A Guide to Contingent Workforce Management
Procurement software used to be a tiny spec on the enterprise software map, solely focused on employing and managing a company’s full-time workforce.
Today, software used in the recruitment and management of workers covers a wide range of bases – much more than just procurement. From payroll and job board applications and platforms, the scope of workforce software is overwhelming. In this guide, we focus on Contingent Workforce Management Software.
Contingent Workforce Management Software is an enterprise application software used to fulfil the sourcing, onboarding, operational management, governance, and off-boarding. It cuts across traditional software categories, such as Recruitment Software and Human Resources software previously used to describe solutions in this area. Talent Management today is all about Total Talent Management. The Total Talent Management concept is about:
- Supporting various ways to get work done, be it packaged up as a task, project, or a role
- Supporting the various routes of talent sourcing – direct or indirect (sourced through agencies)
- Supporting all stakeholders engaged in the recruitment and management of a workforce from one integrated data processing platform
- Supporting the operation of a contingent workforce
Total Talent Management has come to define the Workforce Management Software solution of the modern era. It’s become the aspiration of the industry, and a major talking point at conferences. But how did we get there?
How external factors have redefined contingent workforce software
What has led to the emergence of Contingent Workforce Management Software?
This emerging category of enterprise software has come about as the result of six major market factors:
1. Talent Shortages
A shortfall in skilled talent is plaguing various industries around the world. There simply aren’t enough people to go around in a global market undergoing a massive upsurge in demand for medical, scientific, technological skills.
For example, Canada has an unemployment rate of less than 6% but in disciplines like IT, this rate falls to less than 2%. Meanwhile, America is facing an unprecedented skilled labor shortage.
Even most Fortune 500 firms report growing numbers of open vacancies.
A 2019 survey by Gartner shows that talent shortage is viewed as the top emerging risk facing large enterprises. This US-centered survey of 137 senior executives in 4Q18 showed that concerns about “talent shortages” now outweigh those around “accelerating privacy regulation” and “cloud computing”, which were the top two risks in 2018. According to the Department of Labor, the unemployment rate is at a record 50-year low, and the US economy had 7.6 million unfilled jobs.
2. The gig economy is changing in the make-up of workforces
More people these days want to work on their own terms as freelancers. This on-demand workforce model benefits both the worker and organizations looking for rapid access to talent. Many organizations are now adopting indirect channels and Statement of Work agreements to harvest this resource as an alternative to permanent employees which are becoming a smaller part of the workforce.
The latest figures from the U.S. Bureau of Labor Statistics suggest there were 6 million contingent workers and 10.6 million contractors. The latest reports suggest that use of gig work platforms has grown by more than 30% in emerging economies.
3. New ways to connect to talent markets
The third major influencer on changes to the workforce management market comes from innovations in the way organisations tap into the talent market. As the blend of permanent employees and contractors within the workforce has shifted towards a 60:40 ratio, organizations have been encouraged to consider new ways of reaching out to talent.
4. The rise of AI workforce
The last few years have seen artificial intelligence and robotic automation come of age. Market watchers McKinsey report that many of the jobs we assume humans will do can now be automated by known technology.
McKinsey reported in 2016 that currently demonstrated technologies could automate 45 percent of work currently performed by people, and that about 60 percent of all occupations could see 30 percent or more of their constituent activities automated.
5. New roles emerging from the digital economy
The rapid onslaught of digital technologies including robotic automation, WSNs, the IoT, blockchain, 5G networks, VR/AG to name a few – is creating a demand for new job roles. This well-evidenced trend towards new kinds of jobs led DELL to conduct a research project in 2017 which established that 85% of jobs that will exist in 2030 haven’t been invented yet.
6. Rapidly changing markets and business models
Businesses are experiencing change at a faster rate than ever imagined. This is in no small part due to the global market transformation from the COVID pandemic, a new set of values in today’s consumers, or the consequences of digital evolution. Leadership teams are challenged to balance changes in customer demand with a continuous, high quality talent supply and skills.
Even how businesses are valued is very different in the modern economy. Go back thirty years ago, and companies would receive a business valuation based largely on tangibles, such as profits, the size of the order book, and the fixed assets they held. In the last decade, these factors have begun to play second fiddle to the size of addressable customer bases, the richness of knowledge held on customers, the number of website visitors, and the promise of future opportunities.
