In today’s dynamic business environment, organisations increasingly rely on external workers such as freelancers, contractors, and contingent labour to stay agile and competitive. However, managing this workforce effectively requires alignment between two key functions: Human Resources (HR) and Procurement. By working together, HR and Procurement can optimise external workforce strategies, reduce risks, and maximise value. Here are three ways to align these functions for better outcomes.

1. Develop a Unified External Workforce Strategy

Why It Matters

HR and Procurement often have distinct priorities. HR focuses on talent quality, engagement, and compliance, while Procurement emphasises cost control and vendor management. A unified strategy ensures both priorities are addressed.

How to Do It

• Collaborate on Workforce Planning: Jointly identify the organisation’s short- and long-term external workforce needs.
• Set Shared Goals: Define KPIs that align with business objectives, such as cost efficiency, workforce quality, and compliance.
• Create a Governance Framework: Establish clear roles and responsibilities for managing external workers, ensuring alignment between HR and Procurement policies.

Example

A technology company developed a unified external workforce strategy by integrating HR’s focus on talent quality with Procurement’s vendor management expertise. This approach led to improved talent sourcing and a 15% reduction in costs.

2. Leverage Technology for Centralised Management

Why It Matters

Siloed systems and processes often result in inconsistent data and inefficient management of external workers. Using a centralised platform provides visibility and streamlines collaboration between HR and Procurement.

How to Do It

• Adopt Vendor Management Systems (VMS): Use a VMS to track, manage, and optimise contingent workforce operations.
• Integrate Systems: Connect the VMS with HR systems (e.g., Human Capital Management platforms) to centralise data and ensure consistency.
• Provide Real-Time Insights: Use analytics to give both HR and Procurement visibility into spend, workforce performance, and compliance.

Example

A healthcare provider implemented an integrated VMS and HR platform, enabling real-time tracking of external workers and vendors. This reduced duplicate efforts and enhanced workforce visibility across departments.

3. Align on Risk and Compliance Management

Why It Matters

External workers introduce unique risks, including misclassification, regulatory non-compliance, and security concerns. Alignment between HR and Procurement ensures these risks are managed effectively.

How to Do It

• Standardise Contracts and Policies: Create unified policies for vendor agreements, worker classifications, and compliance monitoring.
• Jointly Monitor Compliance: Collaborate on audits to ensure all external workers adhere to labour laws and company policies.
• Train Teams on Risks: Provide cross-functional training to HR and Procurement teams on compliance requirements and risk mitigation strategies.

Example

A financial services company aligned HR and Procurement on worker classification standards, reducing regulatory risk and avoiding potential fines during an audit.

Bullet Points: Benefits of HR-Procurement Alignment on External Workforce

• Enhanced Efficiency: Streamlined processes reduce redundancies and improve workforce management.
• Better Talent Quality: Collaboration ensures access to high-quality external talent.
• Improved Visibility: Centralised data provides insights into costs, performance, and compliance.
• Reduced Risks: Unified risk management minimises legal and regulatory exposure.
• Optimised Costs: Joint strategies ensure cost-effective use of external resources.

Conclusion

Aligning HR and Procurement on managing the external workforce is essential for optimising talent strategies, improving efficiency, and mitigating risks. By developing a unified strategy, leveraging technology, and collaborating on risk management, organisations can maximise the value of their external workforce.

Vendor Management Systems (VMS) are powerful tools for managing contingent labour and procurement processes. However, to maximise their return on investment (ROI), organisations must adopt a Total Workforce Strategy. This approach integrates the management of both contingent and permanent talent to drive efficiency, optimise costs, and unlock strategic value. Here’s how aligning your VMS with a Total Workforce Strategy can enhance ROI.

What is a Total Workforce Strategy?

A Total Workforce Strategy unifies the management of all talent—permanent employees, contingent workers, and freelancers—under a single framework. It focuses on optimising workforce utilisation, improving agility, and aligning talent with organisational goals.

Key Components of a Total Workforce Strategy

• Integrated Talent Management: Combining insights from human resources (HR) and procurement.
• Strategic Workforce Planning: Balancing permanent and contingent talent to meet business needs.
• Data-Driven Decisions: Leveraging analytics to forecast demand and assess workforce performance.

The Role of VMS in Total Workforce Strategy

Vendor Management Systems play a critical role in achieving a Total Workforce Strategy by providing visibility, automation, and analytics for contingent workforce management. When optimised, a VMS can:

• Enhance cost control.
• Improve compliance.
• Streamline vendor and worker management.
• Provide actionable insights for workforce planning.

Strategies to Optimise VMS ROI

1. Consolidate Data for Total Workforce Visibility

A VMS centralises workforce data, providing a holistic view of all talent categories.

• How: Integrate VMS with HR systems, such as Human Capital Management (HCM) platforms, to capture both contingent and permanent workforce data.
• Outcome: Gain a unified view of talent, enabling better decision-making and strategic planning.

Example:

A multinational company integrated its VMS with its HCM, improving visibility into contractor performance and aligning contingent hiring with project timelines.

2. Use Analytics for Strategic Insights

VMS platforms provide robust analytics that can guide workforce decisions and uncover cost-saving opportunities.

• How: Leverage VMS data to analyse spend by vendor, role, and region. Use predictive analytics to forecast future talent needs.
• Outcome: Reduce costs by identifying inefficiencies, such as overreliance on high-cost vendors or duplicate roles.

Example:

A healthcare organisation used VMS analytics to optimise vendor utilisation, reducing costs by 12% in six months.

3. Automate Processes for Efficiency

Automation through a VMS reduces manual efforts, minimises errors, and speeds up procurement processes.

• How: Automate requisition approvals, timesheet management, and invoicing within your VMS.
• Outcome: Free up HR and procurement teams for strategic tasks, enhancing overall productivity.

Example:

A technology firm automated contractor onboarding through its VMS, cutting onboarding times by 40%.

4. Align Workforce Strategy with Organisational Goals

Ensure that your VMS supports long-term objectives, such as agility, cost reduction, and compliance.

• How: Set KPIs within your VMS to track metrics such as time-to-hire, contractor performance, and vendor compliance.
• Outcome: Improve workforce alignment with project goals and organisational priorities.

Example:

A financial services company implemented goal-based KPIs in its VMS, improving project delivery timelines by 15%.

5. Strengthen Compliance and Risk Management

A VMS ensures that contingent workforce management adheres to labour laws, tax regulations, and company policies.

• How: Use VMS tools to standardise contracts, track worker classifications, and manage regulatory compliance across regions.
• Outcome: Mitigate risks and avoid costly penalties associated with non-compliance.

Example:

A global manufacturing company used its VMS to automate compliance tracking, avoiding significant fines during an audit.

Bullet Points: Benefits of Optimising VMS with a Total Workforce Strategy

• Enhanced Visibility: Gain a unified view of all workforce categories.
• Improved Cost Management: Identify and eliminate inefficiencies in contingent labour spend.
• Increased Agility: Quickly adapt to shifting workforce demands with data-driven planning.
• Risk Mitigation: Ensure compliance with labour laws and regulations across regions.
• Better Performance Tracking: Measure contractor and vendor performance to optimise hiring decisions.

Conclusion

Optimising your VMS through a Total Workforce Strategy transforms it from a transactional tool into a strategic enabler of workforce success. By consolidating data, leveraging analytics, automating processes, aligning with organisational goals, and strengthening compliance, organisations can unlock the full potential of their VMS and achieve a higher ROI.