Six tips to leverage external talent and avoid the dreaded shadow workforce

Over the past decade the labour market has seen a significant shift from permanent employment to ‘the gig economy’ - allowing organizations to adapt quickly to fluctuating market conditions and labour demands. We expect to see this trend accelerate in the ‘new normal’. Temporary labour, or “external talent” or “contract labour”, can mean different things for different organizations, but it emcompasses consultants, professional advisors, contractors, outsourcing, freelancing, etc.

This external talent offers flexibility, but if not managed correctly can quickly become a “shadow workforce” operating outside of Human Resources’ policies and controls, introducing organizational risk, reducing control on spend, impacting quality, and reducing overall efficiency. All of those things combined end up costing more than retaining permanent employees. 

So how do you manage these risks? 

Establishing an external talent management program - that is aligned to the organization’s overall business and talent strategies - can help manage these risks. There are six key components to consider  when setting up such a program:

1. Start with a tangible commitment 
2. Establish policies and procedures
3. Standardize taxonomy and a service catalogue
4. Establish cross-functional governance and support organization
5. Build a preferred supplier pool
6. Leverage the correct technology

1. Start with a tangible commitment

• Ensure you and your organizational leaders make a tangible commitment to your program. Start by aligning and documenting program goals and objectives, and linking them to measurable and reportable performance criteria
• In order to ensure a tangible commitment, a broad spectrum of pertinent leaders need to be engaged: HR, Procurement, Finance, IT and other large consumers of external talent
• Manage external talent requirements with internal talent recruitment to deliver on a total talent vision

2. Establish policies and procedures

• No external talent labour program can be successful without a set of formal, well-understood policies and procedures. These are the basis for effective governance, and increasing user experience and acceptance of the program

3. Standardize taxonomy and a service catalogue

• Define a curated collection of services and solutions based on organizational requirements; focus on the service itself, rather than the source (ie. supplier)
• Create a decision tree to help your business navigate across the service catalogue in order to select the correct service based on their specific needs
• Define and implement data structures associated with those services and solutions (ie. rates, rate cards, job descriptions, contract templates, etc.)

4. Establish cross-functional governance and support organization

• Deciding who owns the external talent management program can be challenging because there can be multiple options (ex. HR, Procurement, IT, Fiance, etc.). The right answer will vary organization to organization and depends on several factors, such as the desire to maintain close alignment to the overall talent strategy, and an appetite for a single point of contact for all things external talent
• Regardless of who owns the program, the support organization should include resources from all areas, with documented roles and responsibilities, as well as decision-making authority

5. Build a preferred supplier pool

• Rationalize your supply base, but maintain full coverage of your business needs. This will achieve standardization and ease of use, while generating business benefits

6. Leverage the correct technology

• Investing in a strong Vendor Management System (VMS), such as SAP Fieldglass, can go a long way in helping your organization manage your external workforce
• Integrating your VMS with other procurement, HR, security and finance systems can help create efficiencies and eliminate error-prone manual processes
• Prior to implementing your VMS it’s important to define how data will move through the various systems, where customizations will be required, and how sustainable those customizations will be

Managing external talent can be challenging, but if you plan and incorporate the correct elements, it can be invaluable! What challenges are you currently facing with your external talent? We would love to hear from you in the comments section. 

Don’t forget to keep an eye on next month’s Digital Procurement installment where Nersi will discuss our thoughts on how to get buy-in and support for your projects.