It’s Time to Objectively Assess How Well Your Business Sources and Manages External Workers. Here’s Why – and How . . .

The last two years have been quite a journey for business leaders. They’ve navigated unprecedented uncertainty and change – and in many cases, their companies have come out even stronger than before. This is particularly true for leaders who have invested in resources of business agility. For example, many have finally moved finance operations to the cloud so they can run their business with staff working at home – and can now close the books with just a few clicks. Others have rolled out personalized digital desktops that free staff to work remotely and more effectively because everything they need – from alerts and task lists and SSO-enabled application and data access – is now centralized and available from anywhere.

Nearly all businesses have relied on their external workforce as a scalable source of labor. Why? Because contractors, consultants, agencies, and service providers provide fast, flexible access to sought-after skills, on-demand capacity to meet spikes in demand, and innovative thinking and ideas that can solve new problems and propel a business forward. Flexibility enables businesses to meet their critical goals. In fact, according to research conducted by SAP in collaboration with Oxford Economics, 55% of executives say their business would be unable to meet business goals (see figure below) without their external workers – who make up 42% of total workforce spend.*

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Source: “Agility Isn’t Always on the Payroll: Gain full visibility of your external workforce to help you drive better business outcomes,” Agile Procurement Insights Research by SAP in collaboration with Oxford Economics, 2021.

Given how much businesses rely upon external workers to run their businesses, it may be surprising to learn that undermanagement of these workers is pervasive, resulting in significant business issues. Despite their strategic business value, external workers are often sourced without a structured, consistent process and consistently undermanaged.

Why? Because most companies lack vendor management strategies and systems that bring structure to their sourcing and management processes. This can lead to all kinds of misinformed decisions and unintentional consequences. For example, marketing directors may insist on using a select group of high-cost freelancers and agencies – and never question actual cost to market value. When facing a sudden demand spike, manufacturing may forgo compliance checks during onboarding, which increases safety risks. And budget overruns can happen before managers – or finance – realize it because there’s no real-time visibility into actual spend.

These are common scenarios that play out across businesses and industries every day – and the costs and risks they pose add up quickly.

To help you objectively evaluate how effectively you are managing your external workforce today, experts at SAP have created a progressive, four-tier maturity framework: ad hoc or manual, enlightened, systematic, and empowered.

Ad hoc approaches are the most concerning, as these are used by organizations that have:

• Little or no awareness of the importance of the external workforce and the risks and costs of undermanagement
• Incomplete data on the “who, what, and where” of external workers
• Sourcing and onboarding processes for new talent and services that are different within each function

This inconsistency can lead to oversights, risks, and uncontrolled costs.

At the other end of the continuum are the most mature organizations at the empowered level, where:

• There’s executive alignment around a defined external workforce management strategy for all external spend categories and labor types.
• Management has invested in a VMS that not only centralizes vendor data, but supports external workforce management automation, process integration, and operational excellence.
• At all times, everyone has a clear view of who’s providing quality work, how much it costs the business, and where to focus spend for the most value.

Where does your business fall? Somewhere in between these two extremes? Wondering if you have room to improve – and if so, how and where is best for your organization?

To learn more about the four-tier maturity framework levels and where your business falls, we invite you to take our maturity assessment. Simply complete a series of questions, and you’ll receive assessment results along with valuable resources and recommended next steps to help you evolve to the next level.