It only takes to look at the valuations of companies like Twitter and Lyft to see evidence of this dramatic change in the way we measure business wealth. What we’re seeing is the structure of markets changing, not just a re-ordering of the major players within a market. Banks are evolving into tech companies (Barclays Bank recently announced that they were now a tech company that runs a balance sheet, not the other way around), utility companies are selling professional services, oil companies are inventing new forms of energy, and retailers are selling holidays and insurance. Nothing fits neatly into boxes we could label as specific and unique markets anymore.
With this change, companies are re-visiting their business models, how they create customer value and turn it into shareholder returns every year. Inevitably, this ‘speeding up’ of business change has its impacts on commercial organisations. We see major blue chips like Oracle and Microsoft undergoing ‘perpetual re-orgs.’
The consequence of these six factors colliding is a resulting seed change in the way organizations are now thinking about the kind of software they need to recruit and manage talent.
Further, we examine the key changes and innovations happening in the Workforce Management Software market, and the influence it’s having on the talent management discipline. But first, let’s overview the different ways businesses now want to harvest talent.
Old and new routes to talent
There are numerous mechanisms businesses are adopting to source talent. Workforce Management Systems adopting a Total Talent Management ethos are expected to support all of these routes to getting work done.
Several of these recruiting channels are relatively new; driven by opportunities to source tasks, projects, and jobs in different ways, thanks to the gig economy.
1. Employment contracts
While the trend persists towards outsourcing work, the majority of the global workforce still consists of people hired on a contract of employment.
With compliance demands growing by the year, the risks of hiring employees have been steadily escalating. For many companies, it’s not just a question of the difficulties they face in restructuring to meet changing needs. The high costs and risks of hiring employees is putting pressure on this traditional route of employment.
2. Zero-hours contracts
This type of employment contract brings a high level of agility for employers. It secures the commitment of an individual to work for an organization without a guarantee in working hours.
It’s a useful solution for businesses which may see short-term/short-notice events that require a temporary increase in staff (such as catering).
3. Indirect staffing – procurement of a contingent workforce through joined-up vendor management sourcing arrangements
One of the fastest growing areas of the talent management market comes in the form of indirect staffing procurements. Harnessing a group of staffing vendors, organizations will source contingent workers through procurement frameworks, fulfilling requirements one job description and purchase order at a time.
A critical aspect of managing an indirect workforce is the avoidance of co-employment fines – i.e. a situation where employers are seen to break the law by treating contractors as if they were employees – as happened to Microsoft who were fined just under $100 million for a co-employment misdemeanour.
For this reason, many employers choose to operate their vendor channel through a Managed Service Provider or Master Vendor charged with employing talent, or making sure their employers step-up to their duties as an employer, even if individuals are working at their premises every day.
Underpinning this supply-chain is a Vendor Management System; a web application that helps businesses manage and procure staffing services, including contract or contingent labor through third-party staffing suppliers. A VMS is a technology platform used to manage recruiting, oversee and manage vendor performance, as well as payroll and payment processing.
Vendor Management Systems automate job board management, the raising of orders, recruitment processes including gathering of C.Vs from vendors, coordinating interviews, making offers, performing background checks and on-boarding new-starters.
Vendor Management Systems create a high standard of transparency over vendor activities, normalising contract terms, installing governance over policies and acceptable norms of behaviour, and automating the communications and workflows needed to operate a supply-chain made up of a series of independent organizations, loosely-coupled into a business-critical operating model.
Managing Payroll and Payments:
The third area of automation focuses on the processing of contractor time-sheets and payments.
State of the art today perhaps, but not tomorrow:
With the industry’s focus in sourcing on-demand talent through staffing vendors over the past decade, Vendor Management Systems are considered state-of-the-art in the talent industry, but given the shift towards a gig economy, together with the process automation possibilities of artificial intelligence and robots, Vendor Management Systems are beginning to fall short on market expectations. Businesses look more towards ‘Total Talent Management’ technology solutions able to support direct and indirect sourcing, and the fulfilment of tasks, projects and jobs – all processed through one usable technology ecosystem – and able to serve all stakeholders including workers, staffing vendors, internal hiring managers and senior managers.
4. Statement-of-Work Procurement Contracts
A Statement-of-Work (SOW) is a form of contract between a company and a staffing provider or individual that agrees to pay a contract worker for their efforts based on the achievement of pre-determined project outcomes. Typically, these outcomes are formed around project way-points (sometimes called ‘Milestones’). SOW contracts allows businesses to offer out tasks and projects as small procurements that individuals or small contracting businesses can deliver. This approach opens up new possibilities in how work gets delivered, leveraging the resource pool of the burgeoning gig economy.
