Procurement is more involved than ever in delivering talent for the organization in the form of contingent workers and professional services.
Success in this ultra-competitive environment requires new approaches to both Procurement Strategy and Procurement Technology.
This blog series focuses on these critical challenges.
Part 1: Strategy
Why Procurement Leaders must become Talent Strategists
Talent is talent, no matter where it resides in or outside an organization. Traditionally, when we think about who owns the responsibility for managing talent, we think of Human Resources, and that’s largely true for full-time employees. But an honest accounting of enterprise talent incorporates far more than those workers on the balance sheet.
The use and importance of external talent has grown dramatically in the last five years. Today non-employees comprise 40-50% of the average company’s workforce. Many Fortune 2000 companies spend hundreds of millions of dollars on this growing extended workforce. And the future of work points to an increased reliance on external labor.
The extended workforce is not only here to stay; it is growing
In “Workforce Ecosystems” by Altman, Kiron, Schwartz, and Jones, the talent landscape can be categorized by part- and full-time labor, long-term contractors, freelancers, service providers, complementors, and software bots. Once one begins to consider talent in this holistic view, it is easier to understand how over $5.4 trillion is spent on external labor annually.
Dependence on these non-full-time categories is growing and will continue to do so for several reasons. The oft-referenced talent war, wage inflation, the great resignation, remote work, and the attractiveness of minimizing fixed labor costs in the P&L are the primary reasons for the surge. There is no indication that dependence on non-full-time labor will subside. Since procurement “owns” much of this labor force, they must assume a more prominent role in talent management.
Procurement is a stakeholder - it must own strategy
Managing talent is a critical factor for the enterprise. The importance of the extended workforce compels procurement to assume an active role as a stakeholder, not just an enabler. Being a stakeholder implies a vested interest. Procurement should embrace this opportunity and, with Human Resources, take the lead.
This may seem difficult for procurement, since it manages scores of other categories. But nothing is more important to a company’s success than its people. Thus, talent must be managed strategically and holistically.
Managing talent is complex and can be unsettling for many. Simply placing the responsibility for managing external talent in procurement’s hands is unfair and will likely lead to less than optimal results. Talent is a company concern. Human Resources is critical to managing talent. So, HR and Procurement need to collaborate on strategy and execution. The extended workforce can remain under procurement’s purview, but procurement needs to work hand in hand with HR. This way, procurement can become a true talent strategist and deliver the solutions the company requires to achieve its desired talent outcomes.
The Extended Workforce as a business strategy
No longer can the extended workforce, representing almost half of all labor, operate on the periphery. Companies that place it front and center alongside their full-time labor will have a competitive advantage over those that don’t. When procurement considers talent management technology, it should be in the context of the ecosystem and the overall talent strategy:
- What work is best done by internal vs. external workers?
- What are the most important factors in this choice? Cost? Time? Quality?
- What percent of your workforce is and should be full-time vs. non-full-time?
- What projects could be done sooner if outsourced?
- How can you monitor market trends, skills, and costs so that your workforce planning will be precise?
When external talent solutions are considered, they should be within the greater context of total talent strategy. Which technologies are best for which purpose, and can they integrate? The talent strategy for the extended workforce includes myriad options from background check providers to assessment to AI decision support and analytics. Constructing a long-term talent plan for the extended workforce will lead to a higher probability of success when the chosen technology solutions in the ecosystem align with the plan.
Procurement’s roadmap for managing external talent
The long-term strategy for managing talent should be inclusive of all types of talent. However, far too many organizations fail to even have a strategy for the extended workforce. As a first step, a degree of house cleaning is in order. Companies should:
- Capture all external labor. First, gain visibility of all workers. The use of software bots can be considered later.
- Risk-proof the labor. Take the necessary steps to properly classify this labor and set up risk management guardrails.
- Develop a multi-sourcing approach to ensure the best options for speed, quality, and cost.
- Develop a 3- to 5-year talent roadmap, supported by technology.
- Establish KPIs and metrics that will serve as early warning systems to monitor whether the strategic plan is working.
A convergence of factors leading to the rise of external workers has elevated external workers who were once considered a shadow workforce. They are no longer in the shadow. Smart companies recognize this and are leveraging this labor force with tremendous success.
For many businesses, there remains a massive opportunity to optimize results with a sound talent strategy that incorporates both full-time and non-full-time labor. First, procurement organizations need to ensure they have the necessary strategies and supporting technologies on the external talent side of the house. These already reside in HR’s hands on the full-time side.
When procurement and HR are properly aligned and equipped with technology to manage both external and internal talent, the enterprise can embark on the truly exciting journey of Total Workforce Optimization. That will be the next phase in talent management and, fortunately, technology to support this journey is available today.
For Part 2 of this blog series – “Why ‘We’re an SAP shop’ is not a strategy for successful talent sourcing” – click here.
