Dennis Lock and Lindsay Scott
Practically all managers, whether they work in projects or not, are familiar with the practice of hiring additional workers from external organisations. Temporary arrangements usually work well to cover secretarial and clerical work overloads, for example when permanent staff are absent owing to vacations, special leave or sickness. The durations of such engagements can range from a few days to many months. If a temporary worker fails to please, or alternatively does not feel comfortable in the job, the relevant agency should be able to make a change at short notice, certainly within one week. Some project vacancies can also be filled by temporary staff relatively easily and successfully, for example in well-defined project management roles. These jobs require special skills, but those skills are usually transferable from one company to another. However, some project work, especially concerning innovative design, managing a business transformation programme or managing a portfolio office, differs considerably from one company to another and that can raise doubts and difficulties when that creative work has to be entrusted to people who are not permanent employees of the project company.
Fluctuating Staff Levels for Project-based Companies
Most companies experience fluctuations in their staff level requirements. In some service industries these can be seasonal and predictable. Companies that carry out projects are more likely than other companies to experience fluctuating workloads that are not seasonable and easily predictable, but which vary as their various projects progress through their life cycles.
Resource scheduling can do much to smooth out the day-to-day peaks and troughs and maintain constant requirements but some company departments will find that their requirements for highly skilled staff can vary considerably and unavoidably over longer periods. This is more likely to be a problem in companies that handle a few concurrent or consecutive large projects than in a company that customarily has a larger number of small projects in progress. In the latter case it is more probable that the peaks and troughs in workloads for individual projects will balance out when the total programme of projects is considered. Figure 48.1 illustrates this, where the graph in each case might be for one particular skill, or for the total project staff.
Figure 48.1 Staffing Requirements for Two Different Project Companies
Note: The company in the upper diagram regularly carries out a number of fairly small projects. The company in the lower diagram carries out a smaller number of projects but these are larger and longer-term ventures.
Companies can overcome the problem of fluctuating workloads to a considerable extent by maintaining a core of permanent staff, and supplementing these people from time to time by hiring additional staff on a temporary basis (usually from agencies) either to work in-house or from home.
The advantages of using agency staff are clear. The project company’s temporary employment contracts are made with the agencies, and the temporary workers are employed by those agencies. There are other types of temporary workers (contractors, for example) where the project company’s temporary employment contracts are still made with the agencies but a contract is then made between the agency and the contractor’s legal entity (the limited liability company). So the project company can, within reason, expand or contract its staff numbers without penalty. The agency workers expect to move from one company to another because that is the way of life they have chosen. They are thus less likely to be demotivated when the project company has to release them.
Note, the contractual arrangements made for temporary workers largely depend on the country or local laws in place. Project managers are advised to use their human resources department to ensure that local employment laws and legislation are adhered to.
The project company will probably have concerns about maintaining the quality and innovation of its technical specifications and designs. Temporary workers might not identify with the established culture of the project company. There could also be problems with intellectual property or business confidentiality. Some project companies spend considerable time and money on induction courses for their new recruits, and temporary workers cannot usually be put through that process.
We now present four case examples. The first two cases illustrate how two different companies used temporary agency staff for project work. Agencies in these two cases are defined as supplying specialist staff for industries such as manufacturing and engineering, where the staff might be supplied to work either on the project company’s site or from the agencies’ own offices.
Cases 3 and 4 show how a project company can use agencies and external consultancies to provide effective ‘body shopping’ solutions to periods of peak demand in projects and also using more experienced agency workers as interim managers.
The company in this case had a permanent staff of about 250 people, mostly very experienced and well-qualified engineers and designers. At least as many people were employed on short-term contracts through external agencies.
Temporary staff worked alongside their permanent colleagues in the same offices. There was no shortage of accommodation at these staff levels. For work purposes, temporary staff were treated on a day-to-day basis just as if they were permanent staff. To the casual observer, permanent and temporary staff were indistinguishable. Cooperation between permanent and agency staff was very good. All enjoyed company amenities such as the staff restaurant and social events. But the temporary staff members were not paid for absences, and were of course not able to join the company’s retirement pension scheme.
Because the temporary staff worked in the company’s own offices, their work was supervised directly by the company’s functional managers. To clients, the work delivered on their projects was just as good as if it had been performed by the company’s permanent staff.
If the workload increased significantly for a new long-term project that could not be accommodated within the existing premises, additional premises were hired for the duration of the project. A mix of agency and permanent staff were moved into the temporary accommodation. No work was carried out externally in the offices of agencies. So the project company retained direct supervision of all its design work and the quality of the work remained high.
Projects in this company tended to have long life cycles. The project workload was supplemented by service contracts with one or two major clients for the resolution of technical problems. These service contracts required the same staff who worked on projects, so they provided a stabilising base that helped to smooth the workload. So the workload did not fluctuate greatly in the short term and resembled the pattern shown in the upper half of Figure 48.1. However, work in the longer term was subject very much to world commodity prices, and when those prices dropped there was reduced demand for new projects. In the worst case existing projects could be interrupted or even cancelled.
