Managing a modern workforce can be challenging, particularly in today's competitive job market. Organizations need to fulfill their workforce in cost-effective and efficient ways, while also ensuring they are able to attract and retain workers.
That’s why many businesses are turning to the contingent workforce for assistance, which offers reduced costs, improved business flexibility, greater access to expertise and filling skills gaps, as well as easier and faster hiring processes.
In fact, a 2020 Success Factors and Oxford Economics report found that 83 percent of global business leaders said they are increasingly turning to contingent, intermittent, seasonal, or consultant workers to retain how competitive they are for top talent.
But these benefits are only achieved when businesses are strategically managing their contingent workforce program in a way that gives them full visibility and control over non-employee workers.
To do that, many businesses are using vendor management systems to give them visibility over their program, as well as working with managed service providers (MSPs) to provide the expertise and resources required to successfully manage a contingent workforce.
However, to augment this process, many companies have also implemented (or are considering implementing) direct sourcing to speed up the acquisition of top talent.
But how do you know if direct sourcing is the right fit for your contingent workforce program?
In this article, we'll explore the benefits and drawbacks of direct sourcing, and discuss some key questions to help you determine whether the addition of this method is the right approach for your company’s contingent workforce program.
What is Direct Sourcing?
Direct sourcing is a talent acquisition strategy that involves companies sourcing and engaging workers directly, rather than going through a traditional staffing agency. With direct sourcing, organizations can identify and engage skilled workers through various channels, such as social media, job boards, their own database and professional networks. This approach allows companies to build relationships with workers, create a more personalized recruitment process and diversify channels of candidate sourcing.
What are the Benefits of Direct Sourcing?
1 - Potential for Increased Cost Savings
One of the primary benefits of direct sourcing is cost savings. When working with a traditional staffing agency, companies typically pay a fee for each worker placed, which can add up quickly. Direct sourcing eliminates this cost, as companies are sourcing and engaging workers directly, without a middleman.
2 - Greater Control and Flexibility
Direct sourcing also gives companies greater control and flexibility over their contingent workforce. With a traditional staffing agency, companies may have limited visibility and control over the workers they receive. With direct sourcing, organizations can engage with workers who meet their specific requirements and have greater control over the entire recruitment process without relying on a third party.
3 - Improved Candidate Quality
Direct sourcing can also improve candidate quality. When working with a staffing agency, companies may receive a large pool of candidates, but not all of them may meet the organization's specific requirements. With direct sourcing, companies understand the fit for their organization and can focus on sourcing and engaging with workers who have the right skills and experience, resulting in a higher-quality pool of candidates.
What are the Drawbacks of Direct Staffing?
1 - Increased Administrative Burden
Direct sourcing can be more administratively burdensome than working with a traditional staffing agency. Companies must manage the entire recruitment process, from sourcing and screening candidates to onboarding and managing workers. This can require a significant investment in time and resources.
2 - Higher Risk of Non-Compliance
Direct sourcing can also pose a higher risk of non-compliance with labor laws and regulations. Staffing agencies typically have expertise in compliance and manage the associated risks. Companies must ensure they are compliant with all relevant laws and regulations when engaging workers directly.
3 - Limited Availability of Workers
Finally, direct sourcing can result in a more limited pool of available workers. While social media, job boards, and professional networks can be effective channels for identifying and engaging workers, they may not provide access to the same volume of candidates as a staffing agency.
Some Important Questions to Consider When Considering the Implementation of Direct Sourcing
What Types of Companies are Best Suited for Direct Sourcing?
Direct sourcing can be a good fit for a wide range of companies, particularly those that have a large contingent workforce or require specialized skills. However, it may not be the best fit for companies that have limited resources or expertise in recruitment and compliance.
How can Companies Ensure Compliance When Engaging Workers Directly?
Companies must ensure they are compliant with all relevant laws and regulations when engaging workers directly. This can involve conducting background checks, verifying work eligibility, and adhering to wage and hour laws. Many governments will have online compliance checkers that businesses can use to ensure they are implementing the right processes to mitigate compliance risks. Companies can also utilize Employer of Record (EOR) providers that will contract and engage the workers at a reduced fee vs agency rates.
What are the Best Channels for Identifying and Engaging Workers Through Direct Sourcing?
Social media, job boards, client ATS/Databases and professional networks can be effective channels for identifying and engaging workers through direct sourcing. Don’t forget about past contractors, employees and retirees as well, who are often happy to come back to your organization to fulfill contingent roles.
How can Companies Manage the Administrative Burden of Direct Sourcing?
Companies can manage the administrative burden of direct sourcing by leveraging technology and automation to streamline the recruitment and onboarding process. They can also work with third party providers, such as an MSP, to ensure they have highly-strategic and repeatable processes in place.
How Does Direct Sourcing Compare to Other Staffing Models in Terms of Cost Savings?
Direct sourcing can be a more cost-effective staffing model than traditional staffing agencies or managed service providers, particularly for large organizations with a significant contingent workforce - but only when done right. When done wrong, it can lead to decreased talent quality and higher spend. Companies should ensure that have a relevant market rate card for directly sourced resources to avoid overpaying.
Is Direct Sourcing Right For You?
Direct sourcing is a staffing model that can offer significant benefits, including cost savings, greater control and flexibility, and improved candidate quality. However, it can also pose drawbacks, such as increased administrative burden and compliance risks.
By carefully considering the benefits and drawbacks of direct sourcing, comparing it to other staffing models, and leveraging real-world examples and best practices, companies can determine whether direct sourcing is the right fit for their contingent workforce program.
Interested in learning more about how you can improve the results of your contingent workforce program? Book a meeting with the Contrax team of contingent workforce management experts today.
