Contractors have always cost more than the equivalent full-time staff. In the employer’s mind, this higher cost is mitigated by the accompanying benefits. Contractors are short-term employees, an expensive resource for dealing with peak demand that can be turned off quickly when not required. Additionally, contractors are often the only way to supply rare skills that cannot be found within the organization itself, and this combination of scarcity and convenience warrants a premium.
In the IT field in particular, contracting is a common practice. Implementation projects regularly need bolstering in the short term with extra staff, and often those staff members need some unique skills—perhaps knowledge of the latest technology or a particular project methodology. In the ’90s, contracting in staff became a way of life that went unquestioned in many organizations, especially the larger ones. Economic reality since 2000, however, has led to challenges to the traditional supporting claims for using contractors. Shareholders and CFOs are particularly unhappy that many whose contracts were originally measured in weeks have now been with their employer for years, often earning a multiple of the salary of full-time employees who sit in neighboring desks and whose jobs are largely the same. They are demanding that contractor costs be cut.
The Alternative: Finding Skills In-House
Driven by this need to cut overhead, organizations are now looking for alternatives to contracting and finding one part of the solution is effective skills management. The skills piece is crucial because it isn’t just that contractors have often extended their contracts and overstayed their welcome. In many cases, the skills they are supplying are not even particularly rare—it’s just that there’s no way to find who else has them within the organization. And yet, if the hiring manager has not first looked internally for a candidate, on what possible basis is he contracting? A different solution to hiring may be possible, such as bringing up internal talent to take the job or cross-training existing, underutilized talent. It’s almost as if using contractors has become such a habit that people simply aren’t considering the alternative of using their own staff first.
“Finding a particular skill set can be like looking for a needle in a haystack,” said Terry Watts, COO for e-skills UK, the body charged with ensuring the development of IT skills in Britain. “But only when you have no mechanism for doing the looking. A methodical approach using suitable tools and a skills framework or ‘map’ makes life a lot easier.”
Some firms already doing this are large, such as UK insurer Norwich Union. Others are much smaller. IT service management software company Touchpaper takes managing the skills of its 200 people very seriously, ensuring that from the day they join the company they are engaged in a process of regularly evaluating skills with line managers, building personal development plans and tracking all this in a database, giving managers a clear view of the existing skills the company has to hand. “The first thing we noticed was how easy it became to locate our experts,” said Gina Davies, training manager, noting that since implementing skills management they have been able to resource their projects much more efficiently.
These organizations have succeeded in implementing skills management by making it a core business process, driven by HR or learning and development, but also used operationally by managers on a daily basis. It needn’t be complicated–in fact it shouldn’t be–and it needn’t be software-driven, although it usually is. At the heart of the process are the answers to two questions: What skills do the positions in your company require, and what skills do your people (full-timers and contractors) have?
There’s a lot that can be done with these two data sets. Most organizations, however, are very far from having even this basic information.
“When working in the private sector, I was as guilty of this as anyone else,” said Watts. “I had one employee called Tim who had great all-round technical and personal skills. Whenever I could, I used him on a project. Whenever I couldn’t, I would ask HR to ‘get me another Tim’ because that was the only way I could describe the skills I wanted. This was a disservice to Tim–who didn’t get developed further–and to others who might have been able to develop into Tim’s role, because they were never identified. Never being able to specifically define Tim’s skills made recruitment time-consuming and expensive. It wasn’t a very successful way of recruiting full-time or contracted staff. Nonetheless, it is still the basis on which a lot of contracting decisions are made.”
So how do you avoid trying to contract in ‘another Tim’ and instead, collect the two vital data sets so that you can find the right staff internally?
Seven Steps to Skills Management
There are seven steps to effective skills management. These can be grouped into three stages:
- Establishing the infrastructure.
- Data gathering.
- Using skills data to reduce contractor spending.
The first two stages respectively provide the answers to the two key questions: What skills does your company require, and what skills do your people have? Only after these two questions have been answered is it possible to run the analysis in the third stage, which enables the reduction of contractor spending.
Establishing the Infrastructure
There are three steps in this stage:
- Establish a skills framework or dictionary.
- Associate that framework with jobs and roles.
- Map the organizational structure to the jobs.
The first step involves finding the right skills framework for the jobs concerned. For IT, companies tend to consider NWCET’s Skill Standards, the Computing Technology Industry Association’s (CompTIA’s) TechCareer Compass or SFIA, the Skills Framework for the Information Age. These are all industry-standard lists of skills, built up over a number of years and through the collaboration of a central industry body with corporate users. While it is possible to create your own skills framework, bear in mind that this is a major task—as is maintaining it. Also consider whether you want to miss out on the benchmarking opportunities of using a national or international standard.
