Classifying Labor – Consultancy or Staff Augmentation

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  • #292363

    This category manager from a buy-side company is responsible for services spend, specifically business consulting spend. 

    Within their sourcing organization and their lines of business, there is disagreement on when an external resource need is consulting or staff augmentation. 

    1. How does your organization differentiate between staff augmentation and consulting services? When is it appropriate to use a Business consultancy firm vs Augment Staff?  Is it determined by activity type, duration, deliverables or something else? Are their guidelines or selection matrixes to guide stakeholders on the appropriateness of one vs the other?

    2. Furthermore, how do you benchmark rates for consultants between multiple vendors within the same category of spend? How do you ensure that, for example a Regulatory Specialist from firm A, has essentially the same skills, qualification and pay rate as a Regulatory Specialist from firm B and C? 

    3. How is staff augmentation spend categorized? Does it all fall under an HR/Human Capital category or is it aligned to the respective category of expertise (e.g. IT for development work).  

    If you prefer a conversation on the topic, please reply to this email and SIG will arrange.

     

    #294447

    1. How does your organization differentiate between staff augmentation and consulting services? When is it appropriate to use a Business consultancy firm vs Augment Staff? Is it determined by activity type, duration, deliverables or something else? Are their guidelines or selection matrices to guide stakeholders on the appropriateness of one vs the other? My company differentiates staff augmentation services vs. consulting services by looking at what the job is for. If we have internal employees performing the same job functions, or have the capability/skills to perform the same job functions, we usually classify it as staff augmentation. If the work is more project oriented with specific deliverables, or if we do not have the capability/skills to perform the functions in house, then we usually classify it as consulting services. There are always times when this becomes very blurry and is not in black and white. In those cases we look at the project or work that is needed to be completed. If the work is on-going without a definitive deadline, we go with staff augmentation. If the work is tied to a specific project with deliverable dates or milestones, we go with consulting services. My company also has rules in place that govern how long we can use a person for staff augmentation. We cap their hours at 1,500 per year, starting on the first day they are brought on and not tied to a calendar year. For retirees that come back to work for us, we require at least a six month period between retirement and when they are brought back. We also cap their hours at 680 per year (due to retirement issues).

    2. Furthermore, how do you benchmark rates for consultants between multiple vendors within the same category of spend? How do you ensure that, for example a Regulatory Specialist from firm A, has essentially the same skills, qualification and pay rate as a Regulatory Specialist from firm B and C? We benchmark rates through RFPs and what the subject matter experts would expect to see in pricing. When comparing rates, we provide the vendors with a position title and a job description of what my company classifies for that position. This helps alleviate the issue of having the same title but job duties are completely different. 

    3. How is staff augmentation spend categorized? Does it all fall under an HR/Human Capital category or is it aligned to the respective category of expertise (e.g. IT for development work). My company classifies this spend as O&M and is tied to each unit/department that requests the services. The accounting is broken out for each group.

     

    #294448

    1. How does your organization differentiate between staff augmentation and consulting services? When is it appropriate to use a Business consultancy firm vs Augment Staff? Is it determined by activity type, duration, deliverables or something else? Are their guidelines or selection matrices to guide stakeholders on the appropriateness of one vs the other?

    [Response: staff augmentation is used when the organization requires specific skills and intends to exercise complete day-to-day direction over the methods (the “how”) and activities (the “what”) of the contractor and retains all accountability for the outcomes, quality, and risk associated therewith. More often than not, the only contractual deliverables in a staff augmentation engagement are approved timesheets. Consultants (as opposed to contractors) tend to operate with more autonomy and are expected to provide not only subject matter expertise and skills but also the methods for accomplishing the desired outcomes. T&M consultants are typically expected to produce certain contractual deliverables and assume some degree of risk in the engagement in addition to accounting for their utilization (time).]

    2. Furthermore, how do you benchmark rates for consultants between multiple vendors within the same category of spend? How do you ensure that, for example a Regulatory Specialist from firm A, has essentially the same skills, qualification and pay rate as a Regulatory Specialist from firm B and C?

    [Response: The degree to which an accurate benchmark can be performed is based on: normalization of the role name/job title; the definition and clarity of the skills, education, and certification requirements; the number of years of experience required/expected; and the region from which the consultants reside versus where the work is to be performed.]

    3. How is staff augmentation spend categorized? Does it all fall under an HR/Human Capital category or is it aligned to the respective category of expertise (e.g. IT for development work).

    [Response: a classical total business management/charge-back question! The answer: it depends on how the organization chooses to track the use of staff augmentation and T&M consulting. In my opinion, categorizing the spend according to the intended business outcomes is most preferable.] 

     

    James L. Lee

    Vice President, MGS

    AVASANT | 1960 East Grand Avenue, Suite 1050 | El Segundo, California 90245

    Mobile: 864 386 0511 | eFax: 810 821 4217 | [email protected]

     

     

    #294449

    Neo Group works with Buy-Side clients only on cost effective sourcing solutions.

     

    Employing various sourcing levers including Analytics, Automation, and Global Talent we help client-partners build capability and expedite savings.

     

    We welcome the opportunity to speak with the SIG member and offer our guidance.

     

    Regards,

     

    John

     

    John Bree  |  SVP & Partner  |  Neo Group

    [email protected]  |  M: 732.306.8022

     

    #294450

    Staff Aug is more appropriate for short term regular engagements vs consulting which addresses both short and long term projects requiring niche skills for the deliverables regardless of category.

    It is a combination of activity and deliverables that decides the approach.

    Primarily Combination of 2  – Market Intelligence report vs the rate card. Needed be we can utilize Glassdoor , pay scale etc. for evaluation of base pay across different levels and experiences.

    It is categorized under respective categories e.g. IT Consulting ,  IT consulting – Temp labor , HR Consulting , HR Consulting – Independent Contractor etc.

    #294451

    Mary,

    Here are some guidelines that KOCG uses to define labor categories.  In addition, we define services by categories and engagement types (e.g. SOW types).  

    http://www.sig.org/general-labor-classification

    http://www.sig.org/professional-services-engagement-type-project-services

    Would love to have a more in-depth conversation with the client on these definitions as well as helping with their categorization and analysis.

     

    Thanks! 

     

    Barbara Lauer

    Principal, Talent Advisory Services, Global

    [email protected] I Mobile: 920.224.3974

     

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