Why companies need a modern work strategy to meet future needs

Streamlined integration and clear governance of non-employee labor are key to boosting business agility and competitive strength.

In brief

• Companies must integrate non-employee labor with clear governance and standardized practices to drive agility and gain a competitive advantage.
• Optimizing a workforce strategy demands effective integration and management of non-employee labor to maximize value and control risks.
• Consistent language and terminology are essential for clear business processes, risk management and performance in managing the extended workforce.

In the current business environment, companies increasingly depend on a non-employee workforce. As much as 35% to 50% of a company’s total workforce population is external, yet management strategies for this critical segment lag, leading to risk escalation and value loss.¹

In its Workforce Solutions Buyer Survey 2024, Staffing Industry Analysts surveyed 165 companies with contingent workforce and/or workforce solutions programs globally. Only 33% of respondents agreed that overall practices for their contingent workforce are leading edge.² That’s down from 45% in the 2023 survey.³

The non-employee workforce is multi-segmented and multidimensional, providing an array of needed skills and talents to support organizations which continue to evolve. Despite these key offerings, inadequate visibility and control over this pivotal group of workers undermines efforts to manage costs, achieve diversity and maintain regulatory compliance, posing significant safety challenges.

The key to long-term success and resilience is a fit-for-purpose operating model framework, underpinned by cohesive governance. This structure is vital for improving oversight and enabling leaders in procurement, HR and business to make informed decisions that enhance value, reduce risk and expedite business strategy

Foundational component 1:

Language, terminology and taxonomy

“What do we mean by that?”

The lack of consistent language and terminology disrupts business processes and therefore deteriorates performance and productivity.

Elementary as it may seem, standardized language and terminology is an often forgotten starting point. When evaluating the extended workforce in its totality, the definition of “contractor” is critical. Different interpretations of certain words creates process disharmony and hides critical safety and security risks, which are literally lost in translation. Similarly, an inconsistent definition of “professional services” creates conflict among teams, increasing the loss of value due to inefficient management levers.

Developing simple and standard definitions, along with a taxonomy focused on the nature of work to be delivered, clarifies polices and improves the ultimate user experience. While no universal definition or structure exists, EY advisors recommend a commonly applied framework to segment the extended workforce population into three major areas. Standardized terms provide consistency in reporting and visibility, enabling informed decision-making and oftentimes brings about realization that the extended workforce population and its spend is larger than every understood.

Foundational component 2:

Lifecycle process framework

Break down siloes

Consistent control and oversight of contractor performance requires integrated processes executed in coordination. While functional teams may excel at managing their linear process (e.g., source-to-pay, hire-to-retire), oftentimes handoffs to other functions fall short.

When managing outside labor and services, we recommend companies reframe their perspective and consider the lifecycle and its multiple processes. Effective lifecycle management requires cross-functional alignment, collaboration and clear accountability. A responsibility assignment matrix (i.e., RACI) can be helpful to provide this clarity, regardless of digital capability.

At its core, every contractor who delivers services goes through the same lifecycle milestones:

To achieve optimal contractor management, companies must adopt a holistic approach, ensuring seamless integration and accountability across all lifecycle stages for sustained performance and success.

Foundational component 3:

Global governance

Enable, don’t inhibit

Governance of contractor programs often stalls post-ownership decision by procurement or HR, leading to challenges during expansion or cost re-evaluation. Recent legislation targeting labor and modern slavery risks further complicates governance without clear, cross-functional oversight throughout the contractor lifecycle.

A cross-functional governance council is essential for defining strategy, tools and standards to manage the global non-employee workforce, allowing local entities to make informed decisions in real time. Comprising primary work process owners and major users of the extended workforce, these councils should guide market-level teams with authority yet flexibility, fostering a “freedom-within-a-framework” approach.

This structure encourages consistent enterprise-wide practices and cross-functional partnership, enhancing compliance and value creation. These principles are universally applicable, and establishing a solid foundation from the outset is crucial for accelerating implementation, onboarding success and maximizing ROI.

Keys to success

Contractors have become an indispensable resource for many sectors, which is causing industries to transform. As this trend becomes part of the standard operating model, companies need to develop a strategy that maximizes the value of contractors while providing better understanding and visibility into how they function in an organization.

Here are three steps to get started:

• Be clear about terminology: There are many words used to describe non-employees: contractors, contingent workers, consultants, advisors, non-employees. As you build your baseline, establish the standard definition. Create a document that establishes the meeting of key terms you’ll be using.
• Establish a baseline: Evaluate your organization’s use of contractors and non-employees and create a summary that gives everyone a clear understanding of how contingent labor is used. This summary can then be used to inform your total talent strategy, and identify any gaps or risks that may exist.
• Take an inventory of risks, needs and priorities: Map out the entire contractor lifecycle, from onboarding to offboarding, and identify the key stages where your organization must manage risks, fulfill needs and align with strategic priorities.