The challenge of external workers: How can a CEO turn a hidden workforce into a more flexible force?

If a CEO asks for a snapshot of the company’s external workers, it wouldn’t be a snap for most procurement departments to pull that information together because individual departments like HR and IT often use different technology to engage an array of workers — for gig jobs, contract labor, overseas staffing, shift work and more.

If those departments operate separately and the systems aren’t integrated, a hidden workforce exists that the CEO and senior leaders can’t effectively manage.

This becomes even more problematic in the coronavirus era, when companies shed temporary staff during the lockdown, but for the recovery stage may need to re-engage talent. And that talent pool in the marketplace has ballooned as laid-off workers join the contingent workforce space.

But if the CEO can’t see the company’s total workforce, it’s difficult to weigh all of the sourcing options and execute a strategy to deploy gig workers to complete projects, engage professional talent to support the Legal department or Finance, have reliable channels to find freelancers, and hire shift workers to meet customer demand.

And tracking and managing becomes even more complex when offshore workers are needed in other countries. The complexity increases to meet laws in those countries as well as finding ways to manage offshore workers and figure out different ways that compensation or pricing is done in foreign countries.

Companies often think that having one technology system like a VMS is enough, but in reality, different departments may deploy their own technology because those systems can work well for their types of workers but don’t track others. And there’s no single solution on the market that allows a company to find, engage and manage every type of external worker.

It’s clear that a patchwork of technology leaves gaps in communications between departments and gaps in visibility. Those siloed efforts essentially create hidden workers who populate a company’s payroll and aren’t managed in any coherent way.

To get a snapshot of the external workforce, CEOs need to deploy a “flexible workforce management” strategy that relies on having options when procuring external labor and services with an array of technology — not on a single solution like a VMS to be a silver bullet.

“A holistic workforce management concept includes not only end-to-end processes but also effective system support to generate transparency regarding the number and qualifications of the resources used, to accelerate processes and ensure compliance,” says a report by Ralf Dillmann, a partner with the BearingPoint consulting firm. “However, no single system on the market currently meets the extensive and complex process requirements, which is why several systems — from personnel planning and e-procurement to ‘talent relationship management’ systems are usually used in an integrated manner.”

Challenges to flexible workforce management

The goal of having flexible workforce management is to reduce costs, minimize the risk of having too many or too few workers, to cover your business’ peak capacity, close competency gaps and to have access to any worker that is considered a scarce resource.

If you get good at accomplishing those goals, you become an employer that attracts external workers and you can expand your pool of resources and reduce the administrative efforts to get people onboarded and the tasks completed.

But why is this process so complex?

It stems from having so many different types of workers, the tasks they need to do, and the technology used to find and manage the work.

Let’s take a look at the options available to find the external workers and manage them: There are gig workers, crowd workers, freelancers, professional knowledge workers, shift workers and temporary staff. They can be found using online platforms, via agencies or internal talent pools — to name a few. Your business may have so many temporary workers doing noncore jobs that you hire an MSP, or managed service provider, to actually oversee one segment of these workers.

All of these types of workers have legal considerations that companies must address so the businesses are compliant with workplace safety regulations, compensation rules and classification changes. (A worker engaged via an online service like Fiverr could be given a project that the company designates as temporary work, but if the company treats that person like a full-time employee, then the company could be responsible for more pay and benefits than it bargained for.)

When formulating a strategy, consider these challenges:

• Flexible employees pose new issues in terms of corporate culture, leadership, management and long-term retention.
• Getting internal workers and external workers to share knowledge and tasks can be difficult.
• Departments like procurement, HR and IT must work together to manage and optimize the external workforce and give leaders visibility into the process of sourcing and managing talent.
• No single software solution meets all the requirements of companies. Tech selections often fail because the complexity of the engagements and the management needs are not fully understood. In addition, tech solutions are often oversold as a “one size fits all” for external labor.

Next steps

Companies have a lot of internal needs and a lot of external options to find the right people to do the job. With the right strategy, you can flexibly manage your modern workforce.

Our next article will focus on how to attain workforce flexibility. In a Q&A, we’ll gain further insights from Ralf Dillmann and BearingPoint Partner Chetan Rangaswamy, who have been researching the issues as the use of external workers evolves in the U.S., Europe and globally.