The external workforce: are you realising its full value?

This is a guest blogpost by Mikael Lindmark, a senior vice president at SAP Fieldglass

As CIOs and other executives across enterprises turn to contractors, freelancers and other external workers to fill  skills gaps and meet their strategic objectives, they are transforming the way work gets done. However, many organisations lack the management rigour and C-suite attention to reap the full value of their external workforce.

Multi-channel workforce moves to core of business operations

A recent survey we at Fieldglass completed in collaboration with Oxford Economics signaled that UK businesses rely heavily on the external workforce, which includes non-payroll workers and services providers. In fact, nearly nine out of 10 senior executives in the UK (87%) who participated in the survey say the external workforce is essential for them to operate at full capacity and meet market demands—much greater than the global average (65%). Furthermore, this rising multi-channel workforce of contingent workers, independent contractors, alumni (i.e. a business’ former employees) and services providers now accounts for nearly half of workforce spend in the UK (46%, slightly higher than the 44% global average).

When it comes to labour market trends, nearly three-quarters (74%) of UK executives say finding high-quality resources at the right time and in the right place is really or extremely challenging, and in just three years, 87% say the external workforce will be critical for sourcing skills that are in scarce supply. Shortfalls in newer technologies, such as artificial intelligence, machine learning, blockchain, automation, cloud and the Internet of Things are particularly severe in the UK, where 29% of executives compared to 13% globally call this a “major shortfall.”

Cost is not the whole story

Increasingly external workers operate at the core of businesses. Not that long ago, companies discussed how and where to use external workers based on an assessment of what was core or non-core to the business as they sought to lower operational costs. Now, nearly half (45%) of executives believe they could not conduct business as usual without their external workforce. External workers are filling roles across enterprises, and contributing to improvements in businesses’ overall financial performance, according to 55% of respondents in the UK.

In addition to making it possible for businesses to operate at capacity and meet demand, UK executives have a greater tendency than the global average (81% as compared to 62%) to credit the external workforce with being important or extremely important to achieve sustainability goals/shrink their carbon footprint. UK executives also look to their external workforce to increase organisational agility (71%), reduce risk (71%), increase speed to market (68%) and develop or improve products and services (61%). Managing costs remains important (77% compared to 60% globally).

Looking beyond traditional metrics, 71% said their external workforce raises the bar for their employees by bringing in new sources of skills and talent.

Managing and extracting value from the external workforce

Visibility provides a basis for measuring and managing results, yet many businesses lack an adequate line of sight into their external workforce. Management of this workforce segment has not fully matured at most businesses. Consequently, companies are not realizing the most value from this important asset.

Around one in 10 companies that responded to our global survey demonstrate markedly superior performance in managing and extracting value from the external workforce—the “Pace setters.”  They are “highly informed” about five of eight areas that executives consider “very important” for managing non-payroll workers and services providers. For example: What are they doing? Are they being paid negotiated rates? What are the contract terms? What is the duration of their work?  Do they have the required licenses and certifications? What access do they have to systems, confidential information and facilities?

Pace setters also find it easier to manage many, yet not all, aspects of their external workforce. For instance: They have greater confidence in their ability to find high-quality talent at the right time, place and rate. They find it easier to avoid payment of duplicate charges and unauthorised expenditures; track who performed well and who should not be re-engaged; and be compliant on local tax and labor laws, regulatory requirements and candidate privacy requirements.

Pace setters also say their external workforce helps them improve their business’ overall financial/business performance and/or helps them compete in today’s digital world.

The Pace setters show how companies could benefit from better visibility and management of the external workforce. Set goals for your company to emulate or surpass the Pace setters as you establish the management rigor required to harness external resources to achieve better business results.

Mikael Lindmark, a senior vice president at SAP Fieldglass, is responsible for overall operations across Europe. Mikael, who joined SAP Fieldglass more than a decade ago, has more than 20 years of experience in human capital development and management, and is based in the UK.

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