Risk Management and the Landscape of Outsourced Work
When you examine the pace of outsourcing work to contractors in the United States, you see that it’s increasing year-over-year. What challenges does this present, and how are companies managing those challenges?
Contractor Outsourcing Trends by Industry
Based on a review of ISNetworld data, United States oil & gas and mining industries reported the most exposure hours in 2018. Trends reported by the International Association of Oil & Gas Producers (IOGP) show contractors accounted for 78% of work hours in the oil and gas industry in 2017, an increase of 11% from 2016.
According to the U.S. Bureau of Labor Statistics, the construction industry shows similar outsourcing trends. After a decline in construction following the financial crisis of 2007-2008, the usage of contractors reached pre-crisis levels again in 2018. Data shows the trend is poised to continue its upward trajectory.
In a survey conducted by ISN, 95% of the surveyed Hiring Clients told us that they expect outsourcing their work to contractors to increase or remain the same. Our review of work-hour data in ISNetworld shows that there has indeed been undeniable growth across industries in outsourcing work to contractors.
Two key reasons for this growth of contractorization stand out. Many companies lack the necessary resources to handle the work in-house, and contractors often provide a higher level of expertise to meet the demand for more specialized work.
The Risks and Challenges Associated with Hiring Contractors
The increase in outsourcing also increases risk exposure and other challenges for Hiring Clients.
A Hiring Client’s exposure to liability increases when hiring multiple contractors and suppliers. Additional employees on-site means more individuals with access to heavy machinery, chemicals and other dangerous resources required to perform work.
A total of 11.4 billion work hours were reported in ISNetworld by more than 40,000 contractors across the U.S. in 21 industries during 2018. These contractors collectively reported more than 77,000 recordable cases.
What’s next? Hiring Clients are already turning their attention to issues such as subcontractor management and cyber security threats.
In addition to the risks from outsourcing, there are also several challenges.
Hiring Clients tell us they lack the internal resources to manage an extended workforce. Staff must become experts in managing contractors, which is different than employees. Human Resource departments, for example, often manage training for internal employees, but contractor training can fall to HSEQ teams to manage. Tracking which contractor employees have completed the appropriate training assigned to them can be a time-consuming process. Teams can struggle tracking standardized, adequate and appropriate contractor training across multiple sites and job functions.
As the use of contractor companies continues to increase, so can the uncertainty of the quality of trainings, written programs and the resources required to evaluate their effectiveness.
Many Hiring Clients are moving their trainings online in an effort to address these issues. Video training ensures the same required information is relayed to all staff and contractor employees by a single presenter. They use online quizzes to then show how well individuals understand and retain the training.
Why you Should Implement a Contractor Management Program
There is change on the horizon. With the landscape for capital-intensive industries evolving, a heavy reliance on contractors will become the new normal. And managing these contractors with a strong and effective contractor management program is critical to support worker safety and reduce liability for Hiring Clients.
It will be critically important that Hiring Clients continually measure their contractors’ safety policies and performances to ensure they are compliant with relevant safety standards and industry regulations.
How ISN Helps Hiring Clients Mitigate Outsourcing Risks
Established in 2001, ISN is the global leader in contractor and supplier information management. Our online contractor management software, ISNetworld, helps companies manage risk and qualify contractors to ensure they meet Hiring Client standards and regulatory requirements.
We partner with our Hiring Clients to drive key initiatives and solutions to mitigate risks associated with outsourcing. Each year, ISN hosts more than 7,200 meetings with clients to provide hands-on training, best practices and networking opportunities. ISN Roundtables, User Group Meetings and Help Desks provide an opportunity for Hiring Clients and contractors to network and discuss the latest industry news and topics.
In coordination with our Hiring Clients, ISN helps identify contractors that need to be included in each prequalification process. Then, our team supports the compliance process by communicating directly with contractors to sign them up and submit required documentation to ISNetworld.
ISNetworld’s tools help organizations identify and evaluate the right contractors for each job. And since all tools are included in each Hiring Client’s subscription costs, we can customize every implementation to support their specific challenges and priorities for one annual price.
The Site Tracker tool, for example, has helped Hiring Clients track site- or project-specific HSEQ performance data. The utilities, power generation and public sector industries alone have reported more than 780 million contractor hours in ISNetworld for more than 350 job sites since 2012.
“Site Tracker helps us quickly identify trends within various sectors of our contracted operations,” said the health and safety director for Bristol-Myers Squibb. “It offers an opportunity to identify areas of concern and focus the necessary resources on a plan to improve performance, reduce incident potential and realign the safety culture.”
Benchmark your Company’s Outsourcing Efforts
ISN’s latest publication, The Orange Book, uses data-driven analytics and industry leader insights to illustrate best practices around how companies are managing the risks introduced with outsourcing work.
Request a copy of The Orange Book to get access to more ISN data and benchmark your organization’s outsourcing statistics against other Hiring Clients.
Let us Help
If you’re a current ISN Hiring Client, speak with your ISN team about how your organization’s contractor management program and contractor performance align with your industry peers.
If you’re a Hiring Client and interested to learn how a partnership with ISN could support your contractor management efforts at your organization, request a demo of our ISNetworld platform.
If you’re a contractor and need help with your ISNetworld account, contact our Customer Service representatives for support 24 hours a day during the business week.