Project work eventually fell away owing to political decisions by a foreign government and through a fall in world commodity prices. A steady decline in staff requirements was inevitable. But the company was able to retain its loyal permanent staff members for a relatively long time and reduce its liability for making severance payments considerably because so many of its staff were on temporary agency contracts.
This case is outlined here because it is a good example of how to use external agency staff to best advantage when the project company’s workload fluctuates considerably.
A company in the business of designing and making very heavy special-purpose machines had a project portfolio that produced fluctuating workloads, very similar to the manner shown in the bottom half of Figure 48.1. This company had almost no spare accommodation within its own premises to accommodate agency staff.
The normal professional permanent staff complement in the engineering design department was approximately 50, in a company with a total workforce of about 600. When project design work reached its highest peaks, the engineering design staff complement could rise as high as 150. Thus this company could at some times require as many as 100 temporary staff, mostly working externally in the agencies’ own offices. These were all highly skilled engineers and designers. More than one agency was involved. Thus problems of quality assurance, progressing and budgetary control arose.
All work was planned using critical path networks, and these were processed together using full multiproject resource scheduling. All priorities were driven by the required project delivery dates, so that each task had scheduled start and finish dates calculated by the computer to achieve those dates. The schedules were run using the time-limited rule, which meant that additional agency resources were hired when that was necessary to keep the projects on schedule. Thus all resource overloads were met using agency staff (mostly working in external offices).
The numbers of staff within each skill required to offset these overloads could be found from the computer reports for up to a year in advance. So there was plenty of time in which to find suitable agencies and to discuss requirements, cost rates and working arrangements with them. All agencies were visited to inspect their premises and working conditions before entering into contracts.
The project company’s small project management office (PMO) included a liaison engineer whose job was to visit the external agencies at frequent intervals, to deliver new work, to check on the work in progress and to answer any technical questions on the spot.
This case highlights the advantages of recruiting multiple temporary project workers within an organisation which delivers programmes and projects on behalf of its clients, as a professional consultancy. This organisation often had demanding and fluctuating resource requirements throughout the entire portfolio of work. There was a need to balance this organisation’s own workforce to ensure that their time was not spent ‘on the bench’. This company used ‘on the bench’ to describe time when project workers were not assigned to any project, so that their time was not being utilised and could not be billed to a client (so that it became an overhead cost). In other companies this would be called ‘idle time’ or ‘waiting time’. However, there had to be enough available resource for periods of peak demand.
A resource management centre was established, which monitored the availability of project workers throughout the organisation and also provided a current list of all the available skills and specialisms that these workers possessed. The centre was managed by two permanent members of staff. When a new project was being initiated, or when existing projects were experiencing resource difficulties, this resource centre was the project manager’s first port of call.
Where resources were unavailable, the resource management centre called on its list of preferred recruitment agency suppliers and submitted job specifications for the resources needed. Roles frequently needed in the organisation included programme managers, project managers, project support people, business analysts and technical consultants. The recruitment agencies would then submit a shortlist of potential candidates and the organisation would interview and make selected hires for deployment on the relevant project. In periods of peak demand, the temporary worker requirement was as a much as a third of the organisation’s total size.
When the number of temporary workers required increased, the organisation looked for other avenues to be able to sustain the levels of resources required. A partnership was made with an external consultancy organisation that specialised in a very similar field to the project company. The external consultancy was able to guarantee to supply experienced and skilled resources with immediate availability as and when required. The body shopping of resources, where the external consultancy contracted out their skilled workers on a short-term basis to the project company, was deemed to be a much more cost-effective solution than agreeing individual terms with multiple recruitment agencies.
This case highlights the solutions available when a company needs to take on a highly experienced project worker for a high profile or specialised role where none already exists in the organisation.
The company, a marketing and sales organisation, was looking to undertake a significant change programme which would dramatically change its product lines, channels to market and internal processes and procedures. The vacant position required someone who would form part of the organisation’s board and be responsible for the entire change initiative across all areas of the company. Such a person did not exist in the company and it was felt that approaching the usual recruitment agencies to hire this individual would be too high risk – this change programme would determine the future for this organisation and failure was not an option.
The organisation decided to appoint an interim manager for the position. Interim managers are considered to be senior executives who have a good track record in specific businesses or areas like project management and change management. Interim managers are used by organisations to meet specific objectives within set time frames. Often interim managers are considered to be overqualified and experienced for the posts they undertake but in this case the positive impact made within days of the appointment gave the board the reassurances they needed. The interim manager took the title of Programme Manager and delivered the changes through a business transformation programme incorporating all the departments of the organisation. The change was successfully delivered eight months later and the interim manager was then released from the contract.
