See U.S. Department of Labor, “Occupational Outlook Handbook,” 2006.




                            6   The State of Contract Talent Management and the Role of HR
                                  Who is Responsible for Contract
                                  Talent Management in Organizations?
                                  Given the importance of contract talent and          respondents report that HR is either primarily
                                  organizations’ emphasis on skilled workers           or partially responsible for contract talent
                                  and professionals, one would expect that             management.
         “Our research has        HR or TM professionals would be in firm
 found that management            control of the process. After all, even in firms     Two things raise concern, however. First, our
     for the contract labor                                                            survey was sent to members of the Human
                                  where line managers are conversant in the
category falls to multiple                                                             Capital Institute, a talent management think-
                                  principles of talent management (for example,
       stakeholders across                                                             tank with HR/TM professionals and executives
                                  the importance of employee engagement,
    the enterprise. Human                                                              comprising two-thirds of its membership. This,
   resources is the bearer        performance management and leadership
                                  development) HR and TM professionals                 and the fact that they voluntarily responded
        of responsibility 42
                                  remain the custodians of competency and              to this survey (indicating a level of interest in
       percent of the time,
                                  skills management, quality of hire measures,         the topic) makes it reasonable to expect that
 however, procurement’s
  involvement has slightly        regulatory compliance information, market            our results are skewed at least somewhat in
  increased to 27 percent         rates for various talent and the best sources for    favor of HR involvement in contract talent
    since our last research       talent acquisition, to name just a few. To achieve   management. More importantly, it is alarming
          effort focused on       volume, quality, performance and compliance in       that, even despite the skew, a full 43 percent of
                this space.”      a contract talent management program, then,          respondent organizations appear not to involve
                                  HR and TM must be involved.                          HR/TM at all in contract talent management.
             —Aberdeen
                                                                                       This almost certainly leaves those organizations
             Group, 2008
                                  According to the 319 respondents to our              at a disadvantage: one that will grow as more
                                  survey, HR/TM is indeed involved in the process      and more of the workforce is comprised of
                                  more often than not (Figure 4). 57 percent of        contract workers.




                                  Figure 4.
                                  In my organization, the following divisions or business units are primarily responsible for contract
                                  talent—i.e., engaging individuals with the right skills at the right price.
                                                                                        25%      50%      75%             n     percent

                                    The procurement department                                                           19       6%

                                    The human resources department                                                       108      34%

                                    Procurement and human resources                                                      34       11%

                                    Procurement and human resources working together                                     37       12%

                                    Individual operating units                                                           87       27%

                                    Other (specify)*                                                                     34       11%

                                  n=319




                           7   The State of Contract Talent Management and the Role of HR
       Figure 5.
       My biggest issue with engaging contract talent is:

                                                                     25%     50%      75%           n      percent

           Co-employment risk                                                                       71       22%


           Rate determination                                                                       37       12%


           Identifying high quality individuals                                                    178       55%


           Other (specify)*                                                                         33       11%


           n=319




       The skills of HR and TM professionals are                   HR or TM professionals, in collaboration with
       needed in the contract talent arena beyond                  the legal department, are normally the best
       the hiring process. After acquiring high quality            positioned in the organization to manage
       contract talent, our respondents report that the            co-employment issues. And with line managers,
       next biggest issue they face in contract talent             they are also the best positioned to address
       management is co-employment risk (Figure 5).                the other main challenges associated with the
                                                                   contract workforce. In that a well-managed and
       According to Don Hanson, President of Yoh                   highly skilled contract workforce represents a
       Talent Solutions, “ … risk of co-employment                 competitive advantage for most organizations,
       occurs when the customer’s employees engage                 these issues and challenges must be overcome.
       in conduct that directly impacts a contract                 Furthermore, few would argue that the skills and
       employee. [For example] the customer may                    knowledge of HR and TM professionals are not
       be held responsible under Title VII or other                required.
       Civil Rights laws when a customer’s employee
       engages in discriminatory or harassing conduct
       affecting a contract employee. Similarly, the
       involvement of customer employees in the actual
       hiring or firing of a contract employee can create
       co-employment risks under applicable state or
       federal laws.”7




