Is Direct Sourcing the Answer in a Tight Labor Market?

This month, TalentNet partner and chief operating officer Justin Lumby joins Bruce Morton on Subject to Talent to discuss direct sourcing. TalentNet enables many of the world’s most recognizable brands to directly source and engage brand-attracted talent through its market-leading direct source platform. Together, they discuss the impact of today’s tight labor market on how organizations are strategically approaching attracting and hiring talent into their organizations as well as hypothesize about what the future of the talent industry will look like. Let’s listen!  

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Bruce Morton: Welcome to Subject to Talent, brought to you by Allegis Global Solutions. Similar to you, we're always trying to learn more. On this podcast, we speak to workforce and talent experts from around the world covering market trends, technology, and our ever-evolving dynamic industry.

Hi, I'm Bruce Morton, the host of Allegis Global Solutions' Subject to Talent Podcast. Today I'm excited that I'm being joined by Justin Lumby. Justin's a partner and chief operating officer at TalentNet. TalentNet works with many of the world's most recognizable brands to directly source contingent talent through its industry leading direct sourcing platform. So welcome, Justin, and thank you for joining us today on the podcast. 

So as our regular listeners will know, we always kick off by asking our guests the same first question. And that is how did you get into the workforce industry, and what was your journey to get you where you are today?

Justin Lumby: Yeah, thank you. So really somewhat accidental. And coincidentally, I was, at the time, going through university. I live in Toronto. I was going to the University of Toronto. One of my uncles, actually, used to own a very small recruitment company. I needed a job while I was in university. And that was really my foray and introduction into the world of all things talent. Going through university, I think like a lot of undergrads, didn't have a lot of direction in terms of what I would do afterwards. So I started actually focused on different topics just around employment. Human resources, talent strategy, talent technology.

I ended up from there going and working mainly within human resources for the first part of my career across procurements, HR technology. Eventually moved into procurement, which is how I got introduced to the world of contingent workforce. I sat at a large telco managing their contingent workforce program. And then fast forward a few years, got introduced to my two business partners in TalentNet. So back in 2013, TalentNet was formed. We initially had this sort of concept of being able to have a very simple database that would allow contingent programs to redeploy workers, just to create some efficiencies both in cost and process. And that was really where TalentNet was born. I've been with TalentNet now for the last seven years.

Bruce: Great. So now you're a chief operating officer, as well as a founding partner of TalentNet. So how do you describe the service that TalentNet now provides eight years since the inception?

Justin: Sure. So a software company that's based in North America, although we do support customers around the globe. So really the product has evolved quite a bit over the years. As I said a minute ago, it really started as this very small and simple technology portal to redeploy existing or known talent. From there, we really expanded out into more traditional technical facility around things like talent marketing, talent attraction, engagement, talent pooling.

And at this point have a multi-faceted, multichannel platform that allows both from a candidate engagement perspective to engage with the platform, to register with a corporate brand and gain direct access to contingent roles at some of the companies that we support, as well as a backend CRM and almost ATS-like application that recruiters and curators would work in that really powers their day in terms of the workflows and processes that they need. Whether it's automating some of their recruitment process through the day, managing different workflows, or things that they have to accomplish through the day, and then integrated into the talent ecosystem around us. So other VMS products and ATS products, CRM products, where we need a seamless workflow and talent data exchanging through those systems.

Bruce: Wow. So when you set the business up eight years ago, I guess, as you say it was redeployment tool. And the industry in a way and the market has obviously morphed into direct sourcing being a key element now of an organization's strategy for directing that non-employee workforce. And I think that TalentNet have not just ridden that wave, you've actually been responsible for driving that. And obviously being very prolific in some of the wins you've had over the years. So as you think about that, and here we are, I hate to use the word post-COVID, but coming back to some sorts of, from a hiring perspective, the contingent recruitment is through the roof right now. So what do you believe is causing that growth of those elements of that strategy for reaching out to candidates directly and organizations using their own brand? What do you see has been driving that growth?

Justin: Yeah, I think there's a number of factors. So I think one is the labor market itself, that we're dealing with a very tight labor market right now. That many organizations, especially those that feel that they have a leg up, whether it's in their, what we refer to as your brand equity, that they feel that they are a top performing organization within the world, within their sector, that has the ability to attract talent to their organization. Then they want to look at different and new emerging techniques to exploit some of those process. As opposed to maybe more traditional recruitment and staffing processes that have been around for some time.

