17 September 2020

What is Rogue Spend in Contingent Workforce Management?

John Clark
John Clark

The non-employee workforce is growing at a significant rate, and now makes up a sizeable portion of company spend for small, medium and large organizations alike.

In fact, according to research from Staffing Industry Analysts (SIA), companies worldwide spent $4.5 trillion (US) on contingent work in 2018. The majority of that, $2.67 trillion, was spent on independent and self-employed workers.

Not only is the non-employee workforce a growing requirement for most businesses, but so is the need to use vendors to source, hire and invoice these workers. That’s not even mentioning the vendors you are using to fill your non-staffing requirements.

It’s not unusual for companies to have tens, hundreds or even thousands (for international enterprises) of vendors supplying their business with products and services.

Alongside the growth of the non-employee workforce and increased vendor use comes a new challenge, managing non-employee workforce spend. Unfortunately, the large majority of organizations are poorly managing their non-employee workforce and vendors, resulting in rogue spend.

What is rogue spend?

There’s no denying it, managing a non-employee workforce and the vendors associated with it is a complex task. Some companies use manual processes such as spreadsheets, in-house databases and sharepoint sites to manage all of these data points. While other organizations do not even manage contingent spend at all.

When either of these two things happens, rogue spend will start to invisibly affect your business. 

Rogue spending is essentially spending that occurs on sourcing, engaging and hiring contingent labour in scenarios that are not accounted for, not approved, and have not followed a strategic approach to non-employee management.

This happens when your organization has no centralized management strategy for the hiring of non-employee workers. 

When you have poor contingent labour management, managers in different departments of your organization will engage staffing suppliers outside of pre-negotiated rate contracts, hire one-off contingent non-employee workers through their own methods at rates they believe appropriate and engage workers outside of pre-approved buying channels.

How to prevent rogue spend with VMS technology

Rogue spend occurs when managers in your organization go rogue, but this doesn’t mean it is their fault. The risk of rogue spend is created by a lack of centralized management, which prevents organization-wide visibility into your non-employee workforce and results in inefficient processes.

The State of Contingent Workforce Management 2020 study from Ardent Partners states that visibility remains an issue for the average contingent workforce program. In fact, the average rate of visibility into non-employee workforces has dropped nearly 20 percent since late 2018. 

There's good news, however, with the study stating: “As businesses adapt to the changing world of work (and, as more rigor is applied to operational aspects concerning the way new talent strategies are integrated into the greater program), visibility will improve.”

One of the most effective ways for your organization to get on top of rogue spend is to move away from archaic manual spreadsheets and start using automated technologies. This is where a vendor management system (VMS) comes in.

A VMS is a cloud-based technology that allows you to consolidate your vendors and manage every step of hiring contingent labour in one central database. Using a VMS will allow your organization to structure and optimize every process in relation to hiring non-employee workers and measuring vendor performance.

A vendor management system will automate transactions, store non-employee labour data, facilitate onboarding, measure vendor performance, collect requisitions from managers and consolidate all of your vendors in one location.

By centralizing your entire non-employee process in one place, every stakeholder in your business will be aligned with your contingent workforce strategy and your business will have clear visibility into non-employee labour spend.

Want to learn more about how a vendor management system can reduce rogue spend within your organization’s non-employee workforce? Contact Conexis VMS today. We would love to answer any questions that you may have.

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John Clark

John Clark

A Co-Founder of Conexis, and Staffing Industry Analysts’ (SIA) top 40 under 40 recipient, John has more than 15 years experience in the Contingent Workforce, Managed Service Provider and VMS technology space. John has designed, built and run dozens of client workforce programs across multiple industries, managing over $1bn in spend. John’s expertise sits in both program design and delivery as well as VMS technology implementation and management.

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