Article: How to transition from contract staffing to outsourcing

Strategic HR

How to transition from contract staffing to outsourcing

Customer needs to identify long-term resourcing strategy before converting work from Contract Staffing to Outsourcing
How to transition from contract staffing to outsourcing

 If contract staffing were the resourcing equivalent of renting an apartment, outsourcing would be paying a mortgage on a home.  Both methods will provide a person with a place to live, but are different strategies that are chosen as part of that person’s long-term goals. Renting an apartment is usually a short-term activity, while buying a house and taking on a mortgage is a long-term commitment.

Customers are often reluctant to engage in outsourcing certain activities due to a lack of understanding of the differences and benefits of outsourcing over contract staffing.

Customers prefer contract staffing as it is simple to deploy and requires minimal effort.  In larger volume applications, more individuals are needed, and not all resources are equally capable.  Another limitation is the lack of focus on capability building across a function. 

Resource management in contractual staffing requires the customer’s direct involvement in the recruiting process, which extends to solving HR issues subsequently. Contract duration, typically 1-2 years results in losing skilled staff at the term end. Contract employees hop from one assignment to another, losing focus on value creation and are usually not interested in guiding or mentoring others. Cost involved in hiring highly skilled staff is steep.

Outsourcing is better suited for repeatable activities or workstreams with a longer duration.  These are sustainable activities that are continuously in demand, around which one can build function-based teams with the necessary capability to take ownership of the workstream on behalf of the customer over time.

The key for getting a customer to convert existing work from Contract Staffing to Outsourcing lies in getting the customer to identify his/her long-term resourcing strategy, and apply the proper services solution.

The strategy for identifying these opportunities and implementing a conversion plan is as follows:

Define the long-term vision for the service: A necessary first step is defining with the customer their long term vision for a particular service.  This will enable the shifting of responsibility for managing various activities as work from a Contract Staffing relationship to a Managed Services Outsourcing model.

Identify a customer champion who will adopt the vision: Commitment at senior levels is crucial to making the transition from Contract Staffing to Outsourcing.  A customer champion is someone who agrees to sponsor the Outsourcing effort, driving the requirement to use your resources to identify staff as good Outsourcing candidates.  

Highlight benefits of Outsourcing vs. Contract Staffing: After the customer champion identification, highlight the benefits of Outsourcing versus Contract Staffing.  You may have to customize the customer’s unique situations towards those needs which are more suitable for Outsourcing and underline the advantages.

Develop the implementation plan: The next step is to lay down the implementation plan that defines the process, identifying the pilot project and selecting the core team. Initializing and validating the process documentation while measuring its scalability to realize the long term vision for the service should follow.  Governance mechanism to effectively monitor and control the workflow should be established.

Clarify investments with customer: These investments come in the form of effort, facilities and sometimes capital.  It is important to set expectations with customers that there will be some up front effort needed to achieve the benefits of outsourcing, but that the payoff is worth it.

Promote return on those investments: At this point the customer has acknowledged the benefits of Outsourcing, identified suitable workstreams suitable for Outsourcing and the advantages of Outsourcing versus Contract Staffing.  To seal the deal, it is recommended that one promote the return the customer will see as a result of these investments of time and money.

In conclusion, the entry points for converting Contract Staffing to Outsourcing are often opportunities to reduce the drag on customers when using outside resources and lower overall engineering costs. The long-term focus, however, should be an overall value creation and not limited to just labor arbitrage. It is recommended that focus be placed on identifying those activities which are more prescriptive and repeatable in nature, and are more consistently in demand by the customer. Look for opportunities which can be applied across customer departments, identifying scalable opportunities to leverage the power of function-based outsourcing.

Disclaimer: This is a contributed post. The statements, opinions and data contained are solely those of the individual authors and contributors and not of People Matters and the editor(s).

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Topics: Strategic HR, Talent Acquisition

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