3M Looks to a VMS to Transform Its Temporary Workforce Program

The company is best known for its inventive products. Post-it and Scotch brands are just a couple of its prominent trademarks. However, 3M, the $24 billion St. Paul, Minnesota-based technology corporation, is involved in health care, display and graphics, and the industrial and transportation sectors.

3M relies on it 34,000 traditional employees and several thousands of temps to keep it ahead of its competition. But 3M’s workforce planning managers needed more detailed information on its contingent workforce. Technology provided the solution.

As a result, it is important that the company knows its contingent workers.

“We wanted greater visibility into our non-3M workforce,” says Tara Lemke Ebenhoch, the company’s workforce planning manager.

Besides, at different points in time senior executives wanted more details about the temp population than Ebenhoch and her group were able to provide.

The problem
The workforce planning squad, a part of 3M’s human resources group, took charge.

Its first step was to put together an HR-led team representing departments such as sourcing, finance and IT. This team supports the contingent workforce program, but its members do not report to workforce planning. They take questions from various quarters and provide answers.

The team began by interviewing 3M’s staff to identify their issues with contingent workers.

The information technology, manufacturing, engineering and marketing groups were surveyed using a Six Sigma methodology called Voice of Customer. In the process, the team learned that the departments being interviewed could not describe their temporary workers or what they were working on.

“Hiring managers also did not know who the qualified suppliers for various labor segments were,” Ebenhoch says.

To top it all off, there was no formal contingent spending approval process, which meant there was no consistency across groups. The company was using hundreds of staffing suppliers, many of which offered the same services.

As usually happens in decentralized operations, business unit managers were making their own hiring decisions based on limited information and focused on their own department’s immediate needs. Bill rates varied for the same skill sets.

The workforce planning team then researched how other companies, such as Johnson & Johnson and Medtronic, handled their contingent workforces. They also looked at Dun & Bradstreet for benchmarking intelligence.

The process helped them collect data on industry best practices and norms.

Finally, in 2007, the workforce planning team concluded that a vendor management system, or VMS, was what it needed to manage its contingent workforce, spending upwards of $200 million.

State of affairs
Currently in the United States, 3M has a preferred vendor on site for its manufacturing, administrative and clerical skills sets.

However, managers who require workers with different skill sets contact either the human resource management or sourcing team to identify a supplier (in 3M’s preferred relationship network) that can provide the appropriate temp.

At that point the manager is given the supplier’s contact information and initiates a relationship.

If there is no appropriate supplier, then the sourcing unit works to identify several of them, negotiate rates and draft contracts. But ultimately, it is the hiring manager who selects the supplier. HR only gets involved when there is a service issue with the supplier or a contingent worker.

As a result, the product company is besieged by thousands of suppliers. The expectation is that once the VMS is fully implemented (in early 2009) and a spotlight is on bill rates, suppliers will be trimmed, leaving the company with upwards of 300 vendors.

The solution
Traditionally, tools like a VMS enable corporations to save 5 to 20 percent on contingent acquisition and better manage their varied types of workers and locations.

In addition, such a system has all the benefits of a paperless process. Everything is automated, enabling managers and executives to quickly know their contingent workforce.

A business case was presented to executives, including the chief information officer, CFO and the HR vice president.

The team demonstrated how the VMS would help the consumer products giant stay compliant. It established that implementing a VMS would provide visibility into the workforce. Senior executives were taken in by the idea that all workers could be tracked by the system.

Surprisingly, cost savings was the lowest concern on 3M’s list.

In fact, internal stakeholders are skeptical about whether the VMS will yield any savings, but the workforce planning team is confident it will.

The team has yet to quantify the savings potential through its VMS of choice, IQNavigator, but reports that it should be 6 to 12 percent, depending on the skill set. Regardless of savings, the 3M management team bought into the idea of a VMS right away.

Course of action
The company was uncertain whether it wanted just a technology source or a model that decoupled the VMS from a managed service provider (MSP). One school of thought was to go with both an MSP and a VMS because of the momentum built around the business case coupled with executive buy-in and support from various in-house units.

But in June 2008, 3M decided to implement IQNavigator and manage the contingent workforce program in-house.

“We chose them because they offer a technology package that caters to a very diverse spend and varied service categories, which are what 3M has,” Ebenhoch says.

Another benefit was IQN’s large global footprint. 3M hopes that down the road all of its contingent workers worldwide will be administered by one tool.

The technology giant regards its contingents as a feeder pool for their employee population. 3M’s contingent worker objective is to get quality temporary workers at the right price.

Currently the conglomerate converts around 10 percent of its temp workforce to traditional employee status. But there are also those temps that fill specialized, strategic needs on a project basis and still others that supplement 3M’s workforce when required.

The company’s manufacturing units use the most temporary workers in the U.S., followed by IT, but 3M also has a large international presence. Internationally, units in China, India, Brazil and Italy are the top users of contingent workers.

“We hope to have a first deployment globally by the end of 2009,” Ebenhoch says. “We are looking at a variety of countries where we can take the tool.”

There will be a central contingent workforce office in the U.S. headed by the workforce planning team. But each country’s local resources and experts would help run the program, but not necessarily report back to the central office.

“3M is extremely decentralized in terms of its management philosophy,” Ebenhoch says. “So we would have the same platform that enables the analysis and compliance, with each unit abroad administering its program and maintaining a link with the central office.”

The tool
“We are going to give them the ability to view the suppliers they are using and the net average unit cost,” says Brian Owens, IQN’s senior vice president of industry solutions. IQN’s benchmarking and analytics will reveal the variance in rate structure for similar types of resources throughout the enterprise.

To keep suppliers and internal users abreast of impending changes, IQN has a formal change management process in place.

First, all the suppliers are notified of what’s going on with the program and then trained on the system. The same procedure is repeated with 3M’s internal stakeholders. Hiring managers can participate in training sessions with an instructor or do Web sessions.

The opportunity to take refresher courses is also available.

The first phase of implementation is occurring in the HR and IT departments.

As part of the implementation process, each business unit will be trained on using the VMS. Managers also will be educated on the suppliers that are qualified to provide required workers. In addition, they will learn about new controls in place to add or remove suppliers.

The workforce planning team is meeting managers to demonstrate the tool and talk through the process. In fact, hiring managers are even asked to participate in testing of the VMS to ensure direct involvement.

Further, the workforce planning team, which owns the program, is preparing companywide e-mails talking about VMS implementation timelines and what to get ready for. These e-mails are then sent by the executive sponsors of the contingent workforce program.

“It looks like the e-mail is coming from our two executive sponsors, and this obviously gets the right kind of visibility,” Ebenhoch says.

Once the program is under way, 3M’s objective is to evaluate its supplier base, and then use the VMS’ reporting ability to analyze its rate structure across all the skill sets it uses. Comparing market price intelligence is next.

“Ultimately it all comes down to whether 3M is competitive,” Owens says.

Strategic outlook
3M hopes the VMS will enable it to use its contingent labor force more deliberately.

Given its size and diversity of products, the company needs a wide range of temps. The contingent workforce program needs to be organized to accommodate the differences yet have a single unified process in view.

IQN is providing a single platform for all of the company’s non-employees. These include temporary workers, outsourced personnel or those who are part of a service contract, supplier representatives and even visitors who have unescorted badge access. The tool will track these groups.

Managers supervising temps not only track which contingent worker is on what task, but which suppliers are performing.

The plan is that IQN will complete its implementation in the first quarter of 2009. 3M anticipates the VMS will level the playing field for its suppliers in terms of price, expectations and process flow.

This in turn will enable suppliers to provide the right contingents at the right price when the company needs them.