Executives are putting pressure on leaders across the organization to justify investments and cut costs wherever possible. It’s all part of a global business effort to ride out the economic effects of this health crisis until we return to a normal state, whatever that may look like post-COVID-19.
For contingent workforce program owners, these times have been particularly challenging. Whether their businesses are considered essential or not, everyone has been forced to make quick and oftentimes difficult workforce decisions. With the immediate urgency behind us, the attention has now been turned to creating a go-forward plan. While the goal is preparedness for whatever lies ahead, the future undoubtedly demands a closer examination of labor spend.
This CWS 3.0 article by Frank Enriquez makes the case for why getting a handle on your largest and toughest spend category – statement of work (SOW)-based services – can pay off. The article defines SOWs this way: “A document that captures the work products and services, including, but not limited to the work activities and deliverables to be supplied under a contract or as part of a project timeline.”
Enriquez talks about what makes your services spend such an incredible cost savings opportunity for program managers, but also why it’s so difficult to get under control.
Are your SOWs written on buyer or supplier paper? Is all of your SOW spend managed through your VMS? Do you follow mandated, documented operating procedures?
Enforcing a standard process is complicated, personal and political. Too often SOWs are managed in silos throughout the organization, according to the needs of individual business units or teams within specific regions or markets. In the article, Enriquez shares that often 90% of SOWs are not competitively bid. Your managers have their preferred vendors or teams and will circumvent the process, if there’s one at all, in order to work with them.
If you ignore the problem, you’re left in a position of having little visibility into your SOW spend data, and at risk of being under fire from cost-conscious executives.
Capturing SOW Spend to Make Cost-Saving Decisions
If you’re only managing temporary labor through your VMS, you’re missing out on the full visibility you need to make cost-saving decisions. This is especially when you consider that services are the largest spend category for the majority of organizations.
The first step on your journey to more strategic SOW management is to ensure your VMS is the right fit for your needs. Staffing Industry Analysts’ 2019 VMS Landscape and Differentiators report compares the capabilities of providers when it comes to managing SOW spend.
The next step is to develop a well thought-out and communicated plan, and it starts with building a business case. Doing so requires consideration of five elements we call ROGER (Risks, Opportunities, Goals and objectives, Executive buy in and Relevant stakeholders). We walk through each of these in our data sheet, How to Build a Business Case for Services Procurement.
Gaining a better understanding of your external labor spend, and SOWs in particular, will put you in a better position to address your executives’ cost concerns confidently.