Optimizing Operations Through Contractor Management

Significance

Numerous companies rely on contractors and freelancers today. More than 40% of all companies hired third-party service providers to close the skills gap. However, there are risks when working with individuals or groups that are not fundamentally part of an organization. These usually result from differences in perspectives or approaches in executing tasks, however seemingly inconsequential those may be.

Effective contractor management is vital in unifying behaviors, ideas, and strategies among everyone involved in the project, from top management to subcontractors. It also brings about the following:

• Ensured Quality – By establishing well-defined expectations, third-party vendors and service providers understand what they need to deliver. Utilizing technology such as contractor management platforms also helps companies evaluate performance and collaborate with their partners, ensuring quality that meets or exceeds industry standards.
• Mitigation of Risks – Constant monitoring is the most effective way to handle financial, legal, operational, and reputational risks. It allows businesses to identify potential issues in real-time and act promptly to prevent escalation.
• Adherence to Regulations – Failure to comply with mandates leads to serious consequences like fines, penalties, recalls, shutdowns, and criminal charges. By painstakingly vetting potential contractors, constantly communicating with them, and tracking their activities, organizations ensure responsibility and reliability from their partners.

Core Competencies

Building rapport and fostering collaboration with contractors ensure operational success. To realize these goals, human resources (HR) teams, procurement managers, or relevant personnel handling outsourced work should have the right skills to facilitate the intricacies of the affiliation.

Some of these key competencies include the following:

Communication Skills

Establishing a strong relationship with contractors can be challenging, but this paves the way to the success of any endeavor. Effective communication fosters mutual trust and respect, leading to better collaboration, problem-solving, and a positive work environment.

Hence, contractors must know the following details:

• Scope of work with clear timelines and well-defined expectations
• Full description of requirements (e.g., specific materials and size of the workforce)
• Payment obligations and insurance information
• Authority to make decisions

Organizational Skills

Since the contractor management process involves developing contracts, maintaining records, setting schedules, resource utilization, and planning workflows, a high level of orderliness is crucial to ascertain efficiency.

Technology can play a significant role in assisting managers with various administrative functions. Comprehensive contractor management software solutions have features that digitize documents, automate workflows, facilitate extensive collaboration, and provide 360-degree visibility into the operations.

Risk Management

All kinds of contractor risks could lead to interrupted or delayed work. The ability to minimize and mitigate these risks is a must-have. Proactive managers will regularly review and update their strategies, prioritize based on evaluations done, and develop contingency plans for every scenario that could emerge.

Here are some tools that will help managers with this undertaking:

• Root Cause Analysis (RCA) digs deep into and solves the origin of the problem, which is a preferred strategy over just treating the symptoms as a band-aid fix.
• The risk register identifies all the potential dangers, evaluates them, and prioritizes them accordingly so the company can better allocate resources.
• The probability and impact matrix is another tool that aids in prioritization.

Performance and Progress Monitoring

As aforementioned, things could still go awry despite careful planning. This is why contractor managers should keep tabs on the project’s progress and the performance of the outsourced employees. Here are some strategies that could help optimize quality assurance (QA) throughout the undertaking:

• Utilize Key Performance Indicators (KPIs) for measured evaluations.
• Leverage technology with monitoring tools and robust analytics to streamline the process.
• Facilitate prompt report generation, particularly after observing early warning signs or the occurrence of incidents. Digital templates sent via mobile devices are helpful for this.
• Remind third-party service and product providers about their contracts.
• Conduct post-project evaluation and utilize various methods, such as feedback gathering, one-on-one interviews, and group discussions.

Compliance Assurance

Adhering to internal policies and mandated government regulations is non-negotiable. While contractors are also under the purview of regulatory agencies and industry leaders, the company hiring them is also responsible for keeping them in check.

Aside from clearly communicating contractual obligations and religiously monitoring performance, organizations can support their contractors when they need more skills or knowledge on legal requirements. For this, providing induction training and upskilling is one of the most effective ways to accomplish this.