5. Direct sourcing
Perhaps the fastest growing route to talent is being called Direct Sourcing. The term describes the process of publishing work through talent portals directly to an audience of potential applicants harvested through social media marketing and historical relationships (such as previously unsuccessful applicants still interested in joining the company). Direct Sourcing is attractive because it removes the agency costs of indirect sourcing and yet still offers employers the option of making work available in the form of full-time employment contracts, Statement-of-Work contracts and the posting of ‘tasks’ that contractors can offer to fulfil.
6. Knowledge and crowd-sourcing markets
Another way of getting some knowledge-centric work done (such as performing research and gaining answers to technical questions etc.) is to contract work through knowledge and crowd-sourcing markets; effectively paying for answers, not for the people to do the work of finding the answer.
There are a variety of sourcing models operating in this sphere, including InnoCentive, a company that operates a ‘seeker and solver market’ specialising in pharmaceuticals research. Similarly, inocrowd, that specializes in providing services to generate ideas and solve problems, based on its own interactive open innovation technological platform. Inocrowd reaches a network of experts from around the world, to accelerate and enhance innovation in companies investing in research and development (R&D).
Contingent Workforce Management Software Technology Innovations
Modern Contingent Workforce Management Software aspires to deliver unifying Total Talent Management solutions for businesses to equip them with the means to use a blend of ‘sourcing channels’ to fulfil their on-demand talent sourcing and management needs. How then, is the IT industry serving up solutions to address this evolving portfolio of Workforce Management Software requirements?
In this section, I highlight some of the more influencing developments gaining traction in the U.S. talent management industry.
Next-generation Private-Cloud Vendor Management Systems (VMS):
The first generation of Vendor Management Systems were based on Software-as-a-Service (SaaS) single platform model. These platforms have proved very difficult to implement, challenging to mould to fit the needs of so many different kinds of business, and almost impossible to economically integrate with other technologies (like ERP, FMS, HR, Code Testing, Business Intelligence and other forms of tooling) needed to create an integrated solution. A second generation of VMS solutions is now coming of age based on private cloud technology that works very much like glue-ware to blend between the incumbent IT systems and preferred best-of-breed technologies employer companies want to use, to then fill between them with deeply integrated workflows and automations. These highly modular and agile Vendor Management Systems, characterized by Simplify VMS, offer businesses an effective way of harnessing an indirect talent sourcing approach.
Second generation VMS platforms overcome many of the criticisms of those who regard indirect sourcing with a jaundiced perspective, having worked previously to create effective talent supply-chains through third-party vendors in the past without the tooling provided by modern technology. These criticisms include the difficulties and ensuring parity of terms, the challenges of enforcing performance standards and acceptable behavioural norms, the lack of transparency over legal compliance obligations, and the risk of staffing vendors not taking their employer responsibilities seriously.
Federated ecosystems: Platforms like LinkedIn create a social medium for business people to connect with one another and share thoughts and experiences. But they are also an extremely effective route to sourcing talent. Similarly, Adobe, a company that offers software and content for creative workers, has recently acquired Behance – a platform that allows web designers to showcase their portfolios of visual work such as graphic design, fashion, illustration, photography etc.- to harness its audience as a talent pool to fulfil work for others. The new portfolio-based talent search of Behance (aptly named “Creative Talent Search”) will use Adobe’s imaging smarts to allow recruiters to not just search based on keywords but on the creatives’ portfolios. In a similar vein, HackerRank, a company that enables coders to qualify their skills by performing self-help tests online, is now promoting coders that use its platform to third-parties; promoting their coding credentials. These are examples of federated ecosystems for talent sourcing that exist beyond the firewall of organizations that use them to source their talent. For seekers of talent, these expert sources become obvious ‘go-to’ places on the web for the talent they need. In this way, seekers of talent can pro-actively find the talent they need, rather than waiting for a CV to arrive!
Gig Working Apps and Job Portals: According to Statistics, the gig economy is a section of the economy which consists of independent contractors and freelancers who perform temporary, flexible jobs. … 56% of gig economy workers in the U.S. report having two or more jobs or projects, and 58% report working 30-hours or less per week.