One of the primary drivers when TalentNet first started, and through too many early years, was always cost savings. Not to say that's not an important factor today. Certainly in most of the organizations we're involved with cost savings is still an element. But one of the things that we're starting to really see is a desire for organizations to take more direct control over the talent strategies and some of those sub-talent strategies that they have.

So one example that I think is very prevalent today is around diversity, equity, and inclusion (DEI). So where we now have this white labeled portal that an organization has branded to their corporate culture, to their corporate brand, it also gives them an ability to directly be in control of a strategy around, let's say, D&I talent attraction. So one example is we're providing the underlying data streams and analytics to allow them to understand what the demographic makeup of their talent pool is. We can compare that against, whether it's census data, or from the American Society Survey that comes out every four years, identifying deltas within their workforce. And then from that, forming very deliberate strategy to try to improve diversity, equity, and inclusion across their organization.

That can be hard to do if you've got a network of traditional suppliers, and you don't really have any direct control over how they're going out, the messaging, and how they're directly attracting talent to your organization. So we feel that it's gone beyond cost savings now. And that's one anecdotal example and topic. But organizations are really looking to take direct control over specific areas of the talent attraction strategy.

Bruce: Yeah. That's a great point. And we certainly see that as well. As you say, to give clients more control of their brand to start with, because they're pushing that out. And obviously staffing companies play a major part in their strategy, but this is a newer channel. So how has the industry reacted from your lens, those staffing companies out there, when they see you giving the clients the ability to reach out directly? Is this a threat, or is it a compliment to what they're doing?

Justin: Yeah, I guess you could look at it as both. But I think one thing to be clear on is that certainly, from our perspective, direct sourcing is not a technology only solution. It absolutely requires a human operator that's supporting it. And we work with many staffing companies and staffing providers out there as partners who ultimately are the operators, that are operating TalentNet on behalf of their customers. And really we're just providing the underlying functionality to support that strategy. So from that perspective, certainly there shouldn't be a view of competition.

The other thing I would mention is that it's very rare that we see in an implementation of direct sourcing, that direct sourcing is going to go and solve for 100% of your talent demand needs. It can be a very high proportion. It really depends on what the goals are, and what sort of the underlying strategy and tactics are of the organization. But at the end of the day, they're using this to solve a particular problem, the same way that you would have statement of work and then have more of your traditional staff aug contingent work. So we see this more as another channel, as a channel that can be very effective for very specific strategy, and not something that is meant to in any way cannibalize the preexisting market, but more to compliment it.

Bruce: That's great. Thanks, Justin. And that's exactly why I asked that question, giving you a chance to clear that up, because I think there are a number of myths out there. But you've positioned that very, very well. Well, so thanks for that. And just coming back to that technology versus humans. So just to play that back, you're saying that you're enabling an organization, giving them the ability to use their own brand to attract talent, but also giving the candidate perhaps a different experience. Because you mentioned engaging as well as hiring. Can you just talk to that element from a candidates perspective? What's my journey like if I see an ad for XYZ brand, and I want an opportunity to go and work. That will be out on a contingent basis, which of course in today's world can put easily convert temp to perm, right? There's a lot of that happening right now. So how does the experience feel like? Do I know I'm in TalentNet platform? Can you talk our listeners through that?

Justin: You wouldn't necessarily know that you're in the TalentNet platform. You could if you looked hard, but that's because it's a white labeled platform that again is deployed specifically for that organization. What you would know as a candidate is that I am viewing and reviewing an opportunity that's in front of me. That I can see that I have a direct ability to apply to this role, to get feedback on my application for that role. So we do like to think that it removes some of the ambiguity and mystery that sometimes exists in more traditional recruitment channels, whereby a recruiter calls you for a position. You've never really seen the position other than your discussion with the recruiter. And you might not have an understanding of what's then developed with your application with that position, and really what's going on with the company ultimately that you've applied for.

So we do believe that there's more of a visceral connection to the brand, to the culture, a more direct candidate application process. But at the same time, and I want to go back again to this, the human element of it, it's somewhat ironic that we sometimes are in a position of defending sort of the role of humans in all of this. And often there's sort of this belief that this is completely just software and it's automatic. We still believe in everything that we design, engineer, and build at TalentNet that getting a job, whether that's a gig job, a contingent role, a full-time role, it's, A, a very important thing that individuals go through. It can be a very sort of intimate and obviously a very personal thing.

