The Chief Financial Officer (CFO) is often frustrated with its organization's lack of visibility and financial control over its contingent workforce, while the front-line business is more focused on ensuring any contract labor jobs are filled as quickly as possible. This can result in misaligned motivators.
Today’s organizations are increasingly turning to the contingent workforce to access high-quality talent and save money. While this brings a range of business benefits it also presents new challenges for the company and specifically for the CFO.
In fact, many organizations do not understand how the CFO and finance function fit into managing a contingent workforce. In many cases, the CFOs involvement starts when the finance team identifies and begins to question the contingent labor costs which are often hidden in numerous GL Codes.
Typically, the responsibility of the contingent workforce falls on either procurement, human resources, or the front line business managers.
As the workforce shortage continues, and businesses increasingly utilize the contingent workforce to access top talent, it’s becoming increasingly critical that the CFO and workforce management strategies operate with one common goal. This is the only way that CFOs will be able to find cost savings to free up capital investment, while hiring managers will get the talent that they need to achieve their strategic objectives.
With that in mind, here are three crucial thought provokers about the contingent workforce that CFOs can use to see if they can better align contingent workforce management with the overarching financial goals of the business.
1 - Business motivators are typically different from that of the CFO
When it comes to hiring contingent workers, the CFO and the business are often misaligned on how best to manage this often expensive and growing talent pool - often to the financial detriment of the company.
Hiring managers often prioritize urgency over cost, and are more focused on filling positions than worrying about rates being too high. This leads to hiring managers overpaying their staffing agencies and paying more than the competitive rate for contingent workers.
Since hiring managers are typically less concerned about budget and more about getting the work done, the business is often ignorant to the fact that they may be overpaying for resources.
By ensuring CFOs and the business are aligned within a formal contingent workforce management program, organizations can ensure they mitigate the risk of overpaying and gain access to the talent they need.
2 - Contingent workforce costs are often hidden
Contingent workforce management is complex. The vast majority of businesses are still using manual processes to manage both their contingent workers and staffing agencies, with no real strategy in place.
The problem is, this leads to “rogue spend” that runs rampant throughout the business. In this scenario, spend that occurs on sourcing, engaging and hiring contingent workers is not accounted for, approved and does not follow a strategic approach.
Hourly work is often hidden as fixed fee contracts to avoid policies and oversight, invoices are coded, suppliers are set up in the system with the wrong category codes, hiring managers engage staffing suppliers outside of pre-negotiated rate contracts, workers are engaged outside of pre-approved buying channels and companies are at huge risk of falling foul of co-employment when they do not implement centralized control.
When contingent workforce management is neither strategic nor centralized, businesses completely lack the visibility and control they need over their contingent workforce.
3 - Organizations that use a vendor management system pay less
In most cases, the risks associated with the contingent workforce are created (and left to run rampant) by a lack of centralized management. This prevents organization-wide visibility into the contingent workforce, resulting in inefficient processes, rogue spend and misalignment between the business and CFOs.
When a vendor management system (VMS) is implemented, these challenges are addressed.
A VMS gives companies central oversight and local control over their contingent workforce, allowing them to build a highly-strategic program that ensures all hiring managers are following standardized and approved processes.
A vendor management system provides contingent workforce program data that gives insight into staffing agency performance, allowing companies to bring high supplier markups in line with the industry standard, consolidate vendors and spend, as well as use benchmarking to access rate reductions.
At Conexis VMS, our customers find that rates are typically 15 percent lower when a company implements a vendor management system to manage their contingent workforce.
By using a VMS, companies are able to improve in many areas of the contingent workforce category and bring down costs so the entire company benefits in faster fills and lower costs.
Do any of these feel familiar for your organization? The first critical step in contingent workforce management transformation is to get visibility and control, and the quickest way to do that is to employ a VMS system.
By using a VMS system to centralize your data in one place, CFOs will finally have the visibility they need to see how much the business is spending on contingent work and with whom. This leads to cost saving and efficiency opportunities.
Interested in learning more? Book a free private consultation or book a 20 min private demo of the Conexis VMS platform with Wayne (here).