Your company no doubt has used non-traditional workers to increase your ability to take advantage of marketing opportunities, control labor costs, and exploit rare and specialized skills that are unavailable among full-time employees. Companies for the most part engage contingent workers on an ad-hoc or piecemeal basis. They discover the need for supply chain experts when it comes time to count inventory. Or they require a data enrichment expert in response to a directive to automate marketing and media buys. This transactional approach remains widespread even as forward-looking firms’ appreciation of strategic management of the agile workforce becomes universal. Deloitte found that 92 percent of the companies it surveyed had yet to implement codified processes to procure and manage alternative workers. Indeed, most organizations make use of freelancers, part-time employees, and other contingent workers merely as fill-ins. As a result, they do not realize the full potential – either strategic or economic – that a progressively managed agile workforce strategy can produce.
Because contingent workers are destined to become an integral part of any successful business, there are significant early-mover advantages to be gained by expanding your use of and optimizing your management of agile workers. Here are three areas to consider as you take the first steps toward building an efficient, integrated contingent workforce strategy:
Labor policy risk comes in many forms and requires constant monitoring to mitigate your company’s exposure. Making your hiring and worker procurement process as transparent as possible will give managers and supervisors the vision they need to ensure your program remains compliant not only with federal, state, and local labor, worker classification, and safety laws, but also your organization’s policies on diversity, compensation, and other corporate values. Use these best practices for overseeing your compliance activities:
- Put all hiring practices, including onboarding, offboarding, and categorization, in writing
- Use software and other tools to produce labor use and expense reports
- Conduct regular audits to analyze spending trends and worker engagement by category
- Establish comprehensive business rules, and automate safeguards to track each worker’s eligibility, licensing, certification, and other bona fides before and during their employ
Of course, compliance is not the only risk businesses must avoid when they expand their contingent labor programs. There is also significant risk associated with vendor relations. Your labor supplier’s competence, resources, fulfillment rates, etc. will to a large extent determine the success of your workforce program. Operations risk can be kept to a minimum by vetting suppliers to find the best combination of industry experience, worker skill compatibility, order-filling success, and other factors important to your company. Doing so will increase the chances that your agile labor force will provide the quality workmanship, on-time delivery, and efficient workflow your customers demand.
Additional oversight will be required to avoid financial risks. Unqualified external workers can cost your company money in terms of lost orders owing to production delays and poor quality. Improperly training and assessing worker abilities can result in hefty fines from labor, safety, and environmental agencies. And poor supervision of vendors, partners, and negotiations can put your company at financial risk by burdening it with unfavorable contracts and inefficient use of various types of contingent labor.
You can minimize risk by engaging vendors and partners that both enjoy a strong reputation for compliance and demonstrate compatibility with your industry and staffing strategy. Establish a vendor management system through standardized qualification, application, and validation processes.
Growing your agile workforce program means moving to a mature approach to managing your human resources overall. That includes better planning for demand contingencies, supply disruption, scalability, evolving market responses, etc. To capitalize on all the benefits the non-traditional workforce can bring, you must transform your management from reactionary, transactional procurement to strategic, integrated solutions.
The overarching decision that must be made is whether to exercise maximum control over your workforce management program by keeping the function in-house or whether it is better to “stick to the knitting” and outsource the task to a managed service provider. There are advantages and disadvantages to each. Your decision should be the product of several factors:
- Which system will best facilitate collaboration among the company’s stakeholders?
- Which model will ensure enterprise-wide adoption?
- Will orders be centralized or left to individual offices?
- How will the appropriate type of contingent worker be determined for each task?
- What will training entail, and who is responsible for conducting it?
- What technologies do we need to find, recruit, train, retain, and profit from contingent workers?
- How will the program, workers, and vendors be evaluated, and what systems can we put in place to ensure continuous improvement?
Whichever option you choose, leadership and commitment from the C-suite will prove imperative. Executives must take ownership of the project and take care to achieve buy-in at all levels. Program design ensures you maintain a results-oriented path to implementation. This is your “big picture” view of what an optimized worker management system will look like.
Controlling tail spend is a major concern when expanding an extended workforce plan. Tight control is necessary to keep labor buys coordinated and accountable. Rogue spend – orders and requisitions made outside established work rules and off negotiated contracts – runs counter to a key tenet of the contingency platform.
Typically used to hire freelancers or independent contractors for small projects – a graphic artist to design a sign or an accountant to conduct a monthly close – the cost of individual hires is often quite small. But the sheer number of rouge spending events can create a long tail – involving as many as 80 percent of all transactions but only 10 to 15 percent of accounts payable. These activities often remain in the shadows, hardly worth the effort to manage them. However, they generally constitute considerable liability risk and a non-strategic and uncontrolled undermining of a consolidated and optimized workforce.
Getting a handle on rogue spend starts by connecting finance with program management. The manager should outline and explain the types of contingent workers the company will use and in what roles and departments they are best suited. HR and accounting then can ensure only these workers are being engaged, used, and paid to perform the approved functions. Controlling maverick spend requires a rigid program management structure that delineates where each delivery system – statement of work, consultants, freelancers, contract workers, etc. – can be used. Each should be attached to comprehensive scope and scale requirements, required qualifications, approved individuals and procurers, etc.
Check out our previous post on how to determine the workforce management model that’s best for your situation. For more insights on how to build, expand, and optimize your contingent workforce, contact MetaProcure.