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Is use of SOW undermining your compliance and control?

Posted by David Nies, Managing Director, Chicago, Hays US on Friday, Aug 18, 2017

Reduce the risk from SOW | Hays US BlogThe use of SOW (Statement of Work) engagements as a way to creatively bridge resource and talent gaps is still growing at a rapid rate, and very few organizations have their arms around it. Everyone in the talent acquisition chain is affected by SOW use – hiring managers, core team members, human resources, internal talent acquisition, external talent/staffing suppliers, and managed resource providers.  Additionally, company finance and legal departments are affected. The use of SOW impacts nearly all aspects of a company and the talent procurement process.

Where are we now? The use of SOW is also largely unmonitored, so HR doesn’t know who is being hired. This means there is no process for on-boarding and off-boarding, leaving room for wasted expense and legal missteps. It also means there is no structure around cost, so budgets can be used too quickly. Furthermore, it means the value propositions of cost-savings, program control, and a vendor agnostic program promised by MSPs do not come to fruition.

If you can’t see it, you can’t measure or control it.

How did we get here? Most of the SOW demand I see is driven by hiring manager frustration over the inability to quickly and effectively identify both the right quality and quantity of talent needed to meet their organization’s objectives for the month, quarter, or year. The use of SOW then often leaves HR/Talent Acquisition and their MSP scrambling to ensure protocol is followed and spend is captured. The challenge lies in that most SOW use is wrapped around a project/service versus being purely staff augmentation. Thus, the guidelines in place relative to staff aug are far too simple to manage complex SOW agreements. SOW agreements frequently include items such as project content expertise, managing project milestones, and managing change actions. The management of these things does not exist in traditional staff aug programs. Is SOW your contingent workforce blind spot?

What’s everyone doing now? I recently spent time with a well-known global MSP and discussed this issue, as they are currently tackling it with one of their global customers. The team responsible for capturing spend has discovered a huge amount of revenue (more than 50%) was wrapped up in SOWs and was not captured in the program. They also found that most of it was non-complex work, meaning it was purely being used for traditional staff aug labor. Recruitment firms are continuing to build relationships with hiring managers and are now engaging in SOW work because it allows them to secure exclusive, bulk business. Hiring managers are engaging in SOW work because it allows them to avoid an often-cumbersome process, work with one supplier, and quickly identify and onboard the talent they need. Sometimes this works well for them and their team; other times it allows them to quickly procure talent but leads to higher attrition down the road.

SOW is the new rogue spend.

Where are we headed? Ardent Partners research has found that “complex contingent labor,” a term used to describe SOW-based projects, services, and labor comprises 42 percent of the average enterprise’s total external workforce. That’s a huge number! And, it’s a number that certainly dictates a widespread desire to build more internal structure around supporting SOW use, particularly as it relates to staff aug. It’s widely expected that reliance upon (and preference for) non-employee labor is going to continue to grow. There are articles abound relative to the “gig economy” and that will feed this SOW work. MSPs are trying to get in touch with the use of SOW and capture the spend in their program, VMS providers are working to include SOW-capability in their systems, traditional recruitment firms are working to engage in more SOW work, leading recruitment firms are engaging in SOW work with some slight oversight (think Project Manager overseeing a few developers), and IT consultants at the core of the work are enjoying the low-unemployment field they’ve known for a long time.

Bring SOW under your MSP to capture and control that spend.

Did you know SOW can be managed as part of your MSP with Hays Talent Solutions? Find out more today.

Contact Chicago Managing Director David Nies about IT jobs and hiring.

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