As corporate America increases its focus on implementing enterprise IC Engagement and Compliance programs, I am frequently asked the following two questions:
1. What is the best advice MBO can give us for mitigating risks around the use of independent contractors?
2. What is the most important ingredient required to create and operate a successful ICES program?
My answers to both questions are straightforward and inter-related. First, the best advice I can give to mitigate risk is to design and build an ICES program that will ultimately keep your ICs happy. The most important ingredient to a successful program is the commitment of the resources and focus to get the job done right.
My former answer is not meant to be trite. Happy ICs don't initiate class action or individual suits; they want to work for your company and most importantly, they deliver quality work. Using our proven methodologies, experience, and intellectual capital, MBO can guide and help design ICES programs that keep your unique ICs happy.
The more important question is the second one. Are you and your company ready to tackle and embrace the critical factors required to run and sustain a successful Independent Contractor Compliance program?
The responses I receive to this question fall into two categories:
- Companies that have already implemented an MSP/VMS program for their recruited temporary labor typically say, "Absolutely! We've already done it with our temp labor spend, so we can simply roll the Independent Contractor category up into it."
- Companies that have not implemented a MSP/VMS program typically say, "What do you mean, am I ready?"
I'd like to spend some time defining the "readiness" factors MBO believes are keys for a successful ICES program, within the context of those companies with MSP/VMS programs. This approach will provide background and insight to both companies with and without an MSP solution.
Though many of the communication, change management, and process re-engineering activities a company deploys in building their MSP/VMS program are similar to implementing an ICES program, there are many subtle, but significant, differences that need to be elevated and embraced. MBO has categorized these key ICES program ingredients into two groupings - the client's "Intent" and how the program "Incents." The Client "Intent" is the critical messaging, process framework, and internal commitment levels that define the intentions and objectives of their unique ICES program. The program "Incents" are the "carrots," processes and design parameters that are the incentives and catalysts for IC adoption and viral support. More about these two groups below:
- First, the majority of these ICs are "self-sourced" by business managers who understand their business requirements, realize additional experienced talent is required, have the budget to fund this resource, and typically find the needed IC talent on their own. Therefore, unlike the MSP sourcing environment, where the challenge is to corral a finite number of external staffing companies, an ICES program must communicate and change behavior of hundreds of internal business managers. Thus, the need for Executive sponsorship and support, along with a clear, concise ICES Policy/ Guidance document, is critical. It defines the program framework and provides the "Executive Air Cover" the ICES and MBO account teams need to deliver the company's desired objectives. MBO, utilizing our library of policy templates, will work with the company's project team and Communications Department to craft a policy document that supports your ICES business objectives as well as resonating with your unique corporate culture.
- Secondly, because the individual Engagement managers are sourcing and "cutting their own deal" with their identified ICs, it is critical to deploy a robust, concise communications vehicle that proactively defines the program, costs, responsibilities, expectations, etc., and delivers these messages as close to the Point of Sale conversations as possible. Unlike the MSP program, where approved staffing vendors must follow pre-defined rate cards and specific on-boarding rules, the acquisition of ICs in most companies can be described as the "wild, wild, West." Therefore, proactively educating and setting perceptions/expectations for the Engagement manager and IC regarding the new company ICES policy minimizes downstream assessment/enrollment issues and escalations which are critical for any program adoption and sustainability. MBO has developed a unique internal Engagement manager and IC communications framework where specific communication scripts can be inserted in a variety of written, video or other interactive media. These messages should be structured to achieve internal Engagement manager buy-in and provide proactive clarity to the IC regarding the ICES program rules and insures there are no hidden costs or downstream surprises.
- Thirdly, like a new MSP program, the ICES program must make it easier and quicker for the Engagement Managers to get their contingent talent to work. If the hiring manager does not understand the relevance and important role they play in managing their company's IC risk, or feels the process is too long or cumbersome, these negative perceptions will quickly and virally prevent a successful launch of the program. As in any new process, change management and adoption is critical, so it is key that management support the program policy, escalations are well defined and followed, and consequences for transgressions are articulated.
