The document discusses various topics related to the labor market and workforce including:
- UK economic growth is forecast to be 2.9% in 2014 and the number of employers planning to increase permanent employees is 75%.
- Permanent salary growth and contingent pay growth are at their highest levels since 2007 and 2013 respectively.
- Finding talent is a top business concern for 47% of HR respondents.
- Workforce agility, pay-rate management, extension management, supplier engagement and direct sourcing are discussed as ways to minimize the impact of talent challenges.
8. FORECAST UK
ECONOMIC
GROWTH IN 2014 2.9%
% OF EMPLOYERS
WHO PLAN TO
INCREASE THE
NUMBER OF PERM
EMPLOYEES
75%In next 3
months
% EMPLOYERS
WHO PLAN TO
INCREASE THE
USE OF AGENCY
LABOUR
48%In next 4-
12 months
PERMANENT SALARY
GROWTH IS AT ITS HIGHEST
SINCE 2007
CONTINGENT PAY GROWTH
IS AT ITS HIGHEST SINCE
JULY 2013
2012 SAW THE FIRST
INCREASE IN THE DIVORCE
RATE SINCE 2007
REALISTIC
GROWTH IN SIZE
OF UK RECRUITMENT
MARKET
8%annually
11. 25% OF CEOs SAY THEY WERE
UNABLE TO PURSUE A MARKET
OPPORTUNITY OR HAVE HAD TO
CANCEL OR DELAY A STRATEGIC
INITIATIVE BECAUSE OF TALENT
CHALLENGES
“
“
12. 33% OF CEOs ARE CONCERNED
THAT SKILLS SHORTAGES WILL IMPACT
THEIR COMPANY’S ABILITY TO
INNOVATE EFFECTIVELY
“ “
13. 56% OF FS CEOs SEE THE LIMITED
AVAILABILITY OF SKILLS AS A THREAT
TO GROWTH, MORE THAN ANY OTHER
BUSINESS ISSUE
“ “
14. 47% OF HR RESPONDENTS SAID
FINDING TALENT IS THEIR #1
BUSINESS CONCERN
“ “
17. D1 S1D2 S2
Increase in
demand
Decrease in
supply
PRICE INCREASE IF
ONLY DEMAND OR
ONLY SUPPLY
ALTERED
PRICE INCREASE IF
BOTH DEMAND AND
SUPPLY ALTER
2013 2014
£575
£500
£64
£56
42. SUPPLIER RELATIONSHIP MANAGEMENT AS
THE SYSTEMATIC MANAGEMENT OF SUPPLIER
RELATIONSHIPS TO OPTIMIZE VALUE
THROUGH COST REDUCTION
INNOVATION, RISK MITIGATION AND GROWTH
THROUGHOUT THE RELATIONSHIP LIFE CYCLE
“
“
44. Whatever model you operate… one its
key objectives will be 100% fulfilment of
your contingent worker requirements
“ “
QUALITY ISSUES
SCARCITY OF MATERIALS
CURRENCY &PRICE
0% 10% 20% 30% 40% 50% 60%
47. DIRECT HIRING
TRAFFIC TO A FTSE
CORPORATE SITE IS
CAREER RELATED 40%
PERMANENT HIRES
COME FROM THE
CAREER SITE 23.4%
YET ONLY
PERMANENT HIRES
COME FROM
CONTINGENT TO
PERM CONVERSIONS
1.5%
COST QUALITY TENURE
The UK’s economic recovery has been faster and stronger than expected.
According to the Office for National Statistics, the UK economy grew by 0.8% in Q1 of 2014.
This marks the fifth consecutive period of GDP growth, the longest positive run since the financial crisis.
The UK’s economic recovery has been faster and stronger than expected.
According to the Office for National Statistics, the UK economy grew by 0.8% in Q1 of 2014.
This marks the fifth consecutive period of GDP growth, the longest positive run since the financial crisis.
UK businesses want to grow!
Companies can’t grow without hiring the right people.
Competition for talent is fierce.
Companies need to address their recruitment and workforce engagement strategies to attract and retain the best people when and where they need them.
The perfect storm of increased demand for talent and decreased supply is worrying business leaders.
Against this backdrop, your like for like costs will increase!
Recruitment is a board level priority. Your recruitment strategy must be aligned directly to business strategy. We suggest you start with the following five suggestions:
A blended workforce — one that consists of employees, consultants, independent contractors and contingent
workers — is quickly becoming the norm among global
companies.
As a first step towards workforce agility: at the point of approval
of a new role, build in a mechanism which enforces consideration of the various options available.
While SRM is a much talked about topic… according to the PWC paper in 2013: Supplier Relationship Management - How key suppliers drive your company’s competitive advantage
<CLICK> Whatever model you operate… one its key objectives will be 100% fulfilment of your contingent worker requirements… with the increase in demand and a decrease in supply… we predict… that having a motivated and engaged group of sub-suppliers will become increasingly important:
And we’re not alone in our thoughts…
Taking the top three benefits of SRM from the PWC findings… and applying them to the management of Contingent Workforce suppliers…
A group of engaged and motivated sub-suppliers should give you:
<CLICK> Quality issues – A strong service;
<CLICK> Scarcity of materials – Access to deep talent pools;
<CLICK> Currency & Price – multiple, relevant, real-time and independent data sources for benchmarking;
When we buy any product we buy with either or heads (objective value) or our hearts (subjective value).
