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The Biggest Invisible Business Problem of Our Time

Nothing is as invisible as the obvious, but chances are, you’re not paying close enough attention to notice. Take your workforce for example. On average, almost half of the workforce spend is on non-payroll workers and service providers. It is assumed that human resources, procurement and department managers have a handle on how this ‘external workforce’ is sourced, managed and deployed. Oftentimes that is not the case.

A recent report from SAP Fieldglass completed in collaboration with Oxford Economics, External Workforce Insights 2018: The Forces Reshaping How Work Gets Done, reveals just how critically under-managed these non-payroll workers and service providers are in most companies, despite how essential they are to achieving financial and business performance. In fact, if you ask most C-level executives how big their external workforce is, the majority would not know or would simply guess. It is one of the biggest, unaddressed C-level business problems of our time as it is an evolving management function.

Furthermore, as we saw in the survey results, the multi-channel workforce of freelancers, independent contractors, contingent workers and service providers is growing. In part, the trend is being driven by today’s workforce. Oftentimes, the available talent prefers to work on a contract or project basis, as opposed to becoming an employee. They may want flexibility. Some simply want to guide their career; they desire the opportunity to work with different people and gain a variety of experiences. Others seek a work-life balance that accommodates more time for parenting, travel or any other number of activities.

This flexible, external workforce also delivers a global labour supply that supports the creation of distributed workforces for multinational businesses while providing access to skills that are in scarce supply. As such, the external workforce now accounts for roughly 44% of workforce spending. That is a significant amount of spending happening across enterprises without an adequate line of sight into it from the top down.

That is significant not only because of the volume of spending but also what that signals.  At many companies, that means senior management may not know who is doing what, the return on investment received as a result, whether they are in compliance with government regulations or their own policies, let alone who is accessing their facilities or systems.

Furthermore, the external workforce spans a range of job categories such as technical, scientific, professional services, finance, and operations. They are not just focusing on ad hoc or periphery project work. External workers are now essential to core operations, delivering on business strategy. Nearly two-thirds of businesses (65%) say the external workforce is important to operating at full capacity and meeting market demands, and almost half say they could not conduct business as usual without them.

As the role of the external workforce moved to the core of business, controlling cost has remained important, but it is no longer the principal driver for accessing the external workforce that is now seen as essential to driving and improving commercial performance.

What started out as a cost mitigation strategy that delivered greater spending flexibility to businesses has silently evolved and proliferated in recent years, reshaping the composition of the modern workforce. As this occurred without standardised processes and solutions to monitor, track, measure and strategically manage the external workforce, most C-Suite and many other top executives find themselves with limited visibility into this labour at many businesses. Only about a third of respondents are highly informed about who is doing work for their organisation when it comes to non-payroll workers, and less than half have a similar line of sight into their service providers. C-Suite executives responsible for leading their functions are least in the know with just 25% saying they are highly informed.

This can open a company to a host of potential management issues although remedies are available and should be adopted to gain visibility into this valuable workforce. In fact, 62% of companies surveyed credit their external workforce by making it possible for them to improve their overall financial performance.

A blend of talent is the new normal for many organisations. Aligning present and future requirements with the appropriate resources, skill sets and management is crucial. As the multi-channel workforce evolves and extends beyond their permanent employee base, employers need to evolve how they manage their total workforce to meet the needs of the business.

Recruiting, vetting and onboarding and managing the external workforce with agility and most importantly, visibility across the enterprise is a necessity for today’s digital businesses if they are to succeed. Modern automated processes and solutions exist in the cloud that can give businesses the visibility they need to manage today’s workforces from end to end.

 

Mikael Lindmark is Senior Vice President, EMEA, SAP Fieldglass. He joined SAP Fieldglass nearly a decade ago and is responsible for the organisation’s EMEA operations and customer success. Mikael earned his law degree at Uppsala University in Uppsala, Sweden.

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