The contingent workforce has become a critical resource to meet the complex talent demands of businesses today. With this group comprising 30% of the workforce and growing, organizations need to put processes and systems in place to manage efficiency, compliance, supplier performance and cost savings.
Procurement leaders, who are most often responsible for contingent workers, continue to be challenged to uncover new ways to improve cost savings, control budgets and minimize risk when managing this group. Rate negotiations can only get you so far.
Organizations are realizing savings of 10 to 20 times higher through Statement of Work (SOW) engagements versus staff augmentation. In fact, within the VMS industry, SOW spend under management has grown 74% since 2012. (Staffing Industry Analysts, 2014 VMS and MSP Landscape)
If you are an organization looking to implement SOW programs to reap the many benefits, what factors should you consider? Here are Seven Steps to SOW Success:
1. Enlist Support: Design your SOW management process to meet the needs of all relevant groups within your organization. In order to do this, you must first build a committee consisting of the various functional areas who will be involved in the process to educate and enlighten the organization. These are your advocates. Departments should include but need not be limited to: Procurement, who typically manages the overall SOW process; HR who are responsible for tracking, compliance, and overall quality; Finance and Accounts Payable who deal with accruals, reconciliation, invoicing, budgets and payment processes; Legal, because creating SOW standards will mean less disputes over time; and of course IT. Don't forget to identify power users within various business units and involve them early in the process. Perhaps most importantly, you must have executive support. With the introduction of any new technology, there will always be an element of change management and if you don't have a top-down commitment, you're fighting an uphill battle.
2. Know your Business: Make it a priority to understand how your organization manages projects that utilize contingent labor. Identify the projects you feel should be managed under SOWs but currently are not. Also do some research to identify the independent contractors who have the skills you are looking for, and the services you need to have in place to execute successfully. Once you have this information, design the tactical processes that will increase visibility, efficiency, and cost savings while reducing risk.
3. Work the Flow: Once you understand how SOWs currently work (and don't work) at your organization, it's time to start developing the ideal workflow. Think about basic questions like: Who should be able to create a new SOW in your organization? Who in the organization needs to approve requests? At what spend levels? Then get into the specifics. When it comes to sourcing bids, what kind of budget controls do you want to have in place? How do you want the system configured to review, rank and score bids?
Give thought to managing the engagement over time taking into account milestones and deliverables, time and expenses, and billing and invoicing. You'll also want to create processes that make it easy to on-board and off-board consultants: think about things like badge assignment and deactivation, and providing access to pertinent data for a finite period of time.
4. Design for Everyone: Keep in mind that you want to design your SOW management process for a wide audience of potential users. Make it easy and intuitive for the end user, informative for procurement, and useful to auditors. You want your system to provide the kind of meaningful analytics that will get the attention of executives and prove the value of the solution. The more time you put into thinking about how to make the system useful to the widest audience possible, the more valuable it will be.
5. Set the Baseline: Understand what your current costs are for SOW management: What is the percent spend of SOW to staff augmentation? What is the average cost per SOW (normalized per hour)? What is the spend per SOW vendor? These are all important numbers for you to know at the inception of the project so that you can benchmark success over time. Consider soft costs as well: How admin-heavy is the current process? How much management time does it take? In order to show the value of an SOW management system, you must have a solid baseline to measure progress.
6. Develop Standards: Revise internal purchasing policies, source labor categories to establish a supplier base, and create standards around things like deliverables, milestones, pricing, payment terms, timelines and governance. These are key components of any strong SOW management system and you must have internal agreement around them.
7. Measure Everything: As the old management axiom goes, you can't manage what you can't measure. You will only be able to show value if you track and report on your results each step of the way. You'll want to measure cost, quality, commitment, and time - among other variables that may be important to your organization.
Organizations that get the most value out of their technology investments are those that plan well for change. Whether you're in the process of identifying or implementing a vendor management solution (VMS), taking a best practices approach to SOW management can help your organization better manage its temporary, consultative and professional services workforce.
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