Building a Contingent Rate Card That Works. Presented by Ron Hetrick, Dir. of Labor Market Analytics/Chief Economist, Allegis Group Services

Transcription

1 Building a Contingent Rate Card That Works Presented by Ron Hetrick, Dir. of Labor Market Analytics/Chief Economist, Allegis Group Services May 23 rd, 2013

2 Ron Hetrick, Allegis Group Ron Hetrick brings 20 years of labor force economic experience to AGS. Primarily, Ron works with companies across different industries as a site selection and workforce planning consultant and specializes in rate card development and management having benchmarked close to 20,000 job templates representing well over 300,000 actual placements. He also provides economic analysis for the long-term strategic growth of Allegis Group and its operating companies. Prior to working for Allegis Group, Hetrick spent nearly eight years as an economist with the Bureau of Labor Statistics in Washington, DC. Supervising the Current Employment Statistics survey. He has published articles on labor trends for the Monthly Labor Review and various industry trade magazines and continues to write white papers on rate card development and rate philosophies.

3 Agenda I. Starting the Process II. III. The Structure of a Card Benchmarking Rates IV. Factors that will Effect the Future of Rates

4 CWP Mission Statement Mission: Our mission is to foster our individual member s learning through the sharing of knowledge, best practices, experiences, lessons learned and by engaging with industry experts and thought leaders. Purpose: Our goals are to enhance the professional capabilities and skills of our individual members and to bring value to the overall contingent workforce management industry. Who we are: CW Professionals is a Professional Association of contingent workforce and strategic sourcing professionals working in multiple industries.

5 Governance Steering Committee Bay Area Mark Murphy, Agilent Technologies Wendy Barnard, Charles Schwab Verdis Baldridge Kaiser Permanente Greg Johnson, Blue Shield of CA Janice Urban, Oracle Steering Committee Houston Holly Olszewski, BMC Software Nandita Joshi, Shell Mike Pruente, ConocoPhilips Kanita Harris, Halliburton

6 I: Starting the process: rate philosophy Hiring is like a river. If you pollute the freshet [watershed], it pollutes everything downstream. Herb Kelleher Low Bill Rates Long time to fill Poor quality candidates High Bill Rates Short time to fill High quality candidates Do you want to be the employer of choice or employer of last resort?

7 I: Starting the process: Your data When we start building a card we always require all of the existing placement data we can find. What are we looking for? Average durations Distribution of fills/presence of levels Average of current rates against any existing rate guidance Locations Volume Special pricing agreements

8 Long durations and co-employment What is an acceptable duration? Co-employment should not be the determining factor in setting a contract s length. As long as the contracting firm remains active in its oversight of a contractor and the hiring firm has clearly specified its eligibility for internal benefits, co-employment should never be an issue.

9 Long durations and tenure discounts Most assignments of a non-professional nature tend to be from 3-6 months. So, should you ask for a tenure discount? Positives: Savings Negatives: Suppliers may adjust their behavior on the front end. Punishes all up front aggressive pricing as no supplier is ever sure that a person will not be extended. Solution: Do not do a blanket, all skill set reduction. Have great benchmarks before implementing.

10 What your current fills can tell you Ineffective and unrealistic rates create negative consequences: Avoidance SoW Template hi-jacking Rate creep

11 Did you know? In a 5 level system (entry to consultant) the normal percentage of those filled at the first 2 levels: Developers 19% Business Analysts 32% Graphic Designers 64% Help Desk 85%

12 Locations Are you in completely different types of market? Variance between market pay rates can be substantial. San Francisco 96,936 Seattle 88,255 St. Louis 81,413 Charleston 76,122 Mechanical Engineer 8 yrs exp. (Source: ERI) 16% difference In general, market graded rates save about 5-10% per grade

13 Volume or special pricing agreements It is the nature of almost any business that the more volume someone gets the more they should be flexible on their price. We have found that staffing firms will give the most consideration to: - small number of competitors - possibility of being in a 1 st tier - easy to obtain and repeatable skill sets - opportunity to gain access to more business units either geographically or by skill set

14 II: The structure of a card An effective rate card needs the following elements to work most effectively: - Non-redundant but clear titles - A correct number of levels - Location grading - Job descriptions with all key elements included.

