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Breaking Down Barriers to Talent Fulfillment: The Impact of Headcount Controls on Sourcing External Workers Efficiently
Maurice Benz | August 30 2024
Navigating the process of fulfilling external talent demands within organizations can often feel like an uphill battle. Managing various types of needs and requests, including project deliveries, subject matter expertise and peak demand periods, can create numerous hurdles that hinder the efficient fulfillment of these demands.
Surprisingly, many organizations inadvertently make it easier for business requestors to make the wrong decisions when it comes to meeting external workforce needs. Policies such as rigid headcount limitations, approval processes that vary between channels, and other barriers can prevent managers from utilizing the most appropriate channels for fulfilling talent demand.
The Impact of Headcount Controls
Data from our latest U.S. Labor Market Report illustrates how much headcount limitations and other barriers are impacting talent sourcing. Three years ago, “traditional” staff augmentation and EOR requisitions comprised about 45% of contingent workforce management spend, while “project work” — SOW, independent contractors, managed services, etc. — made up the other 55%.
But as seen in the chart below, as macroeconomic trends have pushed more companies into cost reduction strategies such as headcount freezes, the gap between the two has ballooned from about 10% to more than 25%:
Why does this matter? As more work gets moved into project-based engagements, the visibility to compliance, rates and underlying costs often deteriorates or vanishes, and these same stressed companies pay more for the talent they so desperately need. Potential complications include:
- Compounded risk exposure: Due to the lack of visibility, misclassification increases, putting companies in danger of class action lawsuits and significant cost overages.
- Higher bill rates: Managed services consultant bill rates are generally 30% to 100% higher than their staff augmentation counterparts, which can often produce equal-quality services at much lower rates.
- Operational inefficiencies: Small service providers, which sometimes present themselves as niche consultants, often fall “under the radar” due to their relatively low spend by the business, but this lack of visibility can prove costly in unmonitored rogue spend.
Building a Better Approach to External Talent Needs
To address these challenges, organizations must reevaluate their approach and consider shifting from a focus on headcount to more flexible budget management strategies. By implementing a centralized entry point that serves as a guiding and decision-making layer, configured according to both legislative requirements and internal business rules, organizations can improve visibility and streamline the process of assessing and fulfilling external workforce demand.
Furthermore, by leveraging automation and configuring your external workforce management system efficiently you can help ensure business requestors and other stakeholders are utilizing the most optimal, compliant fulfillment options. In addition, integrating artificial intelligence and data analytics can further enhance the accuracy of skills gap assessments and talent forecasting.
This shift in approach not only helps organizations to accurately match the type of work with the right type of worker(s), but it also helps to reduce misclassification, mitigate identity risks, and prevent significant talent shortages and cost overages.
By making these changes, organizations can maximize the value of their investments while also creating a more seamless and efficient process for business requestors to make the right decisions.
Our new “Summer/Fall 2024 U.S. Labor Market Report” has more on this topic and other labor market trends, including the evolution of AI, in-demand skills, the rise of offshoring and more — download it now for exclusive data and related recommendations.
To learn more about how the right MSP partner can help you better understand your talent sourcing options and optimize your contingent workforce, check out Magnit’s “Ultimate Guide to Selecting a Managed Service Provider.”
Disclaimer: The content in this blog post is for informational purposes only and cannot be construed as specific legal advice or as a substitute for legal advice. The blog post reflects the opinion of Magnit and is not to be construed as legal solutions and positions. Contact an attorney for specific advice and guidance for specific issues or questions.