Five Phases to an Optimized Contingent Workforce Management Strategy

Dramatic advances in technology continue to disrupt traditional models of employment. The pandemic has accelerated changes in employment and workforce composition even more rapidly. Remote work has exploded, and evolving public health regulations have kept entire industries in a state of flux. This uncertainty and change is making the flexibility of contingent workforce solutions increasingly attractive to employers.

A contingent workforce can include temporary workers, freelancers, and contractors. Nearly 80% of businesses are planning to continue their use of contingent workers, with one-third of those already expecting to increase the scope of their contingent workforce. Advances in technology and rapidly changing business environments demand employers to be able to quickly change and adapt. Developing a contingent workforce strategy allows businesses to fill knowledge gaps, add flexibility, and increase productivity to quickly pivot and scale operations successfully.

Although 80% of businesses use contingent workers, only 25% have an optimized contingent workforce management strategy to accurately track and optimize the impact of their contingent workforce. Without an optimized strategy, businesses are left to guess at the effectiveness of their workforce. Dedicating the time to understand and refine contingent workforce strategies improves talent procurement, employee satisfaction, and productivity, all while saving money by focusing on the strategies that produce results.

This guide will break down the five phases of a contingent workforce management strategy. Your staffing or recruiting agency can help your clients understand these phases, identify where they currently are in the process, and put a plan into place that lays out what steps to take to optimize their contingent workforce strategy for a rapidly changing business world.

1. Sporadic Phase

Businesses in the sporadic phase either don’t use contingent workers or do so very infrequently. They don’t have formal strategies or processes in place and do not plan to regularly employ contingent workers in the foreseeable future. Only 20% of businesses are in the sporadic phase, a number that continues to decrease as the use of contingent workers becomes more widespread.

2. Early Use Phase

In the early use phase, employers rely on contingent workers with some regularity. Perhaps they are giving ad hoc assignments to freelancers and bringing on temporary workers for short-term projects. Similar to the sporadic phase, these employers don’t have a formal workforce strategy in place, and are not measuring results or project outcomes related to their contingent workforce efforts.

The focus in this early phase is on short-term results and filling talent gaps. Longer-term goals are rarely a factor at this point, and using contingent workers is likely thought of more as a necessity to get work done, and not a strategy. About 25% of businesses using contingent workers are in this phase. They are focused primarily on cost control, and often have not yet considered investing in technology and service adoptions for contingent workforce management.

3. Normalization Phase

In the normalization phase, businesses begin to implement some standard processes and procedures to guide their contingent workforce management strategy. The focus begins to shift towards the future, and they are now planning for the growth of their contingent workforce program alongside filling current talent gaps. They are starting to identify KPIs and are beginning to look more systematically at improving cost efficiencies and workforce productivity.

Nearly 40% of businesses are in the normalization phase. There is still a primary focus on filling short-term talent gaps but with more employers working with staffing agencies, vendors, and employers of record (EOR) providers, and more technology adoption to streamline their processes. Businesses in the normalization phase should begin focusing on budget analysis, standardizing procedures, and financial forecasting. Solidifying lessons learned and looking at longer term goals is what will allow your clients to progress to the next level of their contingent workforce strategy.

4. Strategic Phase

Businesses that reach the strategic phase begin to gain a nuanced understanding of their contingent workforce, and the effect it has had on business operations. They are now collecting and analyzing metrics to inform business decisions relating to their workforce. The strategic phase tends to coincide with a shift to more internal HR involvement with contingent workers for greater visibility into workforce spend and productivity.

To reach this more advanced stage, businesses are also building more integrated partnerships with staffing agencies and vendors. They have a better understanding of their needs, what to look for in partners, and continue to invest in technology and service providers. This is when companies increasingly begin to switch from bill rate to pay rate fee models for their contingent workforce. Continuing to evaluate fee models and picking appropriate partners is key to progressing to an optimized contingent workforce management strategy.

5. Optimization Phase

At the optimization phase, employers have a comprehensive understanding of their contingent workforce. They have robust measuring and reporting procedures in place, and are taking greater ownership of their fee models. Businesses in the optimized phase set themselves up to reduce inefficiencies and effectively fill both long- and short-term talent gaps. They see improvements in worker satisfaction, fill rates, and productivity. 

Only 25% of businesses develop and improve their contingent workforce strategies to reach the optimization phase. You and your clients can work to optimize strategies by:

  • Embracing technology that is disrupting old, cumbersome workforce management practices. Adopt new vendor management systems, and strategically partner with service providers to improve productivity and mitigate risks that come with a contingent workforce.
  • Establishing metrics that measure the results of contingent workforce strategies. This should include measuring worker satisfaction, productivity, and fill rates.
  • Using these metrics to make informed decisions about fee models, vendor spending, and budget analysis to continually refine your contingent workforce management strategy.
  • Focusing on building partnerships between service providers and internal HR for more customized and effective talent procurement that best serves the needs of your clients’ business while creating a better experience for prospective candidates
  • Giving contingent workers more connection and more personal investment in your client’s work and mission by focusing on their experience. Offer learning and development opportunities and work to emphasize that they are truly “part of the team.”

Is your staffing agency looking to help clients optimize their contingent workforce management strategy? Contact us today for help building your contingent staffing strategies, and stay ahead of your competition.

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