Managed service providers (MSPs) field countless requests from hiring and procurement managers looking to create standardized metrics for use in Service Level Agreements (SLAs) and Key Performance Indicators (KPIs), which are instrumental in monitoring program success and staffing vendors performance. The staffing industry remains abuzz with talk of time-to-fill, submittal rates, cycle times and other measurements, with many players seeking the “right range” for their metrics. And yet national averages and universal standards tend toward a static, one-size-fits-all approach that often fails to illustrate the true story of a staffing supplier’s capabilities, performance and overall value. Why? Because every program is unique, dynamic and constantly evolving.
Scorecards seldom translate across companies, and not all metrics can be controlled by suppliers. Attempting to develop one “right range,” instead of the “right range for each client and supplier,” could lead to accepting the wrong results. An indirect labor program thrives when the best suppliers are in place to provide the best talent at the best rates. And the proof in this pudding comes from creating scorecards with superior metrics that paint the most honest portrait of the partnership.
There are three things scorecards don’t accurately reveal about staffing suppliers. As a result, clients may be underutilizing top performers who are delivering world-class service. We’re going to demonstrate how to replace misleading and misreported metrics with KPIs that elicit real value. The governing precept clients and MSPs should embrace when designing scorecards, according to Staffing Industry Analysts (SIA), is determining what aspects fall within the supplier’s direct sphere of influence.
“When building a scorecard, many program managers make the mistake of holding suppliers accountable to elements beyond their control. Time to fill is a perfect example,” wrote SIA Senior Vice President Bryan Pena.
The time-to-fill metric measures the number of days between the opening of the job requisition and a candidate’s acceptance of the position. In SLAs, time-to-fill exemplifies one of the most prioritized and frequently touted metrics presented to clients by the MSP. It also represents a big missed opportunity to fully appreciate and judge a staffing supplier’s achievements.
Time-to-fill provides a compelling indication of program health, yet it falters as a supplier metric because critical elements of the hiring process exist outside of the supplier’s control.
A staffing supplier with an amazing pool of qualified and cost competitive talent can submit winning resumes within hours of receiving a requisition. However, prompt resume submittal can’t inspire busy hiring managers to review candidates or follow up quickly. If the engagement manager waits a week or two to submit feedback, the unmanageable delay would count negatively against the staffing supplier in most time-to-fill calculations. The metric suffers through no fault of the agency.
A more productive metric would be time-to-submit, which measures the time elapsed between requisition distribution and the submittal of resumes by staffing suppliers. This metric, more than time-to-fill, proves a supplier’s worth in the fundamentals of sourcing and fulfillment. Dissecting the hiring process to delineate those areas completely within the supplier’s grasp, such as time-to-respond or time-to-submit, delivers an infinitely clearer indication of an agency’s contributions to the contingent labor program.
Assessing candidate quality through metrics alone can present another challenge when developing scorecards. Like metrics for customer satisfaction, those for candidate quality remain largely conceptual. Trying to assess opportunities for improving quality performance requires isolating root causes. According to Richard Swanson, an HR development expert and emeritus professor at the University of Minnesota, quality performance incorporates the personal attributes of the worker as well as the environmental factors of the workplace. When both are measured together, the results can muddy an evaluation of the relative contributions of each. The environmental factors of the client’s workplace can’t be dictated by staffing suppliers; they can affect, for good or ill, a client’s perception of new hire quality.
“If you put a good person in a bad system, the system will win almost every time,” Prof. Swanson told Staffing.org, Inc., in a 2007 industry report. Analysts agree that his observations hold true to this day.
In recent years, engagement managers have also turned to rating the percentages of temp-to-hire conversions as candidate quality indicators. Clients adopt temp-to-hire models as “try before you buy” systems for vetting potential full-time employees who will integrate well with their business environments. The situation works mutually, with managers and associates discovering whether they are good fits for each other.
Ultimately, though, the decision to bring a temporary worker on board as a permanent employee rests with the client, not the staffing supplier. Through the VMS, an MSP can quantify certain areas of worker productivity: attendance, adherence to time and expense policies, goal attainment, compliance, assignment completion and more. When a hiring manager expresses interest in converting a temporary worker, the MSP utilizes this information to guide the decision. Even then, the hiring process retains subjective elements that reach beyond these validations.
The hiring manager’s perception of a worker can become the overarching factor in finalizing a conversion – something that lies beyond the staffing supplier’s control. In the spirit of best practices and objectivity, we must question whether conversion rates truly reflect the excellence of the contingent workers or merely a hiring manager’s preferences.
