Total Workforce

Management
Perspectives on Managing
External Workers
An Analysis from our
SAP SuccessFactors
Customer Micro-Survey

SAP White Paper

Human Capital Management

By Sue Boylan &

Niveditha Kesavan
The future of work is changing. With
shrinking labor pools and multi-generational
demands for a new way of working, companies
are increasingly utilizing external workers to
meet their business needs. According to the
Bureau of Labor Statistics, there are over 6
million contingent (external) workers in the
United States alone. Given these trends, we
conducted a micro-survey to better understand
what our customers are seeing and how they
plan to change in the future. This document
explores some of these trends.

2
 Background &
Summary of Results

We surveyed 44 organizations across 17 industries and 24 executives in North America. The survey covered 11 ques-
tions regarding perspectives on external workers and gathered basic demographic information. To protect custom
er confidentiality, we report only aggregate customer responses.

Key highlights from the survey include:

Managing External Workers Infographic

Managing External Workers
The relationship between organizations and workers has changed in a fundamental way as many
contributors are no longer payroll employees, but rather part time workers, freelancers,
contractors, etc. The term external workers in this infographic is defined as such.

2 61%
Future Proofing HR Microsurvey Series
44 organizations | 17 industries | 24 executives | North America | August 2018

Playing a BIG ROLE in Challenges are abundant in

primary characteristics of organizations agree

Strategy is the priority
white collar jobs managing external workers

of managing the external that external workers

External workers are used for white collar jobs  the primary reason organizations employ external  evenly ranked top challenges include operational
17% more often than for blue collar jobs workers is to increase workforce agility inconsistencies, cost containment, engaging and

75% 18%
 this is closely followed by the desire to broaden the socializing external workers, gaining visibility into

workers effectively includes contribute significantly to

talent pools and save money usage of external workers and compliance
of those surveyed reported that external  fewer organizations rely on the external workforce to  only challenge rated considerably lower was
reported that external workers make up increase productivity, have a trial run with an integration of external workers into HR programs
employee before hiring on full time, or to mitigate (perhaps because it is not currently being done)

visibility and integration organizational success

workers make up at 20% or more of their
least 5% of their workforce risk  Challenges are wide spread with not one dominant
workforce  External workers are being used strategically and challenge in making external workers more
with a long-term lens toward workforce agility, effective
which is great

Most important
characteristics of
an external worker strategy

 administrative efficiency and alignment to business goals are

Key Themes important elements of any external worker strategy, but
visibility integration
having visibility into where and how external workers are
deployed is most critical

64% 52%
the two primary …knowing who we …minimizing any negative
 determining the most effective and appropriate onboarding,
characteristics of have doing what perceptions associated with training, and performance management processes for external
managing external and where… being an external worker… workers is important and yet somewhat constrained due to
workers effectively
” ” ambiguity of employment laws

Excel spreadsheets, Core HR and Vendor satisfaction level is highest Excel spreadsheets

of respondents indicated of businesses still use

Current usage and Management Systems are most commonly with email, LMS and high with Core do not work
used technology solutions for managing HR, Vendor Management Systems
effectiveness of external workers followed by email, Time and Time and Attendance tools

there is a clear business Excel to manage external

technology solutions and Attendance tools, and Learning
Management Systems
! more sophisticated technology solutions do help, and they work !
need to incorporate external Responsibility for managing workers causing lag
workers into workforce fore-
external workers rests with Full steam ahead…
48% 34% 7% 11% 61% 51%
casting, planning, sourcing Business Managers HR Procurement Other including
External Agency
the majority of organizations agree
external workers contribute significantly
the majority say external workers bring
value to their culture and programs if

and recruiting strategies

to organizational success they were to be more integrated

39% closely on managing external workers

stated HR and Procurement do not collaborate
 the forecast for the next 5 years is over a third of organizations expect to maintain
(34%) or increase (39%) the usage of external workers
 70% of organizations agree it is critical to engage external workers
Multiple stakeholders are involved in managing external workers
 but only 45% agree current practices are effective

