5 Reasons the Rapidly Expanding Contingent Workforce Is a CIO Priority

Today, as traditional work boundaries evaporate in a boundaryless skills economy, the CIO faces a mandate to build an infrastructure that supports an extended workforce and enables business agility while carefully managing security and compliance risk.

Enabling an extended workforce (such as consultants, gig workers, and contract workers) is now mission critical, as multiple factors—including shifting business demands, changing employee expectations, and a still-tight talent market amid economic uncertainty—have created a mismatch between in-demand skills and the supply of workers with those skills. 

It’s a serious problem: More than one-third of senior executives say a lack of relevant workforce skills is their top barrier to achieving transformation goals, according to the Workday global report “Closing the Acceleration Gap: Toward Sustainable Digital Transformation.”

To close this skills gap and manage labor costs, businesses are increasingly expanding their talent strategies to support alternative labor. After all, the contingent workforce is growing: 36% of respondents now identify as independent workers, a notable increase compared to 2016 when just 27% did so.  

As companies’ talent strategies are shifting, their IT teams are also evolving, assuming broader responsibility for digital transformation and general organizational resilience. 

Consider this: In many companies, human resources (HR) manages employees in their human capital management (HCM) system while procurement manages contingent workers in a vendor management system (VMS). The separate system approach sets up a disconnect. As many as 68% of independent workers aren’t included in the extended workforce for budgeting and planning, which presents an incomplete picture of skills within the organization. 

As such, CIOs and IT leaders must partner with HR to deliver solutions that power the future of work and include the extended workforce. Moreover, CIOs are best equipped to navigate the hurdles of managing an extended workforce in a connected ecosystem.These hurdles include workforce visibility, security, talent planning, and talent deployment.

Here are five reasons why contingent workforce management must be a CIO priority. 

1. Contingent Workers Pose a Serious Cybersecurity Threat

Every worker—salaried or hourly, seasoned or seasonal, outsourced or otherwise—represents a potential cybersecurity vulnerability. More than 80% of cybersecurity breaches are caused by social engineering, or an attempt to manipulate or deceive individuals to gain control of an organization’s information, according to Verizon’s “2022 Data Breach Investigations Report.” Accordingly, most security breaches are caused—whether maliciously or unwittingly—by company insiders. Contingent workers create additional risks because they have higher-than-average turnover and their departures are frequently handled less rigorously from an IT management perspective than departures of full-time staff. 

This disconnect often stems from how companies manage their core workforce. While they do use HCM solutions that automatically provision and deprovision employees, companies still rely on manual systems to provision contract workers. As a result, contingent departures often fail to spur the automated processes and due diligence that ensure access controls are updated appropriately. This ad hoc offboarding creates orphaned accounts that former contractors can still access long after they leave, routinely compromising access to networks, systems, assets, and buildings. In fact, many major breaches in recent years have been traced back to contractors who continued to access company systems after their assignments ended.

Whether these incidents result from human error or malicious intent, they are incredibly harmful and costly. According to an IBM Security report, the average data breach cost rose to $4.35 million in 2022, a 2.6% increase from 2021 and a whopping 12.7% increase from 2020. To combat the threat, CIOs should view manual processes as unacceptable. The far superior alternative? A VMS that hooks directly into an organization’s core HCM to provide a single system of record for the entire workforce and that ensures continuous monitoring and appropriate offboarding, regardless of worker classification.

2. A Digital Acceleration Strategy Needs a Unified Workforce Ecosystem

CIOs are stepping forward to lead their organizations’ digital acceleration, leveraging technology to disrupt the competition, drive market share, and ensure long-term success. Especially post-pandemic, this role includes taking a more fluid approach to managing resources and upgrading digital infrastructure to meet the demands of remote work. To do so, high-performing organizations are increasingly turning to on-demand staffing models that rely on contingent workers. Their workforce ecosystem approach, however, has failed to keep pace with the on-demand approach.