A stronger gauge of a supplier’s talent comes from implementing a metric for candidate quality in relation to fit, corresponding skills, education, certifications and matching experience. The staffing supplier exerts greater influence over its ability to source remarkable talent when predicated on the details cited in the requisition. Measuring a staffing supplier on its core expertise – fostering talent of exceptional caliber based on job parameters – will show clients where participating agencies truly shine.
The cost-per-hire metric, industry analysts assert, is one of the oldest and most unquestioned KPIs contained in standard scorecards. The figure is intended to address efficiency by calculating a ratio of two measurements: recruiting costs per candidate and number of hires. So if the cost-per-hire is $5,000, what does a client really learn from this information? What decisions should it make based on this number? Is the cost competitive? As a standalone metric, devoid of context, cost-per-hire can’t answer these questions; accurate analyses and comparisons become difficult to determine given the large disparities across regions, demographics and functions. Relying on a static cost-per-hire metric risks misrepresenting the value a staffing supplier is providing through its talent.
Geographic differences may be the most fluid considerations. Recruiting costs vary widely across regions because of labor market trends, average levels of education, cost of living, cost of goods and services, taxes and statutories. A $5,000 cost-per-hire in New York or California may not be cost prohibitive at all. Given the dynamics of those areas, that cost could indicate a staffing supplier’s success: an economically efficient and optimized operation at a comparatively competitive price point. However, that same cost in Mississippi or Alabama could reflect an exorbitant and inefficient hiring process.
Assessing costs universally on a per-hire basis will provide a faulty metric for staffing suppliers that are filling positions across multiple states. In reality, those suppliers could be providing the best resources at the best rates. A standard cost-per-hire metric also ignores the differences between tactical and leveraged buys on a category basis.
Let’s consider industry differences as another good example. Hiring managers in certain industries face greater challenges in attracting candidates. As the technology sector continues to expand and innovate, experienced programmers grow in demand. Luring them to new employers requires a generous compensation, benefits and incentives package, which results in a higher cost-per-hire – but one that is justifiable to the organization in the long term. That’s a tactical buy. A retailer like WalMart, which requires a less skilled workforce, would not incur the same costs to hire cashiers. That’s a leveraged buy. The cost-per-hire figures for these two categories should always differ.
Compensation structures also vary by job level. Measuring costs on a per-hire basis precludes relevant comparisons between positions at different levels of experience and skill.
Offering a case study of successful scorecards, SIA presented the example of Kodak. Standardized SLAs and KPIs had consistently failed to produce qualitative and quantitative results. The MSP, staffing suppliers and client hiring managers worked together to implement processes for developing program-specific metrics that delivered improved supplier performance and meaningful business results.
As Kodak became more reliant on large numbers of contingent workers, it realized that universal metrics would not drive business improvements and cost savings. Workers in the program cut across regions, roles, job levels and divisions. Over time, the MSP and Kodak created 12 targeted scorecards to measure the cost performance of suppliers by grouping contingent workers together using the individual cost-per-hire factors we have explored.
Building a living scorecard, one that drives the client’s vision and strategic direction, is equal parts art and science. Tracking the proper metrics, those tailored to the buyer’s operational aspirations and culture, provides more than just visibility into supplier performance -- it fosters continuous improvement planning and allows all participants vested in the engagement to detect potential obstacles before they have a chance to impede forward momentum and progress. Most importantly, the process of developing, implementing and managing metrics must take place as a shared exercise between hiring and procurement managers, MSPs and their staffing partners.
Hiring and procurement managers can’t measure what they can’t see, and vendors can’t offer metrics without first understanding a client’s unique business environment, workforce goals and overall performance objectives. The march toward a next-generation program begins with tight collaboration among client stakeholders, staffing category managers, MSPs and staffing suppliers. For each specific performance objective, staffing suppliers and MSPs should align closely to define the steps toward accomplishment, assign accountability, define deliverables and track them through customized metrics.
A good way to ensure the metrics are displayed real-time, easy to be measured, trustworthy and not consuming most of time from any of the sides is to find a solution that delivers both the staffing vendors management service plus a technology with a reports dashboard that is generated automatically from the process. That way, clients conquer chaos and focus their attention on running their businesses, not on managing their contingent workforces.
Photo Credit: Collin Harris via Flickr