Once you have your skills framework, the next step is to map jobs to these skills. This is an intensive project that requires both great attention to detail and a sense of realism. There is no point assigning a very large number of skills to a job, because that could well make it unusable later, when users come to grade themselves. Suppose you assign 50 skills to a job. If it takes users a minute to grade themselves against each skill, then it will take them the best part of an hour to self-assess. That’s a lot of time—and in most companies a virtual guarantee that you’ll never collect the skills data you need. Another reason for not overloading a job specification is that a person’s job skills are the minimum he or she will assess against.
The final part of building your skills infrastructure is to map personnel and the organizational structure to jobs. Here it’s possible that individuals will face further skills requirements because they work in a particular location or in a particular team. Technical consultants working in the public sector in France may need a set of consulting skills, another set of technical skills, as well as French language skills and knowledge of the public-sector workspace. In addition, they may choose to add skills not essential to their job, but which they wish to develop.
Building this infrastructure for an entire organization can take some time. In practice it may be beneficial to build a part of it for a department or for an even smaller unit at first. This allows everyone involved in the infrastructure project to get some practical experience of the techniques and benefits of skills management. When you decide to expand skills management to other areas, not only will the practical experience prove invaluable, but the positive experience of those who are already using it operationally will also prove beneficial.
The second stage also has three steps:
- Personnel self-assess against the skills framework.
- Managers verify this self-assessment.
- Managers set development targets.
While the first stage, or establishing the infrastructure, is a one-off process, populating this infrastructure with data is a process that never stops, because for the data to be useful, it must be fresh. Staff should review their skills at least every quarter.
The three steps are self-explanatory: An employee assesses himself or herself against the framework, choosing a particular level of proficiency for each skill. His or her manager then checks that assessment and either agrees with it or returns it to the employee for some further clarification. Ideally this should be done–certainly initially–by the manager and employee sitting down to go through the assessment together. Finally, the manager sets some development objectives for the employee.
Although easily described, assessment can be uncomfortable for both parties. Many managers are happier enforcing rules than they are making judgements about people—especially in their presence. However, in the knowledge economy it is essential that managers become capable of making exactly such judgements. It gives them a clear view of the skills they have in their team, of where individuals could best benefit from development and of what skills they may need to source from outside their team.
Using Skills Data to Reduce Contractor Spending
While this last stage can be described in one step, it is really an ongoing series of activities:
- Analysis for operational benefit.
To be of most operational benefit, the rights to perform this analysis should not be confined to the HR or learning and development departments. When at least some rights are devolved to managers, they take some ownership of the issue of contractor spend.
Exactly what analysis is run will depend on the organization, but some typical examples include:
- Organizations can run a report to check whether they have existing staff who could do work currently done by contractors. On running this analysis, most organizations will find that they have at least some incorrectly employed contractors.
- Well-chosen contractors can also be highlighted. During periods of retrenchment, cutting all contractor staff is disastrous when some of them have been correctly employed to plug a short-term skills gap. Such mission-critical individuals can be identified and saved. (Key full-time employees who might also be cut to reduce overhead can also be identified and retained.)
- Most contractor hiring is done by individual managers, out of their project budgets. These managers seldom have an enterprise-wide view of skills. Putting in place the system described above would give them that view and prevent them attempting to hire “another Tim” when someone is available internally.
Is It Worth It?
These seven steps may seem like a lot of work just to reduce contractor spending. However, it could be argued that understanding our employees’ skills is something we should be doing anyway, given that they account for some 50 percent to 80 percent of most organizations’ overhead. We have asset tracking for PCs and other physical assets, and we would not accept an IT manager buying new servers for a project while he had existing ones sitting underused in the corner that could do the job equally well. Yet this is exactly the approach taken to contracting staff in many organizations, despite the fact that a person costs around 50 to 200 times as much as a computer.
Just as physical asset tracking can be used for more than simply making wise purchasing decisions, once the skills management infrastructure is set in place, other benefits and uses often become apparent. These include reducing project times by cutting the time taken to identify appropriate project team members, setting personal, team and departmental development plans and prioritizing training where it is most needed, and running it more effectively and efficiently.
With increasing numbers of organizations performing skills management against standard skills frameworks, these frameworks are becoming a de facto shared language for describing skills. This is useful for full-time employees, contractors and employers alike, enabling smarter recruiting against real skills needs, with individuals describing their skills using a standard résumé or “skills passport.” Demand for these passports has sprung up simultaneously over the past year in the United States and Europe. In Britain, e-skills UK has recently launched a technical e-skills passport, and a common European ICT skills passport is expected to be piloted next year. In the United States, we can expect IT trade body CompTIA to take a lead in the provision of a similar service.
Donald Taylor is executive director of InfoBasis, a leading provider of business solutions for skills management. He can be reached at firstname.lastname@example.org.