When it comes to people and pay rates, subjective value is typically high.
In this candidate-led market, it is more important than ever to make sure you have accurate benchmarking.
We suggest you start by reviewing the benchmarking capabilities of your operating model to understand its potential limitations.
So if this year you hire the same number of contingent workers with the same skills sets as you did last year - it will cost you more…
I don’t think anyone will argue that the largest component of your cost is the pay rate to the contingent worker.
Depending on what we buy… we either use our heads <CLICK>(objective value)… shop around, comparing prices for our weekly shop or a hotel room… objective value
or our hearts (subjective value)… even though you can get lots of pricing data from Zoopla, Rightmove and Mouseprices to name but a few… my estate agents favourite quote is still: “the house is worth what people are prepared to pay for it…” subjective value
Given that we are talking about people… subjective value is typically high… it is more important than ever to make sure you have accurate benchmarks to enable people to have those difficult conversations…
So what is good benchmarking?
Depending on what we buy… we either use our heads <CLICK>(objective value)… shop around, comparing prices for our weekly shop or a hotel room… objective value
<CLICK>or our hearts (subjective value)… even though you can get lots of pricing data from Zoopla, Rightmove and Mouseprices to name but a few… my estate agents favourite quote is still: “the house is worth what people are prepared to pay for it…” subjective value
Given that we are talking about people… subjective value is typically high… it is more important than ever to make sure you have accurate benchmarks to enable people to have those difficult conversations…
So what is good benchmarking?
Depending on what we buy… we either use our heads <CLICK>(objective value)… shop around, comparing prices for our weekly shop or a hotel room… objective value
<CLICK>or our hearts (subjective value)… even though you can get lots of pricing data from Zoopla, Rightmove and Mouseprices to name but a few… my estate agents favourite quote is still: “the house is worth what people are prepared to pay for it…” subjective value
Given that we are talking about people… subjective value is typically high… it is more important than ever to make sure you have accurate benchmarks to enable people to have those difficult conversations…
So what is good benchmarking?
According to our friends at the SIA, good benchmarking is underpinned by three key elements:
Multiple, relevant data sources: we know that the availability of information is not the problem, it is knowing identifying information that is specifically relevant to you…
<CLICK> Online: payscale.com, salary.com, ONS, glassdoor, indeed
<CLICK> Industry bodies: APSCo and Agile, REC and KPMG…
<CLICK> Market surveys: Michael Page, Robert Walters, Hudson, Hays, etc…
<CLICK> Could be your suppliers and data from legacy engagements….
Independent validation: SIA and Groups such as Towers Watson, Everest, Aberdeen and Hay plus industry specific research firms such as Agile… could be your MSP
Real time: Static reports done on an annual basis
Later I make reference to a reported variance of 18.5% over a 12 month period… so the more frequent the better…
Be it biannual, quarterly or monthly… utopia would be live / dynamic benchmarking for every role at the point of approval…
Perhaps the best way to review these elements is to consider what is common practice against some broad operating models:
Preferred Supplier List: multiple, relevant sources – yep… but are they the right sources and are they trust worthy – no… but they are real time…
Neutral Vend: Yep… yep… yep…
Master Vend: typically… no… no… and yes… though a lot of models still use static reports…
That said, you can’t look at these three elements in isolation as they only tell part of the story… I would suggest that you have to consider the cost of supply model (fixed fee, mark up, margin on margin, etc.) and the level of sub-supplier motivation and engagement...
To be clear… this slide has not been created to promote any of these operating models…
Preferred Supplier List: multiple, relevant sources – yep… but are they the right sources and are they trust worthy – no… but they are real time…
Neutral Vend: Yep… yep… yep…
Master Vend: typically… no… no… and yes… though a lot of models still use static reports…
That said, you can’t look at these three elements in isolation as they only tell part of the story… I would suggest that you have to consider the cost of supply model (fixed fee, mark up, margin on margin, etc.) and the level of sub-supplier motivation and engagement...
To be clear… this slide has not been created to promote any of these operating models…
Preferred Supplier List: multiple, relevant sources – yep… but are they the right sources and are they trust worthy – no… but they are real time…
Neutral Vend: Yep… yep… yep…
Master Vend: typically… no… no… and yes… though a lot of models still use static reports…
That said, you can’t look at these three elements in isolation as they only tell part of the story… I would suggest that you have to consider the cost of supply model (fixed fee, mark up, margin on margin, etc.) and the level of sub-supplier motivation and engagement...
