Although 80% of companies rely on contingent workforce, not all have a contingent workforce management program (CWM).
A CWM program defines how the company hires, onboards and manages their independent contractors, SOW-based projects, and other non-payroll workers.
Since market demands have rapidly changed in recent years, companies are putting greater emphasis on increasing their business agility and, therefore, their workforce flexibility.
By doing so, they realize that relying on traditional contingent workforce management processes will leave them behind in the war for talent.
Here’s why.
Mapping the Maturity Model for Contingent Workforce Management
In a recent report by Aptitude Research, researchers mapped out four clear stages of contingent workforce management, moving from those without a strategy at all, to companies that have outdated systems and processes that create many inefficiencies, to those with a highly optimized approach.
According to Apptitude’s research, less than 25% of all companies have an optimized strategy around contingent workers.
The study found that the main differences between the maturity levels were whether procurement was managing the vetting and onboarding process from a cost-saving perspective or whether it was led by the HR team with a more holistic view of talent management.
Another important differentiator was the visibility into total spend. 58% of companies at the “optimized” level have visibility into their external workforce spend, compared to just 15% of those at the early adoption phase.
In addition, early stage companies were relying mainly on bill rate fee models when working with staffing agencies and MSPs. Companies were adopting VMS solutions when ‘graduating’ into the next phases, but with little impact on fee models and KPIs.
Only ‘optimized’ companies were able to increase productivity and visibility by moving to “next generation” systems like Freelance Management Systems (FMS).
Are You Earlier Along the Maturity Model than You Think?
You might think to yourself, “Hey! I’ve adopted technology, I came up with a strategy for my contingent workers – I’m probably an optimized company at stage 5, or at least stage 4.”
However, if you’re struggling with any common challenges, such as time to hire, time to complete tasks, lack of ownership over independent contractors, or lack of visibility into spend or performance, it might be time to rethink where you lie on the maturity model.
Companies may have implemented vendor management systems (VMS) or are working directly with staffing agencies and Managed Service Providers (MSPs), but it is not enough to get to an optimized level.
As they usually don’t have access to the third parties’ data, they don’t have visibility or control over the contractors’ documents and performance. All of a sudden, what was meant to drive efficiencies is suddenly causing gaps and blind spots, and actually causing greater inefficiencies.
Take a moment and think about whether you can easily answer these questions:
- Are you spending the right amount on each supplier?
- Does your fee model make sense across the business?
- How much do you rely on a contingent workforce?
- How satisfied are you with their work? And how engaged are they in your business?
If you can’t answer these, then whatever solution you have in place for contingent workforce management, you’re stuck at stage 3, with a lack of visibility, flexibility, and control. Don’t worry – you’re not alone! 50% of companies are looking to replace their Vendor Management Systems (VMS).
The Shift in Ownership from Procurement to HR
Ownership over contingent workforce management is a common challenge to most companies.
At earlier stages, procurement teams are leading the vetting and onboarding processes and are designing it from a cost savings and compliance assurance perspective.
In recent years, however, companies have begun looking at the process holistically and promoting business agility over cost savings, with ownership over contingent workforce shifting to HR.
VMS tools were originally built for procurement teams to gain control over spend. Therefore, it cannot help HR or other business leaders better leverage the freelance economy to increase business agility. They are focused on procurement-focused tasks such as vendor sourcing, contract negotiation, vetting, and basic payments.
Today, HR recognizes that the contingent workforce is a strategic part of the company, often making up 30% of their total workforce, and needs to be managed as part and parcel of the whole company.
Business owners need visibility into how contingent and non-traditional workers are being managed, not data that exists in a siloed VMS.
The most mature companies have shared ownership over contingent workforce management, allowing all teams to attain visibility, flexibility and control, and letting HR take the driver’s seat.
However, if your company has only ever leveraged HR for hiring traditional full-time employees — you may be wondering whether they have the bandwidth to manage contingent workers, who are an incredibly different type of hire.