       7
           See “Managing Co-Employment Risks,” Don Hansen, p. 3.




8   The State of Contract Talent Management and the Role of HR
                                  Contract Talent Sourcing

                                  In the present employment scenario where,             workers (Figure 7). In their pursuit of skilled
                                  regardless of business cycles, the need for           workers and professionals, organizations may use
                                  qualified and available talent is constant,           a variety of engagement options when acquiring
      “The future of talent       organizations are often concerned less by cost        contract talent (Figure 8). While most of our
   acquisition clearly rests      and more with talent availability. This is true of    respondents do use staffing firms and consulting
    with the integration of
                                  both contract and traditional talent.                 firms to access contractors (70 percent and
contract, project and full-
                                                                                        56 percent, respectively), they are just as likely
    time hires. All sources       Our survey results demonstrate that employers         to contract directly with independent consultants
     of talent will become        are far more interested in locating contract talent
    critical components to                                                              operating as single-person small businesses to
                                  with the skills and competencies they require         get the right talent (61 percent).
 the strategic leverage of
                                  than in saving money by utilizing contract talent
 human capital. Forward-
                                  instead of regular, full-time employees (Figure 6).   Despite (or perhaps due to) the challenges
   thinking companies are
    already stratifying the       Additionally, as demonstrated above, employers        our respondents face in their search for skilled
  workforce to obtain the         are looking for professionals and technical talent    contract talent, they view its use in surprisingly
 ‘right sourced’ blend for        by a wide margin over other types of contract         restrictive terms overall. Our respondents are
        talent acquisition.”

     — Larry Khilstadius,
   Senior Vice President,         Figure 6.
          Guidant Group           To what extent do you agree with the following statements? Cost is the main driver in employing
                                  contract talent in my organization.
                                                                                              25%       50%        75%             percent

                                   Do Not Know                                                                                       4%

                                   Strongly Agree                                                                                    9%

                                   Agree                                                                                             27%

                                   Disagree                                                                                          54%

                                   Strongly Disagree                                                                                 7%




                                  Figure 7.
                                  Talent/skills are the main driver in employing contract talent in my organization.
                                                                                               25%       50%       75%             percent

                                   Do Not Know                                                                                       2%

                                   Strongly Agree                                                                                    28%

                                   Agree                                                                                             56%

                                   Disagree                                                                                          13%

                                   Strongly Disagree                                                                                 2%




                           9   The State of Contract Talent Management and the Role of HR
                                   willing to take good contract talent from any                       engaging contract workers directly (for example,
                                   source but for only some types of tasks (Figure 9)                  without staffing intermediaries). This is made
                                   and, as in Figure 3, only rarely for senior executive               possible by the advent of the Internet and newer
                                   roles. It would appear that for most organizations                  Web 2.0 tools and services, in which businesses
                                   today, contract talent plays a very defined role:                   have the means to find talented contract workers
                                   that is, to contribute to finite assignments where                  for some tasks and assignments as efficiently as
                                   their specific skills are required.                                 staffing companies. Moreover, many of these
                                                                                                       tools and services also eliminate co-employment
                                   While staffing companies are still considered the                   concerns by acting as the “employer of record”
                 “The most
                                   preferred method for obtaining contract talent,                     for the contract talent.8
       successful contract
                                   many modern businesses are exploring ways of
      talent management
programs not only realize
   significant savings, but
    they also dramatically
                                   Figure 8.
      improve the quality
      of the suppliers and         My organization engages contract talent from the following sources:
  resulting contract labor                                                                                 25%        50%        75%              n        percent
  they utilize. In fact, cost
                                       Individuals operating as their own single-person
savings are no longer the              small businesses
                                                                                                                                                 193         61%
primary driver motivating
 customers to implement                Individuals hired or subcontracted through                                                                224         70%
 these programs, instead               staffing agencies
     control, visibility, and
     improved quality are              Individuals hired or subcontracted through
                                                                                                                                                 179         56%
                                       consulting firms
       just as important.”

