What is the external workforce?
Welcome to the new way work gets done: Enter the external workforce
In a global economy in which digital skills and other specialized capabilities can make or break a business, meeting the demand for talent at the right time and in the right place is essential. Enter stage left: the external workforce.
A fundamental shift is taking place in today’s workforce. In the past, the majority of a company’s labor force consisted of full-time employees who stayed with the same organization for years.
Now a “new normal” exists – global organizations increasingly rely on many sources of talent beyond their traditional, full-time employees – this is known as the external workforce.
In fact, the external workforce is the fastest growing segment of the labor market. A 2016 study by the National Bureau of Economic Research suggests that net job growth in the United States between 2005 and 2015 was due entirely to the external workforce, including contingent workers, temporary and seasonal workers, independent contractors or freelancers, and contract employees.
And this trend continues. A 2022 survey of 430 C-level executives by Economist Impact found that half of all survey respondents, regardless of function, say that their organizations will rebalance their workforce in favor of more external hires.
The external workforce: Who are they and what do they do?
The external workforce can be divided into two categories: Contingent workers and services procurement.
- Contigent workers
Contingent workers are individuals hired by a company to do role- or project-based work on its behalf, but not as traditional employees. They could include independent contractors, consultants, freelancers, temps, or other outsourced labor. These workers could be contracted via suppliers for these types of workers and other talent pools such as staffing agencies or freelance market or sourced directly.
- Services procurement
Services procurement, or specifically services providers, are companies that deliver people-based services to an enterprise – consulting firms, marketing agencies, or facilities management companies, for example. They are typically contracted to do project-based work via a statement of work (SOW).
External workers are in high demand across roles, departments and industries. It includes everyone from the temporary administrative assistant down the hall filling in for an employee on medical leave to the DevOps Specialist half-way around the world designing a new application for the enterprise.
External workers are known by many names:
- Independent contractors
- Non-full time
- Offshore external
- Multi-channel workforce
External workers may perform many roles, across all departments, such as:
- IT Specialist
- Construction worker
- Web designer
- Project Manager
Why an external workforce is important – and how to best manage them
Because we live in a fast-paced, always-on, global and digital economy, organizations that can engage talent with agility and flexibility reap many advantages. The more nimble a company is, the better it can respond to competitive threats and pivot to capitalize on new opportunities. Enterprises need to be able to deploy resources quickly – wherever and whenever they are needed – to maximize ROI and achieve global business benefits.
By engaging the external workforce, companies can secure hard-to-find skills, scale up and down to meet demand, and increase speed to value without the overhead costs that typically come with salaried staff. Organizations are able to employ highly specialized talent and resources anywhere in the world, at any time.
With a robust vendor management platform, enterprises increase access to a talent pool of digital natives and next-generation talent, select and hire the best talent globally, and then gain a full view into this workforce segment to see what work is being done, where and for which rates. Businesses can also fully manage this workforce throughout the project lifecycle, from secure on-boarding to off-boarding, while tracking milestones, deliverables, and compliance along the way.
The external workforce on the main stage
Gone is the mindset that considers the external workforce as peripheral or as understudies to the main cast of employees. Research by Deloitte and Entrepreneur Magazine and others reinforce that the external workforce is essential to improving business operations, increasing speed to market, improving overall financial performance, and effectively competing in a digital world.
Companies who manage their external talent and services providers effectively are finding it to be a key driver of competitive advantage, while others risk being left behind as their rivals make better use of these critical human resources. Many lack of insight into their external workforce – even answering simple visibility questions like: where are they? What jobs do they do? What is the pay? – can be a serious problem for companies, leaving them unable to effectively manage their global external workforce.
New work arrangements require a new kind of management. For over twenty years, one type of solution has transformed how companies find, engage, and manage their growing external workforce: a vendor management system or VMS.
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