A.) Cost savings
B.) Compliance/risk mitigation
C.) Improved quality (suppliers/candidates)
D.) Process efficiencies
Answer? “It depends”
If ever there was a trick question, it would be this one. Every answer is right, but choosing only one answer is wrong. And yet how often are we asked to give the answer to this question? It’s kind of like that story of the college professor who asked his students to write an essay answering the question “Why”, and failed all but two of his students – the two who simply answered “Why not” and “Just because.”
And since a blog entry wouldn’t be worth reading unless there was some substance to it, I’ll skip the two-word answer and spend a few minutes giving my thoughts on why it depends.
First, let’s deal with the cause and effect of these goals. Driving cost savings is often an important objective. But what about the quality of your supplier community and the contractors they provide? At some point it becomes a diminishing return. The more cost savings you drive, the more likely it is to impact the quality. We are talking about human beings, and in many cases, resources that are in high demand. On the flip side, it’s foolish to only focus on contracting for the “best of the best” without at least some regard for cost management. Right?
What about compliance? Of course that’s important. But put too many controls in place to ensure compliance and pretty soon you’ve got a process so cumbersome the business can’t get the resources it needs in any reasonable timeframe. Efficiency goes right out the window. So why not release the business of all those controls and make the process hyper-efficient? Because the risk goes up exponentially, that’s why.
Then there is your objective. If your function in the business is to reduce the costs of contract labor to the business, then you’re more than likely to rank cost savings as the most important factor. For a large portion of our program sponsors (procurement, finance), this is rightfully a prime driver. And since non-compliance can greatly increase risk, which in turn greatly increases the potential for catastrophic costs/losses, then compliance/risk mitigation is high on your list as well.
But hey, what about those guys/gals running operations? Yes, cost savings are good, and compliance makes sense. But they have a job to do. They’ve got to fill those orders, service that business and deliver those products. And often it’s a ‘just in time’ game of making sure you have the right resources, at the right time, in the right place. So ask them what’s important, and you’ll see improved quality and process efficiencies highest on their list of what’s MOST important.
Case in point: I’ll share a recent conversation I had with the CFO of one of our programs. This client had emphasized cost savings as the single most important objective for their contingent labor management program — to the point that despite repeated caution, the rate card was dangerously below market,and still they continued to direct us to drop rates. So we weren’t overly surprised when the CFO informed us that $30 million of the managed spend was being pulled out of the program by the CIO and put under a different, sole-source contract. When asked why, the CFO quickly responded that the CIO was not getting the quality resources he wanted on a timely basis. “Let me guess,” I said, “he’s going to raise the rates he’s paying for those resources.” “Yes,” replied the CFO, “by 10 percent, and he has the support of the operations to do it.”
What’s the moral of that story? The program sponsors lost credibility because they weren’t connected to ALL the needs of the business. Because they were laser focused on cost management and compliance, to the detriment of quality and efficiency.
So what’s the right answer? Yes, “It depends” is one way of putting it. But to put a finer point on this, a better answer is E.) A Balance of All of the Above. The best-run programs recognize there is not one ‘MOST Important’ benefit, but that there are four equally important benefits that must be balanced.