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Direct sourcing is gaining popularity with companies looking for ways to reduce the cost and time associated with engaging quality contract talent, shorten the time to fill jobs, lower bill rates and improve productivity by working with consultants who are pre-qualified and available.

At its most basic level, direct sourcing is about bypassing third-party recruiting firms to directly source and engage contingent workforce talent. For some organizations, the solution is a software tool that hiring managers use to access a pool of contractors. For others, the solution combines the software tool with additional services to populate, curate and maintain that pool of contract talent for the managers.

Companies are attracted to direct-sourcing solutions for two reasons. First, it’s faster: Sourcing from a pool of already-known and interested contractors enables companies to bypass third-party recruiters and shorten the hiring cycle. Second, it’s more cost effective: Bypassing staffing suppliers means bypassing staffing supplier markups.

However, direct sourcing will not replace recruiters; it automates the transactional aspects of recruiting, creating a shortlist of contractors so recruiters can focus on the relationship-based aspects of their profession. Automated workflows for communication improve time and consistency. And we should also note that with direct sourcing, contractor availability and interest are established before personal contact is made, which streamlines the process even further.

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The role of the MSP/VMS changes very little with a direct-sourcing specialist strategy added to the mix — just a slight difference in how requirements are distributed. For example, for open positions that can’t be sourced directly, the MSP still does a quality check of the hiring manager’s requirements, which are routed for approval before being sent out to staffing suppliers. For open positions that can be sourced directly, the requirement can be routed directly to contractors by integrating the VMS and online direct-sourcing technologies. Contractors can then be submitted to the VMS as candidates just as in the traditional process. The biggest difference? Directly sourced candidates have the same pay rate as supplier-sourced candidates but a 10% to 15% lower bill rate.

Setting up a direct-sourcing solution is not much different from adding a new staffing supplier to the company’s program. Leading direct-sourcing solutions technology providers can integrate their software with that of all leading VMS providers with no additional setup or cost. Once installed, the effort shifts to building and maintaining the company’s community of talent.

The direct-sourcing service provider creates, grows and manages the talent community on the company’s behalf. Activities include keeping contractor profiles up to date, validating contractor skill sets, monitoring community member activity and reaching out to contractors regularly to maintain their interest. The goal is to maintain the most relevant and engaged community possible. Collaboration between the service provider and the company’s talent acquisition team is key — they work together to customize and grow the community to meet the company’s needs. For example, some companies fill their communities with former and known contractors, and some look at engaging viable candidates from their applicant tracking systems. There is also a communication component — how best to publicize and encourage participation from contractors. The direct-sourcing service supplier walks companies through these and other decisions to determine what’s best for their organization.

Cost savings begin with the first placement that was sourced directly instead of supplier-provided. The typical staffing supplier markup ranges from 45% to 50%, but direct sourcing reduces the cost associated with traditional recruitment. The direct-sourcing markup is typically 10% to 15% lower than staffing supplier markup, which covers the cost of both the technology and service providers. Companies save approximately $14,000 per contractor per year even while paying the contractor more than in a traditional model. Higher pay helps companies attract and retain higher-quality talent.

When evaluating whether direct sourcing is right for your organization, consider the volume of contractors engaged, maturity of contract resource strategy, strength of your company’s brand to attract talent directly from the marketplace, and types of roles typically engaged on a contract basis. If you use staffing suppliers, there’s a good chance direct sourcing will bring value to your organization.

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