           —Kip Wright,
    President of TAPFIN,
   a Houston based MSP
                                   Figure 9.
                                   My organization will use contract talent for:
                                                                                                           25%        50%        75%               n       percent

                                       Any job or assignment                                                                                      22         7%

                                       Most any job or assignment                                                                                 46         14%

                                       Only some types of jobs or assignments                                                                     251        79%

                                  n=319




                                                               0%        25%         50%        75%         100%




                                   8
                                    An Employer of Record (EOR) remains the legal employer of your contractors. You hire your people, set the pay scale, and deter-
                                   mine the employment agreement. The EOR handles benefits—including 401(k) and other retirement, insurance, state and federal
                                   deposits—and employee taxes and reporting.




                           10   The State of Contract Talent Management and the Role of HR



                                                             0%         25%         50%         75%         100%
                                How Organizations Manage Their
                                Contract Talent Program

                                While organizations are eager to obtain talented                         workforce programs internally, compared to
                                contractors from any source, they are surprisingly                       26 percent who work with an MSP and 13
 “Companies that have
   embraced the use of          self-sufficient in getting the people they need.                         percent who engage a master staffing supplier.
   contract Labor and a         Although 70 percent of our respondents                                   Interestingly, 21 percent use a combination of all
more flexible workforce         sometimes acquire contract talent through                                three.10
 realize that there must        staffing firms and 56 percent from consulting
be a dedicated function         firms (Figure 10), a full 50 percent report that they                    Taken together, this can be interpreted to mean
  in the organization to        do not use a Managed Service Provider9 (see                              that in many, if not most organizations, contract
  manage and optimize           footnote below) or staffing firms to source and                          talent is acquired in a decentralized fashion, with
    their staffing supply       pay their contract talent (Figure 11).                                   few controls and little uniformity; if so, this is a
 chain and their worker                                                                                  situation that can easily lead to wasted resources
    productivity, and to        The majority of those that source and pay their                          and lower quality of hire. Indeed, only about
mitigate their potential        contract talent directly appear to do so without                         half of organizations in our survey report that
      compliance issues         the benefit of Managed Service Providers                                 they are able to identify, assess and minimize
               and risks.”      (MSP) and staffing firms (Figure 10) or Vendor                           worker misclassification and co-employment
            —Jay Lash,          Management Systems (VMS) (Figure 11).                                    risks for contract workers, and fewer than half
 Allegis Group Services         Similarly, according to research done late last                          are confident in their ability to capture, approve
                                year by Staffing Industry Associates, 40 percent                         and track time and expenses for contract talent
                                of organizations manage their contingent                                 (Figure 12).



                                Figure 10.
                                My organization obtains its own contract talent directly—i.e., it does not work with a Managed
                                Service Provider (MSP) or staffing vendor to source and pay talent.

                                                                                                            25%        50%        75%                  n     percent

                                     Do Not Know                                                                                                      13       4%

                                     Strongly Agree                                                                                                   84      27%

                                     Agree                                                                                                            74      23%

                                     Disagree                                                                                                        100      31%

                                     Strongly Disagree                                                                                                48      15%




                                9
                                  A Managed Service Provider (MSP) is responsible for the process and program management in procuring contingent workers
                                through a network of vendors. The most persuasive reason that many organizations prefer using an MSP is that by managing the
                                entire spectrum of the contingent workforce lifecycle, the organization is free to focus on strategic talent issues—and/or, as one
                                expert puts it, “obtain access to the top talent in a tight labor market.” One such example is IBM’s managed service, whose mission
                                it is to provide IBM’s project managers and executives with highly qualified contract talent. As one Atlanta-based staffing solutions
                                provider says,“We are seeing a move toward MSPs, particularly at large companies that take a more strategic approach to contin-
                                gent labor.”

                                10
                                     See: Staffing Industry Analysts, Inc. Staffing buyer survey 2008: CW buyer strategies for managing staffing suppliers



                        11   The State of Contract Talent Management and the Role of HR
        Figure 11.
        My organization sources and pays its own contract talent using a Vendor Management System
        (VMS) technology solution.11
                                                                               25%        50%        75%                n        percent

             Do Not Know                                                                                                39         12%

             Strongly Agree                                                                                             34         11%

             Agree                                                                                                      50         16%

             Disagree                                                                                                  100         31%

             Strongly Disagree                                                                                          96         30%




        Figure 12.
        To what extent do you agree with the following statements?
        (1 = strongly disagree, 5 = strongly agree)

