Joining the External Workforce Revolution

One of the more interesting trends that is taking global supply chains by storm, is that so much of the actual work being done is done by the so-called external workforce. Many business functions that used to be handled in-house are now being outsourced, for example marketing, legal, and other consultancy activities.

Companies are turning to external resources to source new skills to put them ahead of the competition—from outsourcing development tasks, to contracting experts in business transformation.

In fact, recent surveys show that companies funnel almost half all their workforce spending to third-party contractors. This would include the use of contingent workers and temporary staff, freelancers, and various types of contractors

The same surveys show that almost two-thirds of companies make use of external workers to make them more nimble and able to boost the time to market.

In this article, we will give an overview of the external workforce, as well as outline strategies how to manage these workers more effectively.

What is the external workforce?

Before we can look at the external workforce in some depth, we have to formulate a workable definition for what it is. Basically, the external workforce is people that do work for a company without being permanently employed by them.

The external workforce can be divided into two categories:

• Firstly, there are contingent workers. These are not strictly employed by their host company, but do contingency work on specific projects and include consultants, temp workers and freelancers. The host company manages these workers directly.
  
• Secondly, we have outsourced staff. Here, a company would outsource part of a project to an external service provider. Although they do work for their host company, they are managed by the external service provider.
  

The size of external workforce is exploding

The use and popularity of the external workforce is only set to increase. When polling executives, two-thirds report farming out strategic functions to external contractors. Almost all executives plan to make more use of the external workforce over the next couple of years.

This growth in the external workforce is a natural outflow of globalisation and more competition in the market. Companies are increasingly expected to perform specialised work for limited time periods—so they farm out these duties to contractors and seasonal workers. This is a quick and low risk way of growing your talent base on an as-needed basis.

Sourcing talent from around the globe for specific tasks is also becoming easier. People are getting used to doing remote work over the internet.

Which means it's easy to hire new talent and boost your agility in the marketplace, allowing you to scale your business operations as needed and getting an edge over the more traditionally staffed competition.

The external workforce is being mismanaged

You would think with the international shift towards the external workforce, companies would meet the challenge of managing these workers effectively. Unfortunately, that is rarely the case.

In their haste to become part of the external workforce revolution, many companies are not managing their spend efficiently and exposing themselves to unnecessary risk.

Most companies are still used to sourcing vendors with purchase orders. But freelancers don't function like large-scale vendors. You need to manage those workers more closely if you want to get the results you expect and pay for.

As an example, most executives don't know the industry standard labour rates they should be offering their external workers; not to mention the myriad compliance and other human resources issues that have to be put in place for these workers.

If you're employing a haphazard mixture of global freelancers, it’s difficult to track the work quality, adherence to milestones, handling of confidential information, as well as their licensing and certification compliance for these workers. How do you track the work hours of your external workforce, even though you're required by law to do so?

Even though you're farming out a job to an external  service provider, you still need to keep tabs of the basic working conditions of their staff.

When polled, most executives didn't have information regarding the contract terms, location, or even the personal information of their external workers.

This might just be a compliance and ethical concern, but you still need to be able to track the work done by an external company and how well they stack when measured against predetermined deliverables and milestones.

If an executive is unable to answer these basic questions, they don't really know what's going on in their organisation. Which means they’re leaving too much to chance and exposing their companies to unnecessary risk.

Another basic question to consider is how many people actually comprise your external workforce. Do you know where those workers are actually located?

The higher the uncertainty in these matters, the greater the risk to your company. Which is why you need the right technology and services to track your external workforce and manage them effectively.

Know your external workforce

There are a couple of data points you need about your external workforce to manage them effectively. These can be boiled down to five questions.

There are several external workforce management systems available that will be able to track the information you gather when you get answers to the types of questions outlined below.

1. Who are the workers?

The basic definition of the external workforce means that they aren't listed on your permanent roll call. Which means that your HR department possibly doesn't even have a list of the names of all these workers. This is rather irresponsible. HR needs to track who exactly is working for you at all times.

2. What work are they doing for your company?

Once you have a list of all the people that work for you, you need to find out exactly what function they perform. What work are they doing for your company? Which of your projects are assigned to them and which of your departments make use of their services?

