Effectively managing the peaks and valleys in field service demand is one of the greatest challenges facing managers and executives across a broad array of market segments says Michael Blumberg, President & CEO of Blumberg Advisory Group, Inc. Here, we publish the first part of extracts from his White Paper, "The Variable Workforce Model", on how the momentum for freelance service technicians is building and potential solutions for managing them.
The Field Service Dilemma
Typically, temporary or contingent labour was utilised to support periods of peak demand: when there was a spike in new product sales or when brought about by seasonal issues. For example, a surge in installations or refreshes resulting from new product purchases required that the service organisation employ additional field service engineers (FSEs) to complete the installations in a timely manner.
However, relying on a temporary workforce to handle emergency maintenance was historically viewed as anathema to service executives within companies that sell equipment. This was because the FSEs were typically viewed as an extension of the sales team and thus vital to keeping the equipment operating and the customer happy. The conventional wisdom was that if equipment failed to operate properly then the customer would become irate, blame the manufacturer or reseller, and stop buying their products.
FSEs were considered to uniquely possess the specialised knowledge and skills required to resolve emergency issues. These skills took years to acquire and were difficult to replicate. How could emergency service be trusted to temporary employees with limited knowledge or experience with the product? As a result, peaks in demand for emergency service were typically handled by asking FSEs to work overtime hours.
Setting the groundwork for the variable workforce
With margins declining, it was difficult for service providers to justify hiring additional personnel.
In the 1990s outsourcing of non-core activities became popular with a number of prominent original equipment manufacturers such as Cisco, NetApp, IBM, and HP who outsourced non-strategic field service functions to Third Party Maintenance companies.
The recessions of 2001 and 2008 led to layoffs and hiring freezes across a wide array of industries. Service providers could not risk having situations where field service engineers were not available to support customers’ requests. Rather than keep non-essential workers on the payroll, companies realised they could reduce operating expenses and lower overhead costs by hiring field service engineers on a per call basis; as consultants or freelancers.
The freelance model has now become main stream within the field service industry. It gives service providers the ability to manage field service delivery through a variable workforce model. Maintaining a field service workforce on a full-time basis represents a short-term, fixed cost for service providers. With field service experiencing its own peaks and valleys in demand, a service provider can now convert a short-term fixed cost into a variable expense.
Options for building a variable workforce
[quote float="right"]Field service companies have a number of options available to them for obtaining variable field service labour.
- Implement Master Service Agreement (MSA) with one or more companies. This usually requires the OEM hand-off all on-site service requests to the Field Service Organisation who is responsible for managing their own workforce. While this is one of the simplest ways to obtain access to a contingent labour force, it is often the most expensive; particularly if the FSO is using its own workforce to perform the on-site request. This is because the FSO’s price per service call usually takes into account direct labour costs, plus parts, overhead, risk and profit.
Furthermore, the FSO may not be able to provide their client with full visibility, accountability and control into the service delivery process. Basically, the client is alerted to when a call is dispatched and when it is completed, not to what occurs in between.
- Manage subcontractors on their own. Another option is for a company to build its own variable workforce through a “Direct-To-Tech” approach. This requires that a company hire independent contractors either directly or through a staffing company, or they can reclassify existing full time FSEs as independents. Reclassification could create problems from a legal and financial perspective.[quote float="left"]The Direct-To-Tech model can be very successful but only if the nature of the work is truly independent contracting, not a second class worker.
Companies who don’t approach this challenge strategically often end up with ad hoc systems and processes that are cumbersome and unscalable. All too often, companies end up blaming the subcontracted or freelance workforce when the real root cause of the issue is a lack of robust and scalable systems that lead to mismanagement.
- Adopt a “Sharing Economy” model. Companies who are willing and able to manage teams of individual workers can turn to a sharing economy model. In this scenario, a company would use an Internet platform, provided by a 3rd party technology vendor, to recruit, on-board, train, dispatch, manage, and pay individual contractors. There are substantial cost savings to a company who is willing to pursue this course of action. Improvements in service quality and productivity are also possible .Freelance contractors are typically more engaged and motivated since their income is directly proportional to the quality of work performed and number of assignments they accept. More importantly, it avoids the risk of misclassifying workers. Freelancers who make themselves available through this type of labour model have made the decision to become a small business. In their work as independent contractors they have the ability to decide how many companies they contract with and which types of jobs they select, how and when they go about performing their work and how to best use their own tools and equipment.
All things being equal, we believe the sharing economy model offers the optimal solution for obtaining access to a variable workforce. This is provided the company using this model is prepared to engage in the necessary leg work required to manage teams of independent contractors through a Freelance Management System (FMS) platform.
Watch out for Part 2 of this White Paper. Download the version here