And so for some of those reasons, we still believe, even if it is possible to automate everything, that at the end of the day, someone who's applying for a job still wants to speak to a human, and understand what is it like to work at this culture. What is it like to go and engage at XYZ company versus their competitor? And often, again, because the direct sourcing team is dedicated to that customer, that's sort of another benefit. That that team of recruiters or curators, they're working every day with that customer. So they do become a very strong brand ambassador for the culture of that organization that they're representing. And really are able to provide that one-to-one, again, sort of white glove discussion and sort of hold the hand through the job applicant through the process. Even though they are getting this additional access through the software platform to be able to understand exactly what is the role I've applied for, what is my status of that role, and even in the future, see other roles that come up, and essentially have my own autonomy to look through available opportunities.

Bruce: Great. That makes a lot of sense. Thanks for that. And just to complete the picture, if you look across your client base, what's a typical payroll set up here? Is the curator you mentioned, is that a quasi-staffing firm that might be employing those people and pay rolling them? Or does the company, the end client have a payroll? Or do you do some of that? How does that typically look?

Justin: Yeah. So from our perspective, we deliberately try to be as flexible as possible on this. Because we work with a wide variety of organizations, and they will have different sort of designs, architectures, if you will, to sort of what their payroll process is, the backend systems, who's involved. Certainly one of the more common steps would still be that the first payee is the managed service provider (MSP), and then the MSP is distributing payment both to TalentNet, perhaps the VMS, and if there's a third-party EOR involved as well, that can take place as well. We've also seen scenarios if the curator is not the MSP, where they are the first payee. And we even have some scenarios where actually we are the first payee and then distributing funds. And so it really does depend. I would say probably still the most common though is flowing through the MSP, and then to us.

Bruce: Great. And EOR is employer of record just in case folks were wondering.

Justin: Sorry.

Bruce: No, no, not at all. We're all guilty of that one, the acronyms. So as organizations look to utilize this channel to talent, and I like the way you position that. I think, visually, if you think about you've got your traditional staff, or you've got your employees, you've got your gig workers, you've got service providers under a statement of work. And then there's this channel. As organizations think about that, what advice would you give them in terms of where to start? Are the specific types of positions, the level of positions that seem to fit in this channel better than others?

Justin: In terms of where to start, it's really going to depend on a number of factors. The size of the organization, how complex and sort of widely varied the roles are across the organization, and the geographical regions that they operate in. One of the common things that we've seen with larger organizations is to ring-fence a geography or a set of roles, or even both. A sort of a set of a family of roles within a certain geography, prove out success in those areas, and then look to expand.

With respect to roles, just in general, that should or shouldn't be eligible for direct sourcing, we've really found that the largest benefit is as you do show success in those initial roles, expanding out. And part of the reason for that is as you create a digital experience, again, one that is very direct, that's autonomous, where job-seekers can come to your platform, they can view the available roles, and then directly express interest in them. What you don't want to happen is a phenomenon where you're so successful in one area that other job seekers from other professions start coming to the platform, to the portal, looking for opportunities and can't find anything.

So we generally advise that as you are having success in those early days, that you do want to at least have a roadmap and a plan for how you're going to expand into other skillsets and other geographies. It's a great exercise to work through, again, with whoever your MSP is, your creative partner. So here with our partners, with AGS, being able to look at the underlying data, and then make informed decisions about where the best place to start is, but also to have, again, a roadmap to expand into the future.

Bruce: And from a sort of level of position, if you think about your client base, is there a sweet spot, or perhaps it's the median of typically where what level people go up to in this channel? Is it the admin, coordination, or is this high-end highly sought after IT skills? Or is it somewhere in the middle?

Justin: Yeah. For us at this point, it really runs a pretty wide sort of array and scope of industries and roles. I mean, we support customers across banking, oil and gas, technology, telecom, software, insurance, and even utility company. So I think overall the way we look at this is that the world is becoming more digitized. People want more self-serve and autonomous access to apps, and to be able to sort of control their pathway and sort of their destiny towards something. So we don't really see this as being pigeonholed into it only supports sort of these three or four skill types. But more so that there's a general transformation that just slowly continues where people want more digital access to things. And again, more autonomous access where I can control exactly what I'm looking for and what I want to apply for myself. And we believe that's one of the main drivers, from a candidate’s experience perspective in what's driving so much adoption of direct sourcing.

Bruce: And obviously, we partner with you. And very happy to be partnered with you. And I think we've got some great successes between us. And the way we think about that is, and you mentioned talent pooling earlier, I think for organizations that they have visibility of the demand coming down the pipe, it gives more opportunity to start building those talent pools ahead of time, right? Do you see some of that going on now with your clients beyond the ones we work on together?

