The Importance of Analytics

Analytics. That is the new buzz word in outsourcing and particularly in workforce management. Managed services providers (MSP) rely on vendor management systems (VMS) to crunch the terabytes of data on a company’s global workforce—where they work, for how long and how much they cost. But is this really helpful?

“Absolutely,” says Doug Leeby, president of Beeline, a workforce solutions provider that is part of Adecco Group. According to him, “VMS tools have the ability to provide insights to change behavior. They allow recruiters and MSPs to see patterns and trends.”

Adds Matt Johnson, vice president of client experience for TALX, “Analytics uses technology to help workforce departments get the answers they need so they can deliver strategic value to their companies.”

Elliot Owens, vice president of business intelligence for Volt, started Volt’s analytics services eight years ago. Back then he says buyers just wanted to know if they were paying the right price for contingent labor; “benchmarking was all they requested.” Then, he says, they discovered what “was not a simple question to answer. Today they want to know what is going on, why it is going on and how to improve the situation. They want analytics to go down a deeper path.”

Mike Psenka, the CEO of eThority, points out the movie Moneyball shows cinematically how analytics helped the Oakland A’s “gain a huge advantage by taking a small payroll and still producing a great team.” Analytics do the same for MSPs and their clients.

Psenka likens the analytics capability to gun powder. When the Chinese invented it for fireworks, “it was no big deal if you didn’t have any. But when people weaponized gun powder, it was a big deal if you didn’t have any,” he says. TALX, a division of Equifax, purchased eThority in mid-October.

How MSPs use analytics

Owens says MSPs are successfully using analytics for:

  • Improving retention
  • Forecasting and budgeting
  • Predictive modeling
  • Managing the vendors
  • Encouraging compliance

The ability to drill deeply is key to improving performance. Leeby says analytics reports tell companies their contingent workforce spend in St. Louis or how many IT people are working in Santa Fe. But he says what employers really need to know is how that data is affecting the bottom line and what needs to be done about it.

A good analytics report should present outliers and force the hiring manager or MSP to investigate whether they have justifiable causes. “Is the company paying a higher rate because the contract worker has a niche skill or because it’s facing a tight deadline?” He says companies often decide to pay more because of the work itself. They just have to make sure they are not paying more because they are unaware of the market economics. Analytics help them make those kinds of decisions.

Reports from VMS tools can also show employers how much money they are saving using an MSP. A report can inform the buyer it’s saving $500,000 by comparing the discount the MSP negotiated against suppliers’ formal rate cards. But Leeby says reports should go beyond revealing cost savings and allow users to uncover answers to questions that matter including:

  • What positions actually account for these savings?
  • Are these real savings or is the rate card too high?
  • Is there a geographical difference?

For example, a TALX food supply company discovered through analytics that it was paying an unusually high amount of overtime. A deep review discovered overtime was actually low in almost all units but extraordinarily high at two sites. The analytics uncovered which managers were responsible, according to Johnson.

In another case, TALX identified managers at a multi-national corporation who were sloppy with their I-9 certifications (documenting employees are U.S. citizens). “Without our analytics, the company was walking around with a $2.5 million liability around its neck,” says Johnson.

Using data wisely

Sometimes too much data hinders, not helps. Leeby of Beeline tells the story of a U.S.-based provider of technology-based business solutions and services that had the request rate for contract workers visible to the suppliers during the procurement process. Beeline’s analytics tool, SmartView, reported suppliers submitted candidates at bill rates equal to or just under the maximum request rate.

While the program generated savings due to competition, Beeline tried masking the request rates. Since they were now not visible, it forced suppliers to submit candidates at market-driven rates. Once Beeline removed the rate visibility, the impact was immediate. Program savings previously had been between $140,000-$250,000 quarterly. Those numbers doubled the quarter after Beeline made the change. Then, in the second quarter after the change, savings nearly quadrupled, topping out just over $860,000.

A Software-as-a-Service solution

TALX’s solution is cloud-based. Because it is SaaS, “there’s no need for a big IT install. Companies don’t have to spend a lot of IT dollars,” says Johnson.

Beeline’s SmartView takes a company’s vast collection of data on contingent workers and consolidates it into a single interactive report so users can identify trends, spot outliers and detect new savings opportunities in one place.

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