As a result of changing circumstances and increased competition, many companies are reconsidering the hiring of full-time employees, instead of favouring a talent path based on contingent workers. Contingent workers make up a more flexible workforce that can be scaled to meet a business strategy's immediate demands, equipping businesses for adaptability. While the concept itself is simple, the underlying processes to manage and execute this strategy are more complex and should be considered as a portion of the entire services procurement process.
To maximize the value of these workers, it is vital to consider exactly who makes up this contingent workforce (or extended workforce) and how they fit into a company's business strategy.
What is Contingent Labour?
Contingent Labour is one of seven categories of procurement spend, defined by its rate-based payments and people-based selection. Comparing other forms of Services Procurement spend, including services invoicing, recurring spend and professional scope of work services, companies require the right contingent labourer with the right skill set to complete specified tasks. These team members are typically hired on a temporary, often per-project basis and may include service providers, independent contractors, consultants, or other skilled experts.
This trend in the way people work has continued to shift towards contingent labour; in fact, the cross-industry average is now nearly 44% across various roles in organizations according to the External Workforce Insights 2018 report from SAP Fieldglass. Unfortunately, many companies are still struggling to take advantage of this change in the workforce.
The Lack of a Cohesive P2P Solution is Costing Your Business Money
The time and energy required to execute an effective contingent workforce strategy are significant. Small inefficiencies at a middle-management level, such as inefficient sourcing processes or dispersed rate cards, can result in rogue costs that are hurting your procurement budget. Companies need employees to do their best work to achieve the best possible outcomes for business growth. Unfortunately, many factors go into the decision of what work needs to get done and who is doing it.
A centralized strategy to manage temporary workers can give the Chief HR Officer insights into where inefficiencies are occurring and how teams can be empowered to improve them. Since your organization's hiring managers may span across the business, some contingent workers may be unknown to the rest of the company. Even worse, sometimes these same workers are interviewed or negotiated with multiple times by different parts of the company, wasting time and money. At approximately 30% of procurement spend on average, the right management strategy that opens up contingent spend to the rest of the procurement process is necessary.
Your Contingent Workforce Isn't Being Used to Their Full Effectiveness
Oftentimes, information about who the external workforce is, what they are doing and when they are being used does not reach senior executives. As a result, senior executives can't effectively maximize the use of an external workforce when they don't have accurate visibility.
Accurate visibility into your contingent workforce now can help you anticipate what skills you will need to seek out in the future and help build your strategy ahead of your competitors. If those already in your contingent labour workforce possess these skills, it might be worthwhile to engage these team members early and solidify your relationship with them.
Your Contingent Labour Force is Growing
Contingent labour is essential to the core operations of your business. Currently, 65% of enterprises believe that they wouldn't be able to operate at full capacity without their external workforce or meet the needs of growing customer demand according to the External Workforce Insights 2018 report from SAP Fieldglass. As the number of contingent workers continues to grow, it is believed that this group will quickly outnumber an organization's full-time staff. Therefore, this spend area will only grow in importance. Rather than wait for this trend to overtake your existing services procurement strategy, CPOs must take the initiative in defining this strategy now.
As is the case in business transformations, once revenue leakage symptoms become apparent, it is often too late. To avoid facing these consequences, businesses should begin asking if their contingent workforce is managed with the same efforts as their salaried staff. And if not, how soon can a solution be implemented?
Defining Your Contingent Labour Management Strategy
To capture the full value of the workforce transformation, an end-to-end Services Procurement optimization strategy is necessary. Currently, business leaders might be responsible for a fraction of their business' complex procurement process, implementing spot solutions to solely manage their responsibility area. These solutions may be effective at managing one spend area. However, they do not account for the other six areas of procurement spend, which may be disjointed due to the unique solutions used in each case. Therefore, CPOs will benefit from a holistic solution to view all aspects of their procurement solution, including the growing concern around contingent workforce management.
To do so, ConvergentIS has created a swarm of Fiori applications on top of SAP that help employees adhere to a procurement process in a simple and guided manner. This gives your leadership team visibility into the scope, activities and quality of the external workforce. The answer is not exclusive to managing your contingent workforce and can provide benefits across your entire procurement processes.
Learn more by downloading our free guide.