Rethinking Workforce Strategies: The Rise of External Workers

In the ever-evolving landscape of business, how we structure our workforce is changing. The future is already here, with half of business leaders affirming they plan to increase the use of external workers within the next 12 months, according to a recent Economist Impact survey sponsored by SAP. Why this sudden shift, you ask? It’s not just about cutting costs anymore; the reasons are surprisingly complex.

The Survey Story

Earlier this year, SAP initiated a fascinating exploration into the shifting sands of the business world, engaging Economist Impact to conduct a global survey of C-level executives across a broad spectrum of organizational functions. With a hefty sample of 430 executives, including Chief Financial Officers (CFOs), Chief Operations Officers (COOs), Chief Procurement Officers (CPOs), and Chief Supply Chain Officers (CSCOs), the study aimed to understand how businesses and industries are transforming their procurement functions. With disrupted supply chains, escalating costs, pervasive uncertainty, and trend-driven changes, procurement is at the forefront of a business revolution.


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Delving into the Data

The data collected led to the creation of an insightful Economist Impact paper, “Chain reactions: building value in procurement through digitalization,” as well as a focused mini-paper examining the external workforce. These documents provided illuminating perspectives on the evolution of the workforce and the inner workings of procurement’s transformation to address these changes.

Post-release of the papers, a select group of executives was invited to a roundtable discussion. Here, they shared their insights on labor shortages, the ascent of the external workforce, and the conundrums solved (and posed) by these phenomena.

The details of the discussion are shrouded in the Chatham House Rule’s confidentiality, but it’s possible to share the core themes that emerged. These revolved around understanding labor shortages and their impacts, assessing risks and solutions, and examining the strategic implications for procurement and supply chain leaders.

Labor Shortages and Their Effects

The Economist Impact briefing paper revealed an intriguing finding – half of the survey respondents were planning to increase their utilization of external workers over the following 12 months. Drawing from personal experience, the roundtable panel pinpointed a shortage of labor as one significant driver for this uptick.

A Pandemic Perspective

One might be tempted to blame the pandemic for this labor shortage. However, the roundtable participants were quick to dispel this notion. While the pandemic has indeed accelerated the shortage, it isn’t the root cause. Instead, the high demand for skilled labor and the difficulty in finding such talent internally has driven companies to “buy” the skills rather than “make” them. For instance, recruiting individuals with “professional services” skills has proven to be challenging, thus leading businesses to rely on external or contingent workers to fill this skills gap.

Changing Work Landscapes

Another driving factor behind the rise in external workforces is the evolving expectations of workers. Today’s workforce desires greater flexibility in how and where they work. This shift in preference, coupled with the merging of digital and physical work, is transforming our work culture and contributing to the current labor shortage.

Risks and Solutions: A Balancing Act

With the acknowledgment of external workers as a key solution to labor shortages, the roundtable also recognized the challenges involved. One primary concern was the management of external workers. Unless effectively managed, businesses risked losing visibility into delivery teams. This issue is further exacerbated by the geographical diversity that often characterizes remote work.

Culture and brand impacts were also critical to address. Several roundtable members expressed concerns about data access and confidentiality issues. But, as with any challenge, understanding these risks opens the door to formulating solutions and leveraging opportunities.

Opportunities Knocking

The strategic inclusion of external workers in staffing strategies presents exciting advantages. Notably, businesses can react swiftly to changing conditions, access highly skilled individuals at reduced overall costs, and shift their focus from merely filling a seat to buying an outcome.

From a budgeting perspective, employing temporary workers can make managing wage rate fluctuations more manageable. It provides greater flexibility in budgets and facilitates a long-term view of fixed costs.

The Global Perspective on Talent Sourcing

One of the pandemic’s silver linings was the validation of remote work’s productivity, not just for full-time employees, but also for the external workforce. Many roundtable participants stated that this paradigm shift had stimulated significant internal strategy discussions.

The Implications for Procurement

The changing workforce landscape is prompting significant changes in the way procurement operates. Procuring external workers requires different processes compared to hiring full-time employees. As procurement understands these processes, it needs to work closely with human resources to ensure the business contracts the right temporary workers with the requisite skills.

Moreover, the work-from-anywhere strategy that some organizations now pursue has broader impacts on assembling an overall operating model. Procurement functions will need to adjust accordingly.

Summing Up

The roundtable discussion was a goldmine of insights into the future of the workforce and procurement’s evolving role. For SMEs and startups, the rise of the external workforce presents an opportunity to remain agile and competitive.