                                                                                    Average Scores                             standard
                                                                 1              2          3          4         5   mean       deviation
         My organization is able to identify, assess and minimize
         worker misclassification and co-employment liability                                                        3.02         1.02
         risks for contract talent
         My organization is able to capture, approve, and track
                                                                                                                     2.81         1.055
         time and expenses for its contract talent on-line

        n=319




       Figure 13.
       To what extent do you agree with the following statements?
       (1 = strongly disagree, 5 = strongly agree)

                                                                                    Average Scores                              standard
                                                                    1          2          3          4         5    mean        deviation
         My organization is able to quickly obtain contract
         talent with the right skill sets and an adequate                                                            3.00          0.85
         understanding of our business.
         My organization ensures that hiring managers have a
         simple and consistent method to obtain contract                                                             2.99          0.95
         talent and handle billing and payment.
         My organization has one or more employees
         dedicated to obtaining and managing contract talent.                                                        2.56          1.11


       n=319




        11
          A Vendor Management System (VMS) is an Internet-enabled, often Web-based application that acts as a mechanism for business
        to manage and procure staffing services—temporary, and, in some cases, permanent placement services—as well as outside contract
        or contingent labor. Typical features of a VMS application include order distribution, consolidated billing and significant enhance-
        ments in reporting capability that outperforms manual systems and processes (see: Staffing Industry Analysts, Inc: “VMS Marketplace
        Profile,” page 1. Staffing Industry Analysts Insight, 2007).



12   The State of Contract Talent Management and the Role of HR
                                    Furthermore, greater than 50 percent of                            Clearly, there exists a gap in most organizations
                                    organizations report that they disagree or                         where contract talent management is concerned,
                                    strongly disagree that their organization can                      despite the fact that contract talent has
                                    manage contract talent well by a variety of                        comprised a large percentage of the workforce
                                    measures (Figures 13 and 14).                                      for many years. This fact is emphasized by a 2008
                                                                                                       Contract Labor Management study by Aberdeen
                                    Slightly fewer than half of our respondents                        Group, titled “Contract Labor Management:
                                    agreed that hiring managers have a simple and                      Permanent Solutions for Temporary Workers.”
                                    consistent method to obtain contract talent                        According to the nearly 330 executives that
      “Maintaining quality          and handle billing and payment. Once an                            participated in that survey, “… contract labor
 standards is our biggest           organization has chosen a process for contract                     programs have been in existence for some
     issue; it is difficult to      talent engagement, it is crucial to get the hiring                 time. Thirty-eight percent (38%) of respondents
        know what we are            managers to go along with it. And the only                         indicated that they have had a program in place
getting when we see CVs             way they will, is where the method to acquire                      to manage this category for more than five
  and hourly rates. This is         contract labor is consistent and simple. Many                      years.”12
   even more difficult for          contract talent programs break down because of
    the HR team because             “maverick” hiring managers who go outside the                      Finally, our survey results show that fewer than
    hiring managers have            process to acquire the contractors they need.                      50 percent of organizations have a centralized
    their own criteria and                                                                             system to obtain contract talent and a sizeable
                                    Slightly more than half of our respondents                         minority agree or strongly agree that hiring
      hire contractors and
                                    believe that they are capable of tracking contract                 managers are able to ignore the organization’s
           temps directly.”
                                    talent spend and contract talent headcount;                        processes around contract talent acquisition with
          —HR Manager,              however, a sizeable minority are not confident in                  impunity (Figure 15).
           large medical            their ability to get this basic information easily
     equipment company              (Figure 14).


                                    Figure 14.
                                    To what extent do you agree with the following statements?
                                    (1 = strongly disagree, 5 = strongly agree)

                                                                                                              Average Scores                           standard
                                                                                                  1       2        3         4          5   mean       deviation
                                     I am unable to quickly and accurately determine the
                                     amount of money my organization currently spends                                                        2.53         1.13
                                     on contract talent.
                                     I am unable to quickly and accurately determine the
                                     percentage of my organization's workforce that is                                                       2.49         1.11
                                     comprised of contract talent.