Agency charges are either based on hourly or day rates. The rates payable are often negotiated individually with each agency and can vary considerably from one agency to another. An agency that quotes a relatively high rate need not necessarily be excluded, provided that its other requirements (especially its reputation for quality) are satisfactory.
Many organisations opt for a preferred supplier list (PSL), which will feature a number of agencies all working at the same rate. Alternatively they might appoint just one recruitment agency to provide a ‘recruitment process outsourcing’ (RPO) service which, in effect, means that a single recruitment agency will provide the recruitment assistance needed for the whole organisation at very competitive rates.
The relationship between the agency and the organisation is actively managed through formal Service Level Agreements (SLAs) or Key Performance Indicators (KPIs) to ensure that the quality of the recruitment processes and subsequent hires made remain at a high level. Regular reporting on KPIs can help maintain an effective working relationship. Typical KPIs include:
ratio of hires to personal resumés submitted;
ratio of interviews to hires;
time to fill vacancies.
Although the project company will have a budget for every temporary worker it needs, these budgets are often driven by market forces beyond the company’s control. Factors include the availability of certain key skill sets, competing requirements from other organisations in the same sector, and recessionary and economic effects in local markets. Whilst the agency rate will be fixed and agreed up front, the rate for each worker will be agreed on a case-by-case basis.
Consideration must also be given to the inclusion of payable expenses to the agency worker. In some incidences reasonable expenses can be expected on top of the agreed hourly or daily rate of pay. Reasonable expenses could include travel costs over and above those costs incurred travelling between home and the main office of work (travel to client sites for example); meals with the client or hotel costs incurred whilst visiting clients. Steps should be taken at the point of contract negotiation to confirm what the reasonable expenses are likely to be in the course of the worker’s role and an agreement made to suit all parties.
Accelerated Induction Processes
In some manufacturing and engineering organisations, design work subcontracted to external offices might be of a senior nature, requiring that the agencies’ senior design engineers have a good working knowledge of the project company’s standards and design practices. For example, permanent staff employed by one company would undergo an induction programme, sometimes involving a few months spent in the offices of the company’s parent company in the US. That was clearly not possible for agency staff for many reasons, not least of which would be the unproductive time and cost involved. This problem was overcome very successfully as follows.
Whenever a work package from the WBS for each project was selected for allocation to one of the external agencies, a senior engineer from the external agency would be asked to work in the project company’s offices under the direct supervision of the senior project engineers to produce the overall layout drawing for the chosen work package. This process might take two months, during which the agency engineer would acquire a good knowledge of the project company’s design practices and standards. When the layout design was completed and checked, the agency engineer returned to the external agency office and supervised a small group of more junior agency engineers for the completion of detailing, checking and preparation of bills of materials.
Thus, in other words, parcels of work from the WBS were issued to the external offices. The conceptual design and layout was carried out by senior engineers who, although employed by the external agency, had received sufficient on-the-job training in the project company’s main offices.
In other industries, the induction process can be managed more quickly and easily where the project company has a PMO or similar function. The PMO is then responsible for ensuring that all project workers within the organisation (permanent and temporary) are familiar with the company’s approach to project management and have access to the right tools and information about project processes.
Time Sheets and Invoices
The time spent by each worker on each project task is normally recorded on weekly time sheets. Each worker’s time sheet must be approved by the appointed manager before being submitted to the relevant agency to generate billing and payment.
Temporary contracts will invariably state that payment for work cannot be released by the company without a signed time sheet.
In manufacturing and engineering industries, the time sheet data from temporary workers can be just as important for historical records as the times recorded by permanent staff. All times should be recorded against job numbers derived from the relevant project WBS. The hourly times recorded not only support budgeting and invoice control, but can also be entered into the company’s project information system. These records can have many uses, whether as part of the earned value measurement system or other budgetary procedures for the current project, or to provide a valuable estimate base for future projects.
All companies working on projects will experience fluctuating workloads according to project life cycles, and those fluctuations can be managed to a large extent by employing workers through agencies and consultancies. The following pieces of advice emerge from the cases outlined above:
External agencies can provide a valuable resource when staffing or accommodation problems limit the amount of work that can be done in-house.
There are a number of options available to bring in additional temporary workers, depending on the industry sector, local conditions and international employment laws.
The project company will need to ensure that the workers from external agencies can work to the required project standards. That can be achieved by identifying senior staff within each agency to work for a short time in the project company’s offices under the supervision of the project company’s own senior staff or by providing introducing an appropriate induction process.
The hourly rates quoted between different agencies can vary considerably but this is not always reflected in the total amounts invoiced for work packages of equivalent size and complexity.
All agency staff should be asked to submit time sheet information in the same way as the project company’s permanent staff.
The project company should ideally appoint a permanent member of staff to manage the organisation’s resource requirements, including providing a main point of contact for all recruitment activity with external agencies and consultancies (a role that can be contained within a PMO).
If the agency options are managed with common sense and sensitivity, there is no reason why the quality of work produced by their workers should not be equally as good as that produced in-house.