The Shift in Technology from Staffing Agencies and VMS to Next-gen Freelance Management Systems (FMS)
This is where the right technology comes into play. On the one hand, many companies will move from a certain staffing agency or an MSP to another provider to optimize their contingent workforce management program.
Others will opt for implementing or replacing their VMS.
However, those that are the most successful will recognize that the contingent workforce as well as the demands of their contingent workforce have changed, and it is time for a new approach.
Rather than serving only Procurement, the new approach must serve all stakeholders, including HR, Legal, Finance, IT, hiring managers, and the workers themselves, whether they are sourced from staffing agencies, MSPs, or whether they work as independent contractors.
Freelance Management Systems have been designed for the modern workforce and for serving the entire organization. Enterprises are increasingly adopting this approach, so much so that some VMS platforms such as Workmarket have taken the approach of renaming their platform as a FMS. , However, there’s a significant difference between the 2 systems.
FMSs were built to work directly with the worker with no need for middlemen like staffing agencies and MSPs. They were designed as self-service platforms and, most importantly, a FMS supports the entire freelance management lifecycle:
- Sourcing – supporting both HR and the hiring managers to find the best talent
- Onboarding – enabling HR, Finance, Procurement, IT and more to automate the onboarding process, achieve more control and visibility and reduce the onboarding time to 1-2 days
- Management – providing control and visibility to the entire organization in terms of spend and compliance while enabling hiring managers to track progress quickly
- Payments – automating the entire process while ensuring the company retains full control over payment terms.
- Compliance – offering full control over tax, legal and workforce classification compliance
The Workforce has Changed: Grab Hold of Your Competitive Advantage
Let’s face it. Market demand is changing more rapidly than ever before.
During COVID-19, the shift to remote working made the differences between full-time employees and contractors less prevalent.
Post-pandemic, the Great Resignation ushered in a hiring frenzy that was impossible to fill by traditional recruitment alone.
Today, widespread tech hiring freezes are encouraging the use of a contingent workforce.
This is all since 2020! We can’t guess what tomorrow’s challenge will be, but we can bet that flexibility will remain King. Today’s companies need a more agile workforce to execute agile business strategies.
That’s why evolving to the next stage of the contingent workforce management maturity model is so essential.
If you can manage your contingent workers in a progressive way, you have already grabbed a competitive advantage.
What Does a Next-gen Contingent Workforce Management Solution Look Like?
Contingent workforce management programs must be transformed to meet both the changing needs of the market and the changing workforce.
If companies are not able to modernize their CWS programs, then their companies will not be able to take full advantage of what the new workforce can provide in terms of skills and agility.
An FMS isn’t simply another version of a VMS, and it isn’t leveraging services like staffing agencies and MSPs, but rather, it’s a true step into the future of workforce management.
Next-gen solutions must provide the following:
- Ownership – in most companies today there’s no clear ownership over freelance management. Therefore, procurement is leading the onboarding stage with a cost saving mindset. Defining clear ownership of the different stages will enable companies to better leverage their contingent workforce to gain high quality talent and business agility.
- Direct sourcing – top talents are turning to freelancing, but will only work with companies directly. In addition, middlemen like staffing agencies and MSPs reduce your control over spend and compliance when working with non-payroll workers. Companies need to learn when and how to work directly with independent contractors.
- Self-service – in order to scale up your company’s work with contingent workers and to improve the satisfaction of both hiring managers and independent contractors you must offer a self-service platform like all modern tools.
- Data autonomy – As data security and independent contractors’ compliance are becoming increasingly more complicated, your company needs to find a solution that will allow the data to be under your own roof, not siloed externally with third-party vendors or technology.
Not adopting a next-generation solution will prevent your company from business agility all businesses today must possess. How else will your company adapt its workforce management strategy to the changing workforce?
[Alt ending] A next-generation FMS solution provides the necessary business agility which will keep your company two steps ahead of the competition.
By adapting your workforce management strategy to the changing realities of the workforce, you can gain greater visibility into spend and performance, and move up the maturity model by truly optimizing the way you manage the needs of today’s contingent workforce.