The gig-economy is moving into full swing, largely because it offers employers lower employment costs, risks etc. while improving their ability to get jobs done and overcome the rigidity of employing a full-time workforce. The majority of Fortune 500 firms are now embracing gig workers for non-core roles such as marketing, Human Resources, published relations, and procurement. Even in technical, professional and scientific roles, the paucity of gig workers means that firms are having to trash plans for the recruitment of full-time employees and instead are offering these roles out on contract.
The rise of the gig economy gives rise to the need for new technology ecosystems. Gig Economy Apps are important because they facilitate gig working, something that used to be something people only did for small businesses, but not anymore.
In addition to the federated ecosystems I mentored before – that have originated as ‘something else’ only to realize they can ‘sell the skills of their online community to others – some tech start-up companies have produced purpose-built job-board styled portals to bring job seekers and solvers together. These sites are typically described as Task Platforms or Micro-Task Platforms. Examples include Upwork, Toptal , Fiverr, Amazon Mechanical Turk, crowdSPRING, Freelancer.com, Guru, 99designs, Peopleperhour and Twago.
The types of features covered by gig working apps include:
- SOW contract provisioning
- Direct Sourcing job boards with close integration with social media platforms
- Integration with skills testing platforms like HackerRank
- Interview scheduling
- Supplier payment processing
- Comprehensive log files to maintain a record of all correspondence between parties
- Micro-task marketplace’ capabilities
Artificial Intelligence (AI-led): Artificial Intelligence – the application of computer science to perform tasks that typically require human intelligence – has a significant role to play in workforce management to automate workflows and help in decisions that can help to reduce workloads. Examples include:
Re-discovering talent that has applied previously for roles or may exist somewhere in your directly addressable talent pool Using chatbots to perform mundane, repeated communications that often take place with background checks, on-boarding and interview scheduling Posting jobs to the most appropriate channels by learning from previous experiences Running digital interviews Pre-screening of resumes to ensure CVs satisfy minimum requirements and improving the quality of hires by matching job requirements to applicant CVs without installing any bias into the process Companies like Simplify Workforce offer AI-enabled technology platforms to embed the potential of AI tooling as part of its data processing capabilities, embracing many of the use case examples highlighted above, although robotized video interviews are still a way off.
SOW software: I describe Statement of Work contracts earlier in this document. Contracting work out based on small ‘work packets’, where contractors or third-parties are charged with delivering ‘work packet outcomes’ before getting rewarded with payment for their services makes a lot of sense. Expect Total Talent Management Portals to offer the ability for hiring managers to formalize their work packets into procurement lots that can then be offered to an eager gig economy working audience.
Direct Sourcing portals: Use of Direct Sourcing – i.e. when an employer harvests its talent pool (formed from historical internal recruiting activities and social media brand reach) as an outlet to get jobs done – is on the rise. Direct Sourcing offers organizations benefits as a mechanism to source talent because it:
- Reduces recruitment agency costs
- Boosts productivity and retention because employers work with people who’ve already ‘invested’ in their enterprise
- Speeds up time-to-fill and decreases risk – because individuals in this particular talent pool are already known to the enterprise and often pre-vetted
- Increases recruiting efficiency because, given the right self-service online tools, candidates are very often happy to do much of the work themselves to get employed
Total Talent Management Portals: Step-change innovations rarely happen in just one leap. Peer below the veil of any significant technology evolution and what becomes visible are a series of much smaller, and yet still very significant advances. So is it true of Contingent Workforce Management Software innovations. Many of the more impressive innovations are in fact a bringing together of complementary supportive technologies (like AI, video streaming and chatbots). These are today being presented as unifying platforms described as Total Talent Management Portals (exampled by Simplify Hire). Total Talent Management Portals combine the necessary technology capabilities to serve the many different talent sourcing channels and mechanisms businesses now want to use in a single ‘ready-to-‘play’ platform.
Organizations face ever-increasing competition which means that they must adapt to change faster. Agility and adaptability are on top of every business leader’s agenda. In this state of fluxing markets and hyper-competition, it becomes uneconomic to maintain a large workforce of permanent employees when competitors can get jobs done more efficiently and affordably by sourcing talent on-demand.
Any enterprise looking to survive and thrive must find smarter ways of attracting and managing talent. Software for managing all aspects of the workforce is playing an ever more influential role in the ability of organizations to do this well, particularly those committed to a Total Talent Management approach.
Book a demo of Simplify Hire and see how you can manage your workforce more efficiently.