The bottom line with recommendations

1 2 3 4

Strategy = Agility - Any external Technology Can Help - External Visibility, Integration and Business + HR + Procurement =
worker strategy needs to be work strategies are not as effective as Value – The business must Effective External Worker Strategy -
approached as an important strategic they could be and new technology has always know who and where The business, together with HR and procurement,
business imperative that drives already proven to have impact, so use it external workers are and what they should collaborate to source and manage external
workforce agility needed for the future are doing to ensure value workers for the greatest impact
© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC

Based on our findings, it is clear we need to rethink how we manage our Total Workforce.

The primary reason organizations employee external workers is to

increase workforce agility. Yet it is equally important to understand
that managing external workers requires new skills and strategies.

3
 Comprehensive Results
& Insights
Before we review the results, it is important to understand
the definition of the term “external workforce”. The most
common view is grouped into two categories: non-payroll
workers commonly called contingent labor and services
providers such as consulting firms, agencies and others
which are typically contracted to do project-based work
via a Statement of Work (SoW). Your non-payroll workers
or contingent labor may also include part-time workers
and gig workers. Gig workers is a relatively new term for
freelance workers. In fact, in a recent article published in
Forbes, they estimate that approximately 57 million U.S.
people are workers in the gig economy (Forbes, August
2018). Collectively those two group represent the external
workforce.
Reasons to Employ External Workers
3.93
3.00
2.32
Risk Try Before Broader
Mitigation You Buy Talent Pool
With rising cost pressures, shortage of critical skills and the
need for workforce agility, diverse workforce composition is
here to stay and likely to see an upward trend in the years
to come. The following represents the key findings of the
micro-survey.
While cost savings was a top driver for employing external
workers, the highest priority for businesses was to enable
workforce agility and speed. The two lowest priorities were to
“try before you buy” and risk mitigation. This is a significant
shift from just ten years ago where external workers were often
brought into the organization to ensure there was a good fit.
This shift aligns with the Evolution of Management Thinking
published by Deloitte by Bersin1. With the current shift towards
the Network of Teams, organizations need to be able to rapidly
address changing business, demographic and technological
changes. This shift requires a new way of managing your total
workforce.
4.27
3.95
3.52
Workforce Boost Overall Cost
Agility/Speed Productivity Savings
4
 Managing External Workers
As we found in the micro-survey, the two major characteristics
of managing external workers are visibility and integration.
Visibility is essential for both managing the workforce and
managing expense. Organizations have often attempted to limit
headcount spend only to find that managers have replaced full-time
workers with external workers. Due to the lack of visibility this
has historically been very difficult to track and monitor. With a
Total Workforce Management approach, organizations can have
clear visibility into all workers and develop effective staffing
strategies to have the workforce agility that they need, yet the
cost management and compliance that is essential.
Integration is a deeper and more complex issue. Due to legal
considerations when managing your external workforce, there
are clear guidelines on ensuring the proper protocol between
managing your regular full/part-time workforce and your external
workforce. However, to run the business you need integration in
many areas such as learning, certifications, business objectives
and overall engagement.
By fostering clear communication to ensure you have the right
people doing the right work and ensuring your TOTAL workforce
understand the value each person is delivering for the business
you can enable greater integration and performance.
Technology plays a key role in enabling the visibility and
integration necessary. It can be as simple as an organization
chart. Having one, fully integrated, organization chart showing
your total workforce increases the visibility and enables workers
and managers to understand who is on their team and how
they can contribute. Utilizing technology to track the necessary
certifications, training and skills enables managers and HR to
better understand their total workforce and gain a deeper
understanding of the skills for the workforce of the future.
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 Responsibility for Managing External Workers
Currently, 48% of the respondents indicated that the responsibility
for managing external workers rests with the hiring manager. Yet,
with visibility and integration being the key characteristics for