15 Card structure: Proper Job Titles Software QA Engineer Test Engineer Tester QA Analyst Etc QA Test Analyst What are the benefits?

16 Card structure: Optimal Levels Every job does not need the same number of levels but nearly every job should have some number of levels. Suggested: Help Desk 3 levels Receptionist 2 levels Business Analyst 4 levels What are the benefits?

17 Card structure: Location grading There is rarely ever an instant where every single location a company has should have their own rates. Locations should be grouped. What is optimal? By metro area (40 minute drive time) Small number of groupings What are the benefits?

18 Card structure: Job Descriptions There are 4 key elements to a good job description: Summary Short and clear Responsibilities Don t oversell Skills Always list required in own section Education/Experience Verify the relevance What are the benefits?

19 III. Benchmarking Rates One of the most difficult aspects of bill rates that companies struggle with is that there is no such thing as THE bill rate: - Fluctuating labor pools - Different burden structures for suppliers - Different hiring priorities/backgrounds - Different problems to solve - Different company reputations

20 Benchmarking rates: What can make your rate higher than market Short assignment durations Immediacy of need Niche requests in otherwise standard job templates (industry exp., platform exp.) Small name in a market/skill set where employer brand matters

21 Benchmarking rates: Pay rates In mark-up situations, companies often need to benchmark pay rates. There are many pay rate tools each with strengths and weaknesses. Here is what we have learned: For low end jobs you can typically pay in the lower percentiles For higher end jobs (top levels), you typically are paying at the very highest percentiles. Best to look at it like quasi-executive search.

22 Benchmarking Bill Rate Data Benchmarking contingent staffing bill rates is much more difficult. You basically have several options: Bill rate tools (Peopleticker/Specifics, etc.) Your VMS, MSP, large systems integrators that are supporting you. Supplier solicitations What are the strengths/weaknesses of these?

23 Benchmarking niche jobs Industries with niche positions: Oil & Gas Healthcare Finance/Capital Markets Our approach is threefold: - niche positions have a lot in common and therefore nothing is completely unique - ratcheting up bill rates until you see the candidates you are hoping to see - understanding the upper limit before recognizing when someone needs to come in as a consultant (SoW) and forcing them to pass knowledge. <Do you have an exit plan for formers?>

24 Logic checking your card We use several terms when building rate cards. Feel free to invent your own: Splits is there a proper amount of difference between levels? Relative variance is there a proper amount of difference between different jobs of varying complexity?

25 IV. Factors that will affect rates in the short term No matter how hard you try, your rate card, from the second it is created, will be based on historical observations. What will change things: Economic changes Statutory cost changes (SUTA/FUTA,Workers Comp) Migration patterns (demographic changes)

26 IT Outsourcing employment is soaring 1800 IT staffing Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 IT Systems Design is the biggest employing industry if IT workers. IT has added 265K since its trough in late There is no doubt that IT workers are being consumed.

27 Occupational Pools Can Fluctuate Key unemployment rates Low High Current OTY Change Management Business and financial IT Engineering Sales Admin/Clerical Production IT is not the only skill set grouping to see tightening conditions. In fact, everything is tighter except for certain professional skill sets. Even those have experienced month to month problems.

28 Defensive Plays What highly skilled workers want Working on cutting edge products with cutting edge technology Company name and reputation developing desirable candidates Flexibility on work location, work dress, etc Tangible culture, exciting, working on this project means something

29 Questions Speaker Contact Information Ron Hetrick Allegis Group Services, Inc.

30 Thanks! Ron Hetrick Director of Labor Market Analytics Allegis Group Services, Inc.