For example, while salaried team members are often tracked in HCM systems, contingent workers regularly sit under procurement, operations, or individual business lines that track them through a patchwork of legacy systems and one-off applications. This siloed approach not only requires complex integrations each time a new system is added, but also prevents leaders from accessing the real-time data necessary to effectively deploy contingent workers to the right project at the right time.

To break out of the integration management trap and create a future-proofed application architecture, CIOs need to invest in a cloud-based VMS that integrates seamlessly with their HCM to support all workers, including full-time, hourly frontline workers, contractors, and gig workers. A connected workforce ecosystem simplifies the onboarding process while operationalizing data so leaders can easily see where contractors are located, what systems they can access, and how much money the organization is spending on them. Moreover, leaders can also access detailed data on contractors’ skills and past work experience, so they can deploy these workers to new projects quickly and effectively.

3. Leaders Need Total Workforce Visibility to Respond to Growing Challenges

Organizations collect unimaginable amounts of data—about their people, finances, and operations.

But all that information is useless if companies can’t effectively ingest all this disparate data to help leaders make better decisions. 

When it comes to workforce data, this includes integrating contingent-worker information into an organization’s HCM system, so leaders across finance, HR, operations, and procurement can easily see overall costs and fully analyze their talent management strategy. Aligned workforce data also provides greater budgetary control by allowing finance and HR leaders to easily understand both total labor costs and contingent labor costs, so they can execute more effective headcount planning. What’s more, total workforce visibility allows for more agile hiring and sourcing, enabling companies to fill critical talent needs quickly.  

But to do so, CIOs must implement technology solutions that do more than manage data to create a single, real-time source of truth. Workforce management technology should empower IT teams to be innovative with using the data for the growing needs of the business—all without accumulating technical debt. Consider this: With IT teams being tasked by company leaders to modify or extend the technology stack as business priorities shift, CIOs need technology designed with agility in mind. A platform with self-serve configuration (such as low-code or no-code ways to modify processes, organizational structures, or other business attributes) can move rapidly to support ongoing operations and change. 

4. A Unified Workforce Management Approach Reduces Complexity

Today’s technology leaders face unrelenting pressure to streamline legacy systems while maintaining compliance. This tightrope walk can be particularly tricky when assessing workforce management technology. Given the different rules that govern contingent workers, organizations can’t process independent contractors the same way they do full-time employees. On the other hand, using completely separate systems to manage different worker classes creates unnecessary silos and extra work for everyone. 

By adopting a VMS that holistically integrates into a company’s HCM system, CIOs can consolidate HR systems for workers of all classifications while still respecting status differences and eliminating joint employment liability. The same goes for reducing complexity when allocating privileges and permissions. A single provisioning mechanism helps companies ensure security protocols are applied across the workforce, including properly deprovisioning extended workers from company systems after completion of their contract.

Beyond streamlining workflows and better operationalizing data, this integration also makes better use of an organization’s enterprise resource planning investment. Bringing everything together through API integrations also allows companies to further standardize processes and automate workflows. 

5. You Can’t Manage Risk Effectively if You Aren’t Managing Your Contingent Workforce

As trusted advisors to their CEOs, modern CIOs assume responsibility for transforming their organizations’ risk management approach through automated controls and real-time monitoring. And because independent contractors introduce myriad layers of risk—from cybersecurity holes to labor law vulnerabilities—CIOs can’t overlook this part of their business. 

Another risk arises when two organizations have employer rights and obligations to the same individual. This often occurs when a company uses a staffing agency to hire contingent workers. Without proper management, an agency’s lack of expertise or commitment may create legal implications for the company. 

The most effective way to address the risks posed by staffing agencies is to pick a technology solution that automates controls. In addition to helping companies stay on top of evolving labor laws related to contingent workers, the right VMS system should also track tenure policy adherence, pay parity, automated provisioning, and other employment matters to avoid creating liability related to staffing-agency use.

Bottom line, today’s talent shortages have underscored the truth that an organization’s most valuable asset is its people. As the contingent workforce continues to grow, innovative CIOs need to invest in an integrated management system that dynamically deploys contingent talent for maximum business impact, carefully manages compliance and security risks, and provides the insight and agility required to make the next best move—no matter what curveballs come your way.