Taking Total Talent to a Higher Level: Southwest's Direct Sourcing Journey

Having the right approach to contingent labor has become essential for organizations seeking to optimize costs while maintaining quality talent. Direct sourcing strategies, where companies leverage their employer brand across all talent categories, can significantly improve both candidate experience and operational performance.

Southwest Airlines’ transformation of their contingent labor program offers a compelling story in direct sourcing. Greg Muccio, Southwest’s Managing Director of Talent Acquisition shared insights from their journey that challenge conventional thinking about the "gig economy." Their approach demonstrates how brand consistency, technological integration, and strategic vision can build a future-ready contractor recruiting strategy.

"We have all this cool tech that we've been using to hire full-time employees. Why wouldn't we do the same thing for our contingent labor?" — Greg Muccio, Managing Director of Talent Acquisition, Southwest Airlines

What is Direct Sourcing in Contingent Labor Management?

Direct sourcing in contingent labor refers to the practice of an organization recruiting contract workers directly using their own employer brand rather than solely relying on staffing agencies. This approach allows companies to tap into their talent networks while reducing markup costs associated with third-party vendors. For Southwest Airlines, direct sourcing became the cornerstone of their contingent workforce strategy, enabling significant cost savings while maintaining their high standards for talent quality.

In this Article

Southwest's Total Talent Approach

Southwest Airlines is widely recognized for its distinctive culture and powerful employer brand built over its 50+ year history. Beyond being an airline, Southwest operates a comprehensive talent acquisition function that manages both permanent and contingent workforce needs across the organization.

Approximately a decade ago, the company made a strategic decision to leverage their employer brand advantage for direct sourcing of contingent labor.

"We have a really incredible employer brand, and one of the pieces that we began a journey over a decade ago is why don't we use our same brand, our employer brand that we use for full-time employees, to attract contingent labor on top of that," Muccio explained.

The company's talent acquisition team operates with a unique mindset, positioning themselves as "a staffing company with one client: Southwest Airlines," and approaching their work as if "at the end of the year, they review how we did and determine whether or not they renew the contract." This philosophy led to the creation of "SWA Staffers," an in-house group dedicated to managing Southwest's contingent labor program rather than relying entirely on third parties. Today, this program manages approximately 22,000 contingent workers through a VMS (Vendor Management System) tool, covering professional services, managed services, and staff augmentation needs across the organization.

The Evolution of Direct Sourcing: Breaking Down Talent Silos

What began as a simple realization evolved into a comprehensive direct sourcing strategy with significant business impact. Southwest discovered they were paying substantial fees to staffing agencies for talent that specifically wanted to work for the airline.

The solution emerged organically from within the team. Muccio shared the origin story: "I had a person on my team come to me and say, 'I could recruit for that position,' and I said, ‘Okay, do it.’” 

Enter Phenom Direct Sourcing. Southwest was already leveraging Phenom for their permanent hiring needs via their career site, talent CRM, automated interview scheduling, referral programs, and more. The realization that maintaining separate systems for permanent and contract hiring created unnecessary inefficiencies led to expanding their existing Phenom partnership to include contingent labor.

“We want our tech approach to be high tech and high touch — the high tech gets rid of a lot of administrative stuff for us so that my team can spend more time on personalized candidate interactions." — Greg Muccio, Managing Director of Talent Acquisition, Southwest Airlines

By integrating their Vendor Management System (VMS) with Phenom, Southwest now has "one container to do all this work" — a unified ecosystem where existing Phenom tools support both types of hiring:

• Candidates can seamlessly discover both permanent and contract opportunities through a single career site

• A chatbot directly serves up contract positions when relevant

• Ideal potential contractors are surfaced from the existing talent pool

• Hiring managers provide feedback through mobile-friendly interfaces

How does it work? The system brings contractor-specific details directly into the Phenom Talent CRM, allowing recruiters to view pay rates, previous contract history, and availability without switching platforms. The entire experience maintains appropriate visibility controls while ensuring candidates always know whether a position is contract or permanent: “We're transparent at the very beginning about what type of position it is,” Muccio explained.

Key Benefits and Results of Direct Sourcing

Southwest's direct sourcing approach has grown substantially over the years through strategic technology implementation and continuous refinement. “We're very blessed to have an incredible tech stack,” shared Muccio. “A lot of it is with Phenom." 

