Most Leaders Lack Visibility Into Their External Workforces. Here’s How to Get It.

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While businesses have long acknowledged the importance of the external workforce, COVID-19 shone a spotlight on that workforce’s remarkable capacity to lend businesses flexibility in times of profound disruption.

External workers — often referred to as “contingent workers,” “gig workers,” “freelancers,” “contractors,” and “temporary staff” — constitute a growing portion of the overall workforce. According to the Agile Procurement Insights 2021 Report from SAP Fieldglass, these workers are critical for ensuring business continuity and enabling organizations to take steps toward recovery. In fact, more than half of executives report their organizations would be “unable to conduct business as usual” without contingent workers.

When a business is planning to invest in any segment of its workforce, managing costs is a key consideration. According to SAP Fieldglass’s report, 42 percent of a company’s workforce budget is spent on external talent. Yet, many executives lack visibility into this critical category, and, as a result, they do not manage it effectively. Basic questions — like “How much would it cost to hire contingent workers?”, “What would the return on investment (ROI) be?”, and “How much can we save and how soon can we achieve our goals aided by their talents?” — often go unanswered.

With external talent commanding such a sizable share of spend, both procurement and the HR function must attain cost-efficiency in contingent workforce management. Here are four tactics to ensure your company’s financial investment in the external workforce is both cost-effective and generates value in the long run.

1. Plan Ahead

The costs of a bad hire can be steep. Determining which jobs and tasks require which skills in advance allows a business to speed up the hiring process. When workforce planning takes a back seat, businesses end up scrambling for talent at the last minute, sometimes sacrificing quality and skills in favor of speed. Strategic planning and partnering with workforce vendors to identify and procure the appropriate talent can conserve a lot of money, time, risk, and effort.

2. Cutting Costs Isn’t Always Ideal

Cost-cutting is one of the key tactics businesses adopt to manage the bottom line, especially in difficult economic times. However, it’s often only a short-term solution for a persistent business problem.

External workers should be considered a long-term investment rather than a short-term cost-cutting measure, and any expenditures made on these workers should be approached with that mindset. Training and development, access to tools and technology, performance feedback: All of it should be provided for every external worker, with an eye toward increased engagement and productivity. Upskilling prepares workers to fill critical roles and drives better results from talent overall — precluding the need for the business to seek out new talent and the costs associated with doing so.

3. Leverage MSPs

Routine external workforce management activities like monitoring day-to-day responsibilities, maintenance, and IT support can be time-consuming and not necessarily cost-effective. Rather than managing these tasks in house, you may consider outsourcing them to a managed service provider (MSP), thereby reducing overhead costs. Some MSPs also offer consultations on the best tools and technologies to implement for efficient external workforce spend and management.

4. Gain Visibility Into the External Workforce

It’s always easier to manage what you can see. When you do not have full visibility into a matter, decisions will be based on mere speculation.

Unfortunately, most organizations are forced to speculate when it comes to external workforces. According to SAP Fieldglass’s report, many organizations lack visibility into even the basics, like contract terms, who is doing the work, where they are located, and what they are doing.

Obtaining access to performance data enables business leaders to make more informed decisions about leveraging external workers. With greater visibility into the contingent workforce, a leader can make quick decisions even in disruptive times — all while eliminating some of the invisible costs of compliance, risk, and productivity.

Managing an external workforce may seem easier said than done. To get the most value out of a contingent workforce program and ensure its cost-effectiveness, processes must be streamlined, time spent on trivial tasks has to be decreased, and digital tools must be implemented to get deeper insights into the program. Taking these steps can help business leaders make impactful decisions in service of productivity and enduring value.

Vish Baliga is chief technology officer at SAP Fieldglass.

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By Vish Baliga