Embrace the freelancing economy
With the rise of external talent, procurement executives are facing more responsibility and complexity in their roles. However, developing and maintaining a clear tangible strategy for external workforce programmes can add great value to an organisation.
A study by The Economist, interviewing 430 C-level executives found that the clear majority, 53%, of companies increased the use of external workforce for risk-reduction purposes. This risk includes increasing labour costs from talent shortages to higher staff turnover rates. Backed up by a study on the global talent shortage by Manpower (2023) who interviewed 39,000 employers across 41 countries and found that 4 out of 5 employers report difficulties in finding the right talent, with reliability & discipline and IT & Data being the most demanded sets of traits and skills-sets. To put further emphasis on the necessity of adopting an effective external workforce setup, JP Morgan's 2023 midyear business outlook finds that leaders consider their number one external threat to be labour shortages.
Whilst many enterprises are accustomed to traditional $100,000 average contractors that have large markups, moving to talent platforms with 10 pct. overhead costs can be a game-changer. External talent can be hired within days, tailored and specialised for the specific task at hand, and only paid for the effective hours worked. This results in cost-savings through several channels; increased efficiency and remote resources.
The global freelance economy reached an estimated 5.4 trillion USD in revenue in 2021 with an estimated 435 million freelancers worldwide according to Staffing Industry Analysts. Not having a clear-cut strategy on how to make full use of such accessible talent puts organisations in a disadvantageous position relative to their peers. Labour shortage risks can be pretty much eliminated, businesses can focus their efforts on core operations, whilst effectively sourcing talent for specific tasks, candidates can be found in a matter of days, and organisations are likely to improve their diversity & inclusion efforts with a more globalised usage of talent.
Furthermore, freelancers are generally directly incentivised, as they have to produce desired outcomes, and if not done well, risk losing out on any future opportunities with the client.
According to MIT Sloan 86% of global business leaders said the effective management of external contributors was critical to their organisation's overall performance. In other words the role of procurement is transitioning from transactional to one of strategic value creation at the centre of organisations’ long term strategies. It is therefore paramount that organisations dedicate sufficient expertise and resources to establishing and managing an external workforce programme that is transparent, cutting edge, cost efficient, sustainable and diverse.
Businesses leading the charge within the realm of external workforce will reap the benefits whilst their competitors, stuck in traditional mindsets and approaches, suffer the consequences of the increasing global talent shortage.