Insight

Redefine your Contingent Workforce Management strategy

Contingent Workforce Management is one of the most important spend areas for many organizations. Key indicators include the following statistics.

Part I

Contingent Workforce Management is one of the most important spend areas for many organizations. Key indicators include the following statistics.                             

  1. 40.4% of the total US workforce is made up of Contingent Labor1
  2. 22% of the average organization’s total workforce is Contingent Labor 2
  3. 51% of Executives believe globalization of labor and Millennials is their biggest concern3
  4. 83% of Executives foresee and are increasingly using Contingent Labor4
  5. Typical average cost savings potential is 6-11% and can go higher5   

Confronted with margin pressure, a tight and rapidly changing labor market, shifting regulatory environment, and wage growth, organizations are revisiting their Contingent Workforce Management (CWM) strategy. Contingent Workforce Management scope encompasses all resource types outside an organization’s permanent headcount. This includes Temporary Labor, Independent Contractors (IC), Outsourced and Professional Services.

KPMG has helped many of the world’s leading organizations tackle challenges in the area of CWM. Here is one of the many examples of client successes.

Client Need: A leading global manufacturer was seeking to unlock value from their Contingent Workforce Management program through the adoption of industry leading best practices.

Client challenges: The client lacked visibility and insights into their CWM global spend, spending patterns and a structured cost model for managing the margins between their organization, Managed Service Provider (MSP), staffing provider and the contract resources. The client organization was also experiencing issues with their CWM program due to the lack of a robust governance framework and an unclear model for delivery of CWM services. Stakeholder roles overlapped with each other, as well with the MSP due to lack of role planning and accountability at different levels in the organization.

Our Approach: Our team used KPMGs leading Target Operating Model (TOM) framework to identify and address gaps across different program layers such as Service Delivery, People and Organization, Functional Processes, Technology, Data & Reporting and Governance & Controls. Here are the list of five key activities.

  1. Followed the 360 feedback approach through interviews and survey covering Executives, Customers, Owners and Service providers.
  2. Benchmarked the current CWM practices against industry leading practices to understand the variation.
  3. Conducted a thorough review of spend and headcount to uncover noncompliance and potential areas of opportunity.
  4. Reviewed the contract between the client and the MSP to identify discrepancies.
  5. Provided recommendations for the CWM program which were aligned to the organizational priorities and created a roadmap for implementing these recommendations over 36 months segregated into short term (< 6 months), midterm (6-18 months) and long term (> 18 months)

Client Benefits: As a result of our assessment, the client organization was able to identify substantial value from their CWM program. 

  1. Savings potential in the range of 8% - 13.7%
  2. ROI between 5X to 8X over 36 months
  3. Potential for extrapolating the savings by moving from a US centric to Globally managed CWM program

The client was also able to:

  1. Identify challenges in role overlap, lack of program accountability and how to address these through a change in the operating model.
  2. Establish centralized decision making and coordination between different functional units through the establishment of a Contingent Workforce Management Office (CWMO).
  3. Provide greater visibility on worker classification through implementation of an Enterprise Workforce Segmentation strategy.
  4. Avoid risks involved in insourcing and de-centralization of CWM tool management.  
  5. Improve visibility into the CWM market conditions through the use of third party benchmarking services. 

KPMG can not only help you identify opportunities in your CWM program, we can help you take action. To learn how KPMG’s Procurement and Operations team can help you with your CWM program, please visit kpmg.com/us/procurement.

 

References
Source US Government Accountability Office
2 Abardeen
3 Pewresearch
Oxford Economic
5 Internal KPMG benchmark