                                    n=319


                                    Figure 15.
                                    To what extent to you agree with the following statements?
                                    (1 = strongly disagree, 5 = strongly agree)

                                                                                                              Average Scores                           standard
                                                                                                  1       2          3         4        5   mean       deviation
                                         My organization has a system, cost controls,
                                         and a centralized acquisition process to obtain                                                     2.87         1.05
                                         contract talent.
                                         In general, there are no consequences if a hiring
                                         manager fails to follow the organization's centralized
                                                                                                                                             2.48         1.14
                                         acquisition process for obtaining and managing
                                         contract talent.

                                    n=319

                                    12
                                         See “Contract Labor Management: Permanent Solutions for Temporary Workers.” Aberdeen Research survey report, January 2008.


                            13   The State of Contract Talent Management and the Role of HR
                                      With the advent of contract talent and workforce                   and technologies are more likely to be “best-in-
                                      management technologies, contract labor                            class” organizations (as far as managing contract
                                      management programs have become web-based                          talent is concerned).13
                                      and more advanced. Technology has automated
                                      and streamlined the manual processes                               The results of our study revealed similar findings.
                                      associated in acquiring and managing contract                      Organizations that utilize vendor management
                                      labor. This is highlighted in the previously                       technologies and/or managed service providers
                                      referred to 2008 Contract Labor Management                         were significantly less likely to experience
                                      study by Aberdeen Group, which says, “With                         challenges around co-employment, finding high
        “We refer to this as          technology usage, organizations can gain a                         quality contractors and determining appropriate
     contingent workforce             plethora of benefits while sourcing the right                      rates (Exhibit 1). Moreover, users of vendor
          management and              prospects for temporary projects.” The same                        management systems were less than half as
              it is specifically      research demonstrates that those organizations                     likely to be challenged by managers who fail to
  addressed in our annual             that use contract talent management services                       follow the centralized contract talent acquisition
       workforce planning.                                                                               process (Exhibit 2).
           We use a vendor
                                      Exhibit 1.
      management system
                                      Respondents who utilize MSP and/or VMS versus those that use neither:
   and approximately 150
                                      Percentage reporting various challenges in managing the contract workforce
   staffing firms at various
      levels to support our                   30%
       needs. Our business
         units work with HR                   25%
       and procurement to
 source, hire and manage
                                              20%
   contractors and temps.
The VMS tracks suppliers                                                                                                                 With MSP or VMS

    by tiers and things like                  15%
                                                                                                                                         Without MSP or VMS
  billings and expenses; it
also produces reports on                      10%
  the financials and warns
       when a contractor is
                                                5%
  going past their original
         period of hire. Our
                                                0%
 system works well as far                             Identifying high          Rate determination         Co-employment
         as I’m concerned.”                          quality individuals

       —HR Executive,
           Fortune 500                Exhibit 2.
pharmaceutical company                Percentage of respondent organizations in which hiring managers frequently fail to follow
                                      the organization’s centralized acquisition process for obtaining and managing contract talent
                                      (organizations that that use VMS versus those that do not).




                                                          VMS users




                                                               Others


                                                                           0%          5%            10%            15%            20%            25%

                                      13
                                           See “Contract Labor Management: Permanent Solutions for Temporary Workers.” Aberdeen Research survey report, January 2008.


                              14   The State of Contract Talent Management and the Role of HR
                                Contract Talent Management
                                as Strategy

                                For the great majority (75 percent) of                                 In most organizations, contract talent is woven
                                organizations we surveyed, contract talent                             into the workforce, as the quote above suggests,
“A contingent workforce
        strategy means an       management is seen as strategic (Figure 16)                            and is more likely than not to be managed
organization intentionally      in that it can enhance competitiveness and                             alongside permanent employees. While the
 integrates a percentage        profitability.                                                         practice of drawing a narrow distinction between
   of contingent workers                                                                               contract workers and the regular workforce is
     into their permanent       As described above, one of the reasons                                 common, the danger is twofold. First, contract
             workforce.”14      that contract talent management can confer                             talent should be managed differently as it is
                                competitive advantage is because many talented                         often more costly (on an hourly basis) and more
                                knowledge workers—particularly Generation X                            specialized. As such, contractors should be fully
                                and aging Baby Boomers—prefer contract work                            leveraged at all times and should be focused on
                                to traditional employment. It is not surprising                        the projects for which they were originally hired
                                then that a full two-thirds of our respondents                         to lead or assist. Too often, because contractors
                                agreed that effective management of contract                           are integrated within the general workforce,
                                talent is vital to attracting this segment of                          they become semi-permanent and move from
                                the workforce (Figure 17). This might seem                             their original purpose to wherever they are
                                obvious until one recalls that many, if not most,                      needed. This blurs the line between contractor
                                organizations manage contract talent only on an                        and permanent staff, most likely costing the
                                individual, informal and decentralized basis.                          organization more and exposing it to risk of
                                                                                                       co-employment violations.