Justin: Yeah, absolutely. I think that that's a great scenario that sort of emphasizes the intersection and the importance between software and the human operator here. So from a software perspective, you obviously need some sort of a solution that's going to allow you, once you have sort of drawn a ring-fence around sort of this is the group that we want to go after, well, you need somewhere to make sense of that. So you need somewhere to have profiles, and to store those profiles, and to be able to update those profiles, and sort of have a history and continuity there.

On the other hand, by having a dedicated, direct source curator, so if Allegis Global Solutions is sitting in that role, working directly with their client, then the advantage is by working every day with that customer to sort of, to your point Bruce, they can get in front of major initiatives and projects that are coming up. Maybe not today, that's transactional recruitment, but that's two, three, even six months into the future, and really have sort of deliberate and strategic workforce planning sessions with that end customer, and then TalentNet can provide the underlying software platform to sort of make sense out of all of your efforts.

But I think that's a great scenario and example of where really that human operator in the platform working directly with the customer have to come together to make that successful. And it's, again, not to diminish in any way the efforts of a traditional staffing supplier, but where you have a network of decentralized staffing suppliers, it can be a bit more just logistically challenging to have that sort of focused strategic sort of future workforce planning with your customer.

Bruce: Yeah, that's a great point. So, as a company, started redeployment, direct sourcing. Do you remember when the first deal was that was direct sourcing, as we think about it now? Was that like three or four years ago, or something?

Justin: Yeah. So for us it would have been 2017. I think the European market is a little bit more sort of mature and ahead of North America sort of in this respect. So certainly that wouldn't be the first direct sourcing. But from our perspective, it would be in the US. And I'd say the velocity, I guess, to sort of borrow a term from Agile, but just sort of the ramp up that we're seeing now continues to sort of accelerate. So if we look at sort of any 12 to 18-month window, and go back to typically every sort of four or 12 months, we're seeing even more acceleration just in general adoption and subscription.

Bruce: Great. And what are those, the early adopters, now that, four years, that's quite a long time in our industry, what are the main benefits those early adopters are gaining and enjoying right now?

Justin: I think one of the trends that we're seeing is, because again, as simple as we want things to be, there is some thought process and planning that has to go behind this. So it's not just you sort of turn it on and go and you're successful. So I think for early adopters that now have success doing this in the contingent space, what it's allowing them to do is have some very productive discussions. If traditionally they are, say, full-time talent acquisition has been very segmented from sort of the contingent world.

Now there's a bit of a bridge there to have very effective dialogue and discussion about where are we going, and not to use the cliche of total talent, but now the contingent program's going, okay, well, we've got this platform. We've been now building a talent pool for the last few years. Let's say we're engaging 50% of our contingent workforce through this. This has the connectivity to speak to our other systems within that talent ecosystem, be it on the full-time side, consulting, what have you. So really it takes take some of those discussions and sort of strategic thinking around total talent out of sort of the whiteboard and the theoretical world, and starts to make it a reality. Where we can really see a future where there's bridges between these systems and even the operating teams that are working. And we can start to just say, talent is talent. There's one front door. 

And really be more flexible. Which I think, today, if you look at how tight the labor market's been, and just the competition overall for talent, that if you can be that organization that says we need the best React JavaScript developer out there right now, we're willing to hire contingent, we're willing to hire full time, but we need our systems talking to each other so we have one sort of view of that entire talent ecosystem available to us. I think that has started to be a more pragmatic topic, where years ago it was more theoretical. So I think just really getting ahead of the curve in terms of converging those worlds of contingent, gig, full time, consulting, et cetera.

Bruce: Right. And I haven't actually asked where these different talent pools come from. So obviously, as you mentioned earlier, one of the methods is you're using the client's brand, pushing that out, and through social and everything else, to attract them that way. But talk to me about that connectivity there with HR, the so-called silver medalists, and those candidates that might apply to a permanent role, how that works.

Justin: Sure. So we facilitate workflows and integrations today, whereby let's say that you are recruiting for a large pool of IT developers. And you have some great candidates in that applicant pool on the full-time side, but you simply just don't have enough seats, don't have enough vacancy to sort of hire them all. Then one of the common processes that we see set up today is an integration through to the ATS. And as they receive that off-boarding email notice, whatever the communication medium is to tell them that they won't be successful right now in gaining the full-time employment, but it then incentivizes them to join the contingent talent pool. And we can even go as far as to programmatically start to recommend and match roles on the contingent side right away.