To be clear… this slide has not been created to promote any of these operating models…
Preferred Supplier List: multiple, relevant sources – yep… but are they the right sources and are they trust worthy – no… but they are real time…
Neutral Vend: Yep… yep… yep…
Master Vend: typically… no… no… and yes… though a lot of models still use static reports…
That said, you can’t look at these three elements in isolation as they only tell part of the story… I would suggest that you have to consider the cost of supply model (fixed fee, mark up, margin on margin, etc.) and the level of sub-supplier motivation and engagement...
To be clear… this slide has not been created to promote any of these operating models…
Russ has mentioned the fixed fee v % mark-up / margin debate and we wanted to avoid quick fix options like offering long contracts to existing workers to lock in current rates…
So from a long term perspective… we would advise that you… make yourself aware of the model you have and it’s potential limitations…
Unless you have a lot of time to commit to managing your operating model… and/or a budget to appoint a third party to validate your pay rates… motivated and engaged sub-suppliers are of value not only from a delivery perspective… but from a benchmarking and rate validation perspective…
For an MSP with an average headcount of 1,000 contractors, they will ‘process’ approx 650 hires pa (churn rate of 65%).
In the same period, the MSP will ‘process’ approximately 1,300 extensions, twice the number of new hires.
So a larger opportunity for your rate alignment exists through extensions than new hires.
Why not set the objective of ensuring your extension process is at least as robust as your new hire process in terms of requirement assessment and pay rate benchmarking?
If you think it is important to get the pay rate right for a new assignment…
For an MSP with an average rolling headcount of 1,000 professional contractors in financial services… the MSP will ‘process’ approximately 650 hires (churn rate of 65%) in a year…
In the same period the MSP will ‘process’ approximately 1,300 extensions… twice the number of new hires…
So a larger opportunity for rate alignment exists through extensions than new hires… just because of the volume of transactions…
And we know rates don’t stand still… and can move a fair amount in a 12 month period… According to Broadbean’s ‘Annual Salary Trends in on-line recruitment’
One sector reported a decrease in remuneration for 2013 of 18.5%... as compared to 2012 figures… that’s an average of nearly 5% a quarter…
Take an example pay rate of £300 per day…
A 5% decrease equates to £15 per day…
If you use the old rate for a 65 day quarter… we’re talking about nearly £1,000 for one contractor for the period…
Take my earlier 1,000 contractor example… using the original rate would cost you the best part of £1m more than you could have spent in a 13 week period…
Put another way… if you consider
An average employee’s contribution… click for line 1 (gold line)
Against the role (steep learning curve… days inside and outside comfort zone…)… click for line 2 (wave)
The pattern of skills required from the role won’t be that different… over time… from the requirements of a project or package of work for a contingent worker (planning… build… support…)… click for line 3 (slightly different wave)… which replaces the first two lines…
So… given the potential swing of up to 18.5% over a year… and the varying levels of skills required over the lifecycle of a project or package of work…
You might achieve better value for money by purchasing the skills you need, when you need them… click for the broken line – each represents a phase of the project… and a potential saving against a straight line (SRG).
Be aware of the model you have and it’s potential limitations…
Set yourself the objective of ensuring your extension process is at least as robust as your new hire process in terms of requirement assessment and pay rate benchmarking…
Building relationships with motivated and engaged suppliers will drive your company’s competitive advantage, ensuring:
Quality of service
Access to deep talent pools
Multiple, relevant, real-time and independent data sources for benchmarking currency and price
A sensible first step: identify which, if any, of your current sub-suppliers are key and ask them what they think about your current operating model.
Accenture defines: Supplier Relationship Management as the systematic management of supplier relationships to optimize value through cost reduction, innovation, risk mitigation and growth throughout the relationship life cycle.
And there are plenty of definitions, models and diagrams available for your consumption… I think most people accept that the concept of Supplier Relationship Management… implemented properly… can add real value to a business…
<CLICK>To be clear… today… I am only talking about SRM in context with the supply-chain… the group or list of sub-suppliers used to fill roles…
While SRM is a much talked about topic… according to the PWC paper in 2013: Supplier Relationship Management - How key suppliers drive your company’s competitive advantage
<CLICK> Whatever model you operate… one its key objectives will be 100% fulfilment of your contingent worker requirements… with the increase in demand and a decrease in supply… we predict… that having a motivated and engaged group of sub-suppliers will become increasingly important:
And we’re not alone in our thoughts…
Taking the top three benefits of SRM from the PWC findings… and applying them to the management of Contingent Workforce suppliers…
A group of engaged and motivated sub-suppliers should give you:
<CLICK> Quality issues – A strong service;
<CLICK> Scarcity of materials – Access to deep talent pools;
<CLICK> Currency & Price – multiple, relevant, real-time and independent data sources for benchmarking;
As with the other suggestions made today… the path to utopian supplier relationship management might be tricky… but it begins with a single step…
Identify which, if any, of your sub-suppliers are key… and ask them what they think about your current operating model…
Demand currently outstrips supply of good candidates in key areas.
This can have a direct impact on growth.
The way we find and manage our workforce is changing.
To get ahead you need to align your recruitment directly to business strategy. There are many challenges to consider but it can be done!