                                Figure 16.
                                My organization views the strategic utilization of contract talent as a way to enhance its
                                competitiveness and profitability.
                                                                                                          25%        50%        75%                 n     percent

                                     Do Not Know                                                                                                    14      4%

                                     Strongly Agree                                                                                                 118    37%

                                     Agree                                                                                                          124    39%

                                     Disagree                                                                                                       54     17%

                                     Strongly Disagree                                                                                               9      3%




                                14
                                     See “A Contingent Workforce Strategy is an Effective Part of Workforce Planning”, Bob Walther, Oct 22, 2008.




                        15   The State of Contract Talent Management and the Role of HR
        Figure 17.
        My organization recognizes that effective management of contract talent is vital to attracting the
        growing segment of the workforce that prefers to work on a contract basis.

                                                                           25%       50%        75%               n       percent

             Do Not Know                                                                                          20         6%

             Strongly Agree                                                                                       68        22%

             Agree                                                                                               128        41%

             Disagree                                                                                             82        26%

             Strongly Disagree                                                                                    12         4%




        To achieve the strategic goals of contract                       management is not a member of the senior
        workforce management and avoid the potential                     executive committee that determines corporate
        pitfalls (including co-employment risk), careful                 strategy).16
        planning is necessary. Contract workforce
        planning should be driven by the overall                         In the case of contract workforce planning,
        workforce plan, which in turn is driven by and                   a similar problem exists. 43 percent of our
        integrated with the broad corporate plan.                        respondents state that those responsible for
        95 percent of our respondents agree with this                    procuring contract talent are not involved in the
        rather obvious statement (Figure 18). Quite                      organization’s strategic planning process
        clearly, however, the challenge is in actually                   (Figure 19). Worse, more than half (54 percent)
        conducting, maintaining and executing on the                     report that contract talent is not presently
        contingent workforce plan.                                       included in the organization’s strategic business
                                                                         planning process and, in fact, the organization
        In more than 80 percent of companies in the                      has no strategic contract talent plan at all
        U.S., organization-wide workforce planning                       (Figure 20).
        (let alone contract workforce planning) is not
        done.15 The reasons are numerous, but in at least                In general, organizations have yet to realize
        50 percent of cases the organizational structure is              the true benefits that an effective contract
        not in place to permit corporate-wide workforce                  workforce can provide. Few have developed a
        planning (for example, the head of HR or talent                  comprehensive mindset that moves contractors
                                                                         from a convenience to an indispensable (and
                                                                         therefore, strategic) necessity.




         See HCI Research, HR in the Age of Talent, December 2007 and HCI/IBM research, Integrated Talent Management, Part Two,
        15

        October 2008.

        16
             Ibid.


16   The State of Contract Talent Management and the Role of HR
        Figure 18.
        I believe it is important for my organization’s contract talent planning to be closely aligned with
        its business objectives and strategies.
                                                              25%     50%      75%            n      percent

         Do Not Know                                                                          3        1%

         Strongly Agree                                                                      181      58%

         Agree                                                                               114      37%

         Disagree                                                                            10        3%

         Strongly Disagree                                                                    3        1%




        Figure 19.
        At this time, the employees responsible for procuring contract talent are not involved in my
        organization’s strategic planning.
                                                              25%      50%     75%            n      percent

         Do Not Know                                                                          28       9%

         Strongly Agree                                                                       30       9%

         Agree                                                                               108       34%

         Disagree                                                                            117       37%

         Strongly Disagree                                                                    36       11%




        Figure 20.
        My organization’s strategic business planning does not include contract talent—i.e., it does not
        have a strategic contract talent human capital plan.
                                                              25%      50%     75%            n      percent

         Do Not Know                                                                          27       9%

         Strongly Agree                                                                       47      15%