For companies with MSP programs, and the MSPs themselves, it is important to realize and internalize that the IC worker as a vendor is different from the Staffing Agency as a vendor. Therefore, the same "benefits" and paradigms of how the MSP manages or incents the Staffing vendors may not apply. The ICs view themselves as independent business owners/sole proprietors and are what MBO calls "self-employable." With this "self-employable" mindset, the IC is responsible for new business development and charging a bill rate that covers their business expenses, all appropriate taxes, operational costs, down time, profit, etc. They run their business on a profit and loss basis, and their projects are defined by a Statement of Work paid upon milestone completion or defined deliverables. Though the temp agencies governed through the MSP program are also independent businesses, the following differences need to be kept in mind when designing a successful ICES Program:
- In an MSP Program, a justifiable incentive for the Staffing Company to accept the lower rates and absorb the MSP fee is that they will now have access to all of the client's requisitions, and if the Staffing Firms are operationally efficient, they will place more temps and therefore grow their business (and make up any mark-up concessions in volume, as well as decreased business development costs and commissions). This top line scalability does not translate with the IC, as they are typically sole proprietors and have only so many hours to bill as an individual. So, the determination of "who pays the MSP/MBO Fee" in the ICES program needs to be considered, since the IC will view this incremental cost as a negative. With no upside, trying to push the ICES fee costs down to them is a true dis-incentive. MBO's recommendation is for new clients to consider funding or paying for the incremental ICES fees, especially for transitioning incumbent IC's. An IC-funded approach for new ICs has a much better chance for success, as long as the IC is proactively aware of the incremental requirements of the Client's ICES program, and can offset these new costs by enrolling in the IC engagement solutions (i.e. the MBO Exec offering). IC's also appreciate the opportunity to negotiate these increased costs with the Engagement Manager at the Point of Sale.
- As an independent business owner, "cash is king"; timely and predictable cash flow is crucial. If there is one tangible incentive a client can leverage in their ICES program, it is to substantially shorten the payment terms from the existing payment process. Clients of MBO who have shortened payment terms to immediate payment or less than 15 days, have shown increased success in IC adoption, enrollment, and contentment (remember, the key is to keep the ICs happy) over companies who have not done so. If the MSP is handling the treasury function, the additional time it takes for the MSP to pay MBO must be included in the overall timeline for payment to the IC.
- It is also critical to insure that the technology used to manage the requisition to payment process for the ICES program resonates and supports the IC business model. We realize companies with VMS systems have invested a lot of time and resources to capture and gain visibility on their temp labor spend, but most ICs' contracts and invoices are based on SOW deliverables, milestones, etc., not on an hourly rate and timesheet. Thus, it is important to make sure your VMS system has the ability to capture the SOW purchase order details, allows easy submission of milestone/deliverable invoices, provides good visibility to the IC on the payment timeline of approved invoices, etc. If the IC becomes frustrated or feels the VMS technology does not support their business needs, their experience with the ICES program can quickly sour - which decreases program adoption while increasing IC unhappiness and client risks. MBO has extensive knowledge of utilizing and interfacing with Fieldglass, IQN, Beeline and other VMSs and can assist in technology layer decisions. MBO can also offer our own ICES technology system that we have developed to handle all of the various IC business models and contract/invoicing permeations we have supported over the last 25 years. So, make sure you choose the technology system that will support the unique business parameters of your Independent Contractor population.
- Lastly, a significant "Incent" consideration that MBO recommends to our clients is the creation of programs that allow the IC to potentially grow their business. In MBO's 25-year history of supporting ICs, the most common concern is, "where will my next project come from?" A potential solution for this concern is for the company to create an "Approved" vendor initiative, where IC's enrolled in the ICES program are considered first for fulfillment of new client business requirements. This type of incentive provides the IC the potential of growing their business based on the quality of work they perform, making it an effective motivator to be considered in all ICES programs. MBO has developed our own unique solution called MBO Access, where our ICs' expertise, skill sets, etc. can be stored, searched, and matched with new project requirements within the client's community of consultants (like a Virtual Bench).
In conclusion, MBO's word of advice to prospects and clients is to design and build an ICES program that has the right balance of Client "Intents" and Program "Incents," delivering proactive communication and keeping the IC happy. So, when choosing a partner to create and operate your ICES program, make sure they have documented implementation methodologies, communication template libraries, change management plans, and other best practices to guide and assist you in developing your desired solution. The other important question is, "Are you and your organization ready to embrace and reinforce the ingredients needed for a balanced and sustainable ICES program?"
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