If you have ever been tasked with executing a corporate initiative, like a new policy or change in process, provider or technology, you know the benefit of an Executive Sponsor. It’s like having a note from your doctor excusing you from gym class - no one asks any questions, they just deal with it. Through our experience implementing large enterprise Independent Contractor Engagement Solutions (ICES), we have found it makes all the difference.
28% of our Enterprise Accounts have over 100 active Associates. 100% of those large customers have Executive Sponsorship. Dave Cassar, our VP of Operations, explains it this way: “An executive level resource who is engaged in the implementation of the program, has bought into its value, and stands up for the program when conflict arises is the single most important factor in a program’s success or failure.” It is no surprise to us that these customers have consultants that consider these companies “Clients of Choice.” As such, they are actively engaged, keep their rates competitive and are likely to get re-engaged for future projects.
However, executive sponsorship is not the only factor in the effectiveness of an ICES program. If a customer decides they are committed to using Independent contractors as part of their business model and sees them as critical resources, they usually expect everyone to participate in the program and follow the designated process of on-boarding and vetting. In order to mitigate the risk of misclassifying an IC, all of a client’s non-employee resources need to be included, so adoption is also a key factor. Of our enterprise accounts, only 11% allow resources to go directly to the client (corp-to-corp) and in those cases, they are all qualified IC’s. A qualified IC certainly poses less of a risk, but if the IC engagement isn’t monitored, the documentation isn’t maintained or the project and/or relationship changes, the risk can be great.
One other factor that we see as important is payment terms and funding. An Independent Contractor is a small business. As a small business usually consisting of 1-3 people, their cash flow is limited. Many enterprise assignments require 75-100% of the IC’s billable time while on assignment. In order to maintain the focus and positive relationship with an IC, we recommend 30-day payment terms. Funding of a program or the fees that are associated with an ICE can also have an effect on program success. More importantly, it is an indication that the client sees the value and wants to make sure the IC isn’t burdened by their desire to assure compliance. 78% of our largest programs the client funds 95% of the time, and 55% of our programs are 100% client-funded.
A new corporate initiative that isn’t endorsed and actively promoted by a senior executive will appear as unimportant and will likely be ignored. If there isn’t a consequence for going around a program and or if the executives aren’t personally taking part or following the process, it probably shouldn’t be initiated in the first place. If an ICES program is to have value and really mitigate risk, it should be worth an executive’s time and the company’s money.
MBO Partners defines direct sourcing and related terms relating to the new world of work.
As 2016 winds to a close, we at MBO Partners like to take time to reflect on what has changed in preparation for the year ahead. As is common in any fast-growing industry, we marvel at how much has changed in the past 12 months, and how much will likely change again as we head into and through 2017.