         Agree                                                                               120      39%

         Disagree                                                                             94      30%

         Strongly Disagree                                                                    23       7%




17   The State of Contract Talent Management and the Role of HR
        Conclusions:
        A Contract Talent Perspective

        In response to today’s fast and volatile markets,      Approached strategically, the contingent
        organizations are shifting from fixed cost,            workforce can provide key skills and
        traditional models to more project-centric and         competencies on a just-in-time basis with greater
        flexible structures just as skilled workers are        flexibility and reduced wage and benefits costs.
        changing their attitudes toward the typical            To deliver on this potential, the combined and
        corporate career path. Already, there has been         aligned efforts of several parts of the organization
        a profound change in the makeup of the U.S.            are needed, including procurement, legal, senior
        workforce with the paradigm shifting towards a         management, business units and HR/TM.
        much larger “non-traditional” workforce.
                                                               Regrettably, in many organizations, HR and talent
        With a compelling need to respond quickly to           management professionals are marginalized
        marketplace dynamics, most businesses are              where the management of contract talent is
        continually looking for ways to benefit from the       concerned. Yet it is clear from this research
        flexibility of converting fixed cost structures to     that if this increasingly critical component of
        variable ones. One way companies accomplish            the workforce is to be managed effectively and
        this is to reduce their number of full-time            strategically for competitive advantage, HR and
        hires in favor of contingent or contract talent        TM must play a prominent role.
        engagements. Yet few organizations appear to
        be ready for this shift. Responsibility for contract
        talent acquisition and management is often too
        narrow in organizations or is a free-for-all with
        few rules and little accountability. Consequently,
        the contract talent pool is too often ignored
        and under-managed, resulting in higher-than-
        necessary costs and risks.




18   The State of Contract Talent Management and the Role of HR
        Appendix A:
        About the Research Partners

                                      The Human Capital Institute
                                      The Human Capital Institute (HCI) is a catalyst for innovative new
                                      thinking in talent acquisition, development, deployment and new
                                      economy leadership. Through research and collaboration, our global
                                      network of more than 138,000 members develops and promotes
                                      creativity, best and next practices, and actionable solutions in strategic
                                      talent management. Executives, practitioners, and thought leaders
                                      representing organizations of all sizes, across public, charitable and
                                      government sectors, utilize HCI communities, education, events and
                                      research to foster talent advantages to ensure organizational change
                                      for competitive results. In tandem with these initiatives, HCI’s Human
                                      Capital Strategist professional certifications and designations set
                                      the bar for expertise in talent strategy, acquisition, development and
                                      measurement. www.hci.org


                                      MBO Partners
                                      MBO Partners makes it easy for independent consultants and their
                                      clients to work together. With their Portable Employer of Record™
                                      service powered by the MyBizOffice™ system, MBO Partners is the
                                      leading alternative to self-incorporation for consultants, freelancers,
                                      and independent contractors. For organizations that use contract
                                      talent, MBO Partners is the preferred provider of consolidated
                                      contractor payrolling, 1099 risk mitigation, and independent
                                      contractor compliance solutions. www.mbopartners.com



                                      Guidant Group
                                      Guidant Group is a management services and consulting company
                                      dedicated to developing a comprehensive and integrated talent
                                      acquisition program for our clients. At Guidant Group, we leverage
                                      our vast experience in the staffing industry, our recruitment
                                      infrastructure, our valuable sector knowledge, and our proven
                                      methodologies in order to offer our clients a holistic approach to
                                      deliver effective Cost Management, Risk Mitigation, Process Efficiency,
                                      Sourcing Strategy, Business Intelligence, and Technology Optimization
                                      for talent acquisition. www.guidantgroup.com




19   The State of Contract Talent Management and the Role of HR
                                      Allegis Group Services
                                      Allegis Group Services (AGS) is a leading workforce management
                                      solutions provider and human capital management consultant.