3. Where are these workers located?

Globalisation has made it possible for anyone around the globe to work for your company. Many executives are surprised to learn where all their workers are located.

It comes as quite a shock for a company to discover that they employ thousands of extra workers which they didn’t even know about. These workers could be employed in an obscure country on the other side of the globe. But how would you ever know, if you’ve never actually done the research?

For you to be able to manage your external workforce effectively, you need to know in which country and city they are located. You need to know where all your workers are located at all times.

4. Which company resources do they use?

It's important to know what company resources are being used by your external workforce. For example, are they making use of your IT infrastructure or electronics hardware? What access do they have to your software or company documents?

This is important to know, because temporary workers are by definition not permanent employees of your company. When you no longer need their services, you need to make sure that they return all company property and that their access to your systems are revoked.

5. How much do these workers cost?

Of all the questions, this ons is probably the most important. What is the final cost of all these external workers?

This is important for budgetary reasons, because you need to know exactly where all the money goes so that you can manage your spend effectively and optimise your budget.

Use VMS to manage the external workforce

The global workforce is only becoming more complex, with an increased focus on multi-channel fulfilment. Which means that companies have to up their game if they want to know who exactly is working for them and at which rates.

But, as you might have gathered from the rest of the article, managing the external workforce is no trivial matter. You need the right type of vendor management software (VMS) that is specifically geared towards handling external workers.

Usually, a VMS is a cloud-based technology platform geared towards sourcing, onboarding, and managing external workers. These would include both the contingent and service provider varieties.

The right technology will also assist in sourcing the best workers for any project, and then managing them effectively.

With the right VMS setup, you will gain proper visibility in all activities related to your external workforce. In this way, you will be able to make the best use of these workers and gain a real competitive advantage in the market.

Use VMS to source the right talent

When you decide to hand a project or part of a project to external workers, it might not be an easy task to source the right talent for the job. You need the right mixture of workers that simultaneously meet several compliance, legal, security and financial criteria.

Which means that sourcing the right external workers can be a challenging task. This becomes even more difficult if the right workers are scattered across a wide geographic area and comprise a mixture of skill sets and disciplines.

If you try to juggle all of these responsibilities without the right technology on your side, you can run into serious challenges in managing and administrating this external workforce.

When you outsource work, your workers and labour contractors are quite possibly scattered across several countries and even continents. Each country has their own labour standards and compliance certification. You need the right technology to manage all this complexity.

Furthermore, different departments in your company might employ different procedures and technologies. You need a VMS that will be able to integrate seamlessly with all these systems and processes.

Most probably, there will be several departments and team members in your company involved in sourcing new talent and then taking them through the onboarding process. Possibly other teams will be responsible for offboarding those same workers.

A VMS will be able to steward this complexity to ensure maximum visibility in the external workforce while avoiding lapses in communication and efficiency.

Conclusion

Managing the external workforce is a complex affair. When you rely on external contractors and freelancers to perform mission critical tasks in your company, your exposure to performance and compliance risks multiplies. This is especially true if these workers are spread out over various global geographies and are managed by disparate departments and teams within your company.

You need the right VMS solution to source, onboard, and then manage your external workforce. The technology will be able to perform these functions while ensuring compliance to corporate policies and governmental regulation.

You need a VMS system that is flexible enough to deal with any combination of contingent workers and outsourced staff to manage assigned projects and missions.

Ideally, you need a system equipped with the following features:

• Sophisticated management tools. You need a system that allows you to manage the external workforce in real time, giving you a stream of continually updated analysis data. This gives your managers the correct information to make informed decisions with regards to external workers. This can then be used to maximise your income potential and lower costs.
• Sophisticated collaboration. The VMS should become a central hub where your team members can communicate and collaborate with external workers and organisations. In this way there is a constant stream of communication between your suppliers,  managers, team members and other external workers.
• Sophisticated automation tools. The VMS should enable you to automate routine and mission-critical tasks related to sourcing and managing the external workforce. For example, the system should allow you to automate your payroll, the managing of expense accounts, as well as calculating and rewarding overtime.

Furthermore, the system should provide tools that makes it easier to comply with the laws of your country, as well as the geographical areas where your workers are located.

In this way, you will be able to glean the most benefit from all your commercial agreements, while maximising profit and minimising costs related to your employment of external workers.