So the message now, although simple to the candidate, there's a lot happening from a technology perspective there to be able to say we realize that this role didn't work out for you. However, we really enjoyed the experience, the interview experience that we went through, and we'd like to recommend a few roles that we have over here in our contingent program. And that can go the other direction as well, right? So again, trying to set up workflows that are seemingly simple, but really provide that sort of bridge, that connectivity between those two otherwise sort of diverse worlds of talent.

Bruce: Yeah. No, that's a great, great point. And I think that anything that brings HR and procurement closer together has got to be a good thing, right? And I love the fact that you're doing it at the tactical level, at the coalface, not just on the white board. So again, great messaging. And I think almost by stealth, by osmosis, the world will get to more of a universal workforce approach as these different channels get the control that you're giving. So great news.

Justin: We hope so.

Bruce: Yeah. So final question for you, Justin, and you sort of just answered it so this'll probably make it even tougher, but crystal ball time, you were just talking about how the worlds are going to collide, but more generically, I guess, what do you think the industry's going to look like in two, three years' time different to today?

Justin: I don't have a crystal ball. I wish I did sometimes. But I can try and speak to a couple of themes that I think are evolving and will continue to evolve over the next couple of years. So first and foremost, coming out of the pandemic, we certainly foresee tremendous labor demand that's going to be difficult, if not impossible, to meet. So I think for a lot of organizations becoming more efficient overall, more collaborative in their talent attraction and recruitment processes is going to be necessary.  And I think it's going to be important for organizations to differentiate their talent experience, including having, again, from a contingent perspective, a direct connection to the talent community that's out there, and being able to directly sort of market and expose your brand and really advertise what your corporate culture's about. 

The second thing, and spoke about it earlier, but just the idea of a convergence between different sort of work formats or worker types, and ultimately the teams that manage them within an organization. So speaking where we've had in the past sort of segregation between contingent workforce programs and HR talent acquisition, seeing those worlds come together more. And there's both from a technology perspective, again, an evolving connectivity between systems, including systems like TalentNet that increasingly allow for business processes and workflows to flow seamlessly between different ecosystems and talent systems. Exchanging data and making those workflows possible. But again, from a curator, from a recruitment perspective as well, the human operators that are ultimately behind this being able to collaborate and work more in conjunction as opposed to on islands and somewhat segregated.

We're also seeing as well, even from how organizations look at talent, starting to take a very similar view, while maybe not from a taxation status, but certainly in terms of the types of benefits that they're trying to offer, the type of talent experience they're trying to offer both to contingent workers and full-time workers. And we honestly believe because of the demand that there is on talent now that you will have to. That you will have to provide a similar experience for your contingent workers going forward that you do to your full-time employees, if you plan to win the war, so to speak, on talent and be able to attract them.

On the technology front, I think we'll see, of course, continued investment in R&D going into things like machine learning and AI within the talent space. The talent space with respects to machine learning has some complexities because of course we're dealing with personal data. We're dealing with PII. There's both privacy laws and obviously ethics that we have to respect, and that we want to promote the right thing. So that does bring some complexity in R&D and engineering process. But I do think that we'll continue to see large leaps in sort of the complexity, and really just the efficiencies generated through machine learning and AI within the talent space.

The second big theme I would say is just a growing interconnectivity around the talent ecosystem. We've certainly seen it over the last decade or so, but that velocity seems to be continuing to accelerate where we just see more and more connectivity between systems that really allows and promotes, again, this idea of seamless workflows and easily exchanging data between systems, which ultimately just makes business processes that much easier and that much more flexible. So that's what I see over the next couple of years. And I'll look back in a couple of years and see how accurate that was.

Bruce: Great high note to finish on. So thank you so much for joining me today, Justin. It's been a great conversation. So where should our listeners go if they're wanting to learn more about TalentNet?

Justin: So they're welcome to go to our website, talentnet.com. We obviously have a social media presence on LinkedIn. They can speak to our partner in AGS. Or they could email me directly, and I'm happy to take anyone's emails and come speak to them. That's jlumby@talentnet.com.

Bruce: Fantastic. Thanks again, Justin. Really appreciate it.

Justin: Thanks Bruce. Have a great day.



Bruce: To learn more about AGS, please check us out at AllegisGlobalSolutions.com. You can also send questions for me or our guests. Just tweet us @AllegisGlobal with #SubjectToTalent or email us at SubjectToTalent@AllegisGlobalSolutions.com. Until next time, cheers! 

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