managing external workers, there appears to be a disconnect. If
we want to have a workforce that can deliver agility and speed
and we need visibility and integration, we need to rethink overall
management of our Total Workforce.
Traditionally, HR owned the regular full and part-time workforce
while Procurement managed external workers. The expansion of
external workers to include independent contractors and SoW
project teams has increased the involvement of line managers
as they have been the entities sourcing these resources. Federal
and State enforcement of regulations in this field has increased
the involvement of Legal and increased spending on external
workers has made it a strategic focus for Finance and safeguarding
organizations’ data, process and privacy.
Should an organization choose one entity to drive its objectives
for external workers? The challenges are all manageable and
organizations can benefit by taking an integrated approach
outlined below towards the management of external workers
resolving all three major areas of focus and concern, namely
addressing external workforce spend, external workforce
management and adhering to regulatory compliance.
Procurement personnel are experts at bringing deep knowledge
of market rates based on demand and supply needs. Skilled at
rate negotiation and contract execution, their expertise should
be leveraged to identifying diverse and dependable external
worker supply bases.
34% of our micro survey respondents stated “cost savings”
as a reason for employing external workers. The potential for
reduced costs makes it the responsibility of Finance to ensure
all purchases are properly budgeted, applied to the respective
cost entities and that expenditures do not exceed established
budgets.
Line managers are the direct beneficiaries of the services provided
by external workers. From an Operations standpoint, they know
best the type, skill and the number of resources required to
fulfill their specific needs on projects. Tools and processes must
be developed to gather line manager feedback on on-going and
future external workforce requirements.
Legal is an indispensable part of any program’s success and
often provides the backbone in setting commercial terms. Legal
challenges with external workers go beyond compliance with
employment legislations to also address issues of workforce
safety, protection of intellectual property and adherence to
privacy regulations. Legal often provides the needed direction to
HR, Procurement and IT to enforce policies set forth by them.
While Procurement focuses on finding the best rate and best
value, HR must assert the need for the best fit to attract,
onboard and nurture external workers. In a world expanding its
on-demand workforce, HR must actively involve itself in processes
of attracting, onboarding, developing, reviewing, rewarding and
embracing external workers.
As the custodian of employee data, HR must determine how
external workers are identified in HR systems, how they are
6
measured, trained and supported. Being the face of the organization
to potential hires, HR needs to reconsider how they sell the
employer to the external worker. Promoting job security and
opportunities for internal advancements as reasons for joining
may not resonate with external workers who chose independent
work models citing greater autonomy over time, higher pay etc.
HR must define the process of recruiting external workers in
the same way they would for permanent workers. Policies must
outline procurement to handle vendor selection and contracting
and allow HR to determine skill sets, experience, cultural and
compliance requirements.
That external workers crave flexibility and independence is true,
they also crave a sense of belonging and purpose. HR should
work with legal and IT to give external workers clear performance
goals, access to internal communications systems and the
necessary training and support to make them productive and
aligned to the organizations vision.

The trend for utilizing external workers continues to

increase placing a greater need to manage effectively
the total workforce.

HR must drive integrated strategies that can help organizations take advantage of diverse workforce
types. The needs of this highly sought-after talent pool must be focused at each stage of its life
cycle. By understanding the requirements of external workers and reevaluating the assumptions
about how work gets done internally, HR will differentiate their organization as a brand to which
external workers will gravitate towards.

7
This article is part of an extensive ongoing research
program currently being conducted by SHRM and SAP
SuccessFactors’ research groups on the challenges
affecting the use and management of external workers
including contractors, temporary employees, contingent
workers, and freelancers. If you would like to learn more Authors:
about this research program, including opportunities Sue Boylan, HR Executive Advisor
to participate, please contact Greg Selke, a member of sue.boylan@sap.com
the Human Capital Management Research Team at SAP
SuccessFactors, at greg.selke@sap.com
Niveditha Kesavan, Senior HR Advisor
Niveditha.kesavan@sap.com