                                      AGS is a member of Allegis Group, a privately held network of human
                                      capital services companies. Collectively, Allegis Group companies
                                      provide recruiting and staffing services, workforce management
                                      solutions, and a variety of other human capital management services
                                      to Fortune 1000 companies and many reputable regional and local
                                      companies across the nation. www.allegisgroupservices.com



                                      TAPFIN
                                      With a focus on human capital management, TAPFIN deploys
                                      successful solutions delivered with a commitment to people,
                                      process and technology. Tapfin leads the industry in human capital
                                      management knowledge and experience. Coupled with its agnostic
                                      tool philosophy and ISO 9001:2000 certified processes, TAPFIN offers
                                      the best solutions for its clients’ human capital management needs.
                                      www.tapfin.com


                                      IQ Navigator
                                      IQNavigator’s Managed Service Programs (MSP) and robust services
                                      procurement platform enable companies to better, source, procure,
                                      manage and measure all categories of indirect services, such as
                                      consulting projects, contract labor, outsourcing/offshore services,
                                      legal services, IT projects, and more. With proven domain expertise
                                      and innovative technology solutions, IQNavigator helps customers
                                      quickly and easily turn complex services spend into a new source
                                      of value, competitive advantage, and continuous bottom-line
                                      improvement. www.iqnavigator.com


                                      Fieldglass
                                      Fieldglass is committed to providing intelligent solutions that help
                                      companies successfully acquire contingent workers, services and
                                      direct hires. Fieldglass InSite software allows hiring managers, human
                                      resources personnel, staffing companies, or others to utilize one
                                      integrated resource for the entire acquisition process of all human
                                      capital. Fieldglass customers span industries including financial
                                      services, healthcare, pharmaceuticals and telecommunications.
                                      www.fieldglass.com




20   The State of Contract Talent Management and the Role of HR
                                      About the Author
                                      Allan Schweyer, Executive Director and Senior Vice President-Research
                                      of the Human Capital Institute, is an internationally respected
                                      analyst and speaker on the topic of transformational human capital
                                      management for individuals, organizations, regions and nations.
                                      Trained as a labor market economist, Schweyer’s contributions include
                                      the development of award-winning talent management programs and
                                      platforms in North America, Latin America and Europe for public and
                                      private organizations including Cahners Business Information, Disney,
                                      Industry Canada, ARDEC, The U.S. Army and the World Bank.

                                      Directly prior to joining HCI, Allan was a senior researcher, analyst
                                      and consultant with a global professional services firm. Allan’s articles
                                      and white papers appear in dozens of popular media and industry
                                      specific publications worldwide. He is a past editor of Leadership
                                      Excellence: The Journal of Human Capital Management, author of
                                      Talent Management Systems (Wiley, 2004) and co-author of Talent
                                      Management Systems (forthcoming, 2009).




21   The State of Contract Talent Management and the Role of HR
  22
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The State of Contract Talent Management and the Role of HR
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                                                                                                      What best describes your functional area of responsibility?
                                                                                                                                                                           sp om                            s
                                                                                                                                                                             or
                                                                                                                                                                                 ta mu Ret
                                                                                                                                                                                                                5
                                                                                                                                                                                                                                                                                 Respondent Demographics




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                                                                                                                                                                                                  O s
                                                                                                                                                                                                      th
                                                                                                                                                                                                          er
                                                                                                                                                                                                                                                          133
        Figure 3.
        Revenue breakdown for your organization?

                                                                  Less than $50 million


                                      7%                          $50 million to $100 million
                               9%
                                                                  $100 million to $500 million
                                                   31%
                         7%
                                                                  $500 million to $1 billion


                         11%                                      $1 billion to $5 billion


                                                                  $5 billion to $10 billion
                               7%                 11%

                                           17%                    $10 billion to $25 billion


                                                                  > $25 billion




        Figure 4.
        Number of employees in your organization?

                                                                  < 500 employees
                                     10%
                                                                  500 to 1,000 employees
                              6%
                                                   32%            1,000 to 5,000 employees
                         9%
                                                                  5,000 to 10,000 employees
                         7%
                                                                  10,000 to 25,000 employees


                                    22%          14%              25,000 to 50,000 employees

                                                                  > 50,000 employees



        Figure 5.
        Your organization is a __________?

                                           1%
                                                                  Publicly-owned company
                         1%          11%
                                                                  Privately-held company
                          5%
                                                   37%
                                                                  Government agency

                                                                  State-owned enterprise

                                                                  Not-for-profit organization

                                45%                               Other




23   The State of Contract Talent Management and the Role of HR
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