Performance ReviewBy Anna Maria Virzi | Posted 2007-04-05 Print
CUNA Mutual Group, which spends $15 million a year on contract workers, wanted to get the best talent at the best price. First, it had to take a good look at its hiring processes.
Before Nelson and his team even looked at software, however, they worked with hiring managers to perform an "early discovery," or in-depth review of how the company scouted out, screened and retained contract workers. As a result of this exercise, the sourcing team, hiring managers and others realized that there was an opportunity to more efficiently hire, manage and pay contract workers.
Some of the team's findings from the review included:
The company had maintained limited—and piecemeal—information about contract workers. An information-technology manager, in one instance, collected names of workers and hiring managers and maintained them in an Excel file that had to be manually updated and was not easily shared, according to Nelson. It did not include, for example, billing rates or hours worked in a single repository.
Salesmen and women from sourcing firms would "troll" CUNA Mutual's hallways, trying to get preferred status or place people in jobs. In effect, the sourcing firms were managing the process instead of CUNA Mutual managers.
Performance of workers and sourcing firms was not measured or shared among CUNA Mutual managers, either. So, if one worker failed to meet a manager's expectations, that worker could end up in another department with no history of his track record readily available.
After the review, CUNA Mutual's sourcing team, hiring managers, and information-technology and human-resources staff in early 2005 developed requirements and standard job descriptions for contractors, such as a Java programmer or business analyst. They then used Ariba's QuickSource spend management software to set up a reverse auction, inviting sourcing firms to submit their billing rates for work, based on job descriptions. After bidding, CUNA did due diligence on the sourcing firms, examining each one's processes, technology, background, and the skills and experience of workers available, according to Nelson. Some firms were given "Tier 1" or preferred status, meaning that CUNA Mutual's sourcing team would give those firms first crack at submitting candidates for openings. Others received "Tier 2" status, meaning they would get a shot at filling positions if Tier 1 providers did not come through with a qualified or suitable candidate.
A review of the bids turned up an interesting pattern: Sourcing firms that had previously worked with CUNA Mutual submitted bids that represented cuts of 12% to 14% in billing rates, compared to rates charged at the time in 2005. Firms new to CUNA Mutual came in with billing rates that represented cuts of 30% to 35% from pre-2005 levels, Nelson says.
Using an Excel spreadsheet, CUNA's sourcing team developed a model to aim for an 18% reduction in billing rates by using a mix of incumbents and newcomers, though the plan was to rely more on those firms already doing business with CUNA—a move seen as less risky than working mostly with the less expensive newcomers. Nelson characterized this as a "low-risk, buy quality" approach.
At this point, CUNA Mutual's sourcing team went to business executives to make a case for investing in software to manage the sourcing firms and contract workers. "We could not guarantee that we could maintain those savings unless we had an electronic marketplace," Nelson says.
While CUNA Mutual uses Oracle's PeopleSoft human-resources software to handle payroll and benefits for 5,000 employees, the sourcing team opted to seek software from a niche vendor, instead of an enterprise resource planning vendor. Gartner's Pring says companies looking to deploy services management software are often more comfortable working with a vendor that has domain expertise—and can offer up some TLC—instead of a vendor with a broader portfolio of software tools.
Vendors on CUNA Mutual's finalist list included Peopleclick, Elance and IQNavigator. CUNA's team decided to go with IQNavigator 7.5, a hosted application. "It has the best fit with our processes," Nelson explains. "And we were seeking a tool that could expand to other labor-based services like consulting, training and facility services."
CUNA entered into a five- to seven-year agreement with IQNavigator, paying an up-front fee and annual maintenance costs that Nelson declines to disclose. Companies typically pay 1% to 3%—minus a volume discount—based on the value of services or goods processed through the system, says IQNavigator's Brady, who also declines to discuss CUNA's fees. At 1%, the ongoing annual cost of IQNavigator to CUNA would be $150,000 a year, based on spending $15 million on contract workers.
Nelson estimates that a return on investment came in less than six months and saved at least $400,000 in soft costs, such as reducing the amount of time that managers spend on candidate searches and accounts-payable staff devotes to processing invoices.
Nelson says the deployment required a limited amount of development work—about one to two developers working part-time between nine and 12 weeks—to integrate CUNA's PeopleSoft ERP system with IQNavigator. Specifically, programmers had to write code to allow IQNavigator to import from PeopleSoft a so-called approval hierarchy that indicates whether a manager has the authority to approve the expense of a contract worker.
And IQNavigator had to be programmed to export information such as the contract worker's name, the hiring manager's name and department to the PeopleSoft human-resources application, so that a roster of employees and non-employees is maintained in one place—all in PeopleSoft.
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