By applying their employer brand and technology strategy to contingent labor, they’ve witnessed: 

1. Significant Cost Savings & Vendor Consolidation

 "When we started the journey, we probably had over 100 vendors. And now we're down to somewhere around 12," noted Muccio. This focused vendor strategy allows Southwest to maintain stronger partnerships with fewer suppliers while handling most positions through direct sourcing — equating to millions of dollars saved.

"We do about 80 to 85% direct sourcing right now so it does save us somewhere in the neighborhood of about 7 million a year in staffing costs." — Greg Muccio, Managing Director of Talent Acquisition, Southwest Airlines

2. Improved Contractor Time to Fill

"We currently have around a 12- to 14-day time-to-fill for our contractor roles. We believe this will help us get to 10 days or less, which is hugely valuable when you consider contract roles usually stem from urgency."

3. Streamlined Processes

The unified platform eliminates the need for recruiters to switch between tools, which significantly improves efficiency. As Muccio emphasized, "My team not going back and forth between multiple tools is important to us."

4. Leveraging Southwest's Brand

The ability to use Southwest's career site directly for contract roles represents a major advancement in their direct sourcing strategy. Muccio believes this capability will drive a "landscape shift" in temp-to-hire opportunities.

5. Expanded Talent Pools

Southwest's direct sourcing implementation demonstrates how organizations can achieve significant cost savings while maintaining or improving talent quality. Southwest has tapped into various sources for contract talent:

• Retirees who "would love to come back for a little bit"

• Former interns

• Silver and bronze medalists (strong candidates who weren't selected for full-time roles)

• Candidates who express interest in both contract and full-time opportunities

When it comes to who converts, 33% of all contractors convert to an FTE, and about 20% of silver medalists eventually get brought on board in some capacity, Muccio estimated.

Implementation Strategies: Insights for Others

Southwest's direct sourcing success stems from both foundational principles and carefully designed operational processes. For organizations looking to enhance their contingent labor strategy, Muccio offered practical insights based on their journey:

Core Strategic Principles

1. Leverage Your Employer Brand for Direct Sourcing. "Use your brand,” advised Muccio. “Whether it's a local brand, a regional brand, a national, or international brand, we all have one.” Extending your established employer brand to contingent labor creates a powerful advantage in attracting talent without the premium costs of traditional staffing approaches.

2. Unify Your Technology Ecosystem. Apply the same technology stack and processes used for full-time hiring to contingent labor direct sourcing. This integration eliminates silos and creates a more consistent experience.

Operational Best Practices

1. Create Flexible Team Structure. While Southwest maintains 3-4 dedicated people who handle administrative aspects, sourcing responsibilities are shared across the team. This provides adaptability to shift resources based on hiring needs, maintaining specialized knowledge while providing scalability.

2. Establish Transparent Supplier Relationships. Southwest maintains strong partnerships with staffing agencies by establishing clear boundaries for their direct sourcing efforts: "We do it on a rec by rec basis... once we put it out to the supplier, we stop working on it." This transparency prevents conflicts while maximizing efficiency for all parties.

3. Implement Strategic Payroll Management. Rather than employing contractors directly, Southwest uses a carefully structured relationship with a payroll provider that offers both cost-effectiveness and benefits flexibility for contractors.

4. Practice Silver Medalist Reengagement. With help from their CRM and talent marketing tools, southwest combines personalized outreach with automation technology to maximize the return on their recruitment investment.

“For companies just starting with direct sourcing, the low-hanging fruit is about 20%,” Muccio revealed. “If you think about the money you spend on your contingent labor staff… if you could direct source just 20% of it and reduce the bill rate down to a markup rate of 20%, just do that math. The savings are substantial.”

As employer branding and talent acquisition technology continue to evolve, Southwest's integrated approach to direct sourcing and total talent management offers a clear flight plan for organizations looking to optimize their contingent workforce strategy. By removing unnecessary connections between systems and charting a direct route to top talent, companies can ensure their contingent labor program soars to new heights while maintaining the smooth, consistent experience that today's talent expects.

See how Phenom Direct Sourcing helps build talent pipelines for contingent workers and start saving!