HR vs Procurement: Who Manages the Extended Workforce?

The workplace has been evolving to include more external workers. With the ongoing pandemic, more organizations are using non-employees who are flexible and can be accessed on-demand. Thus, creating an agile workforce to meet business needs. 

As the market and programs mature, the quest to source external workers is leaning further toward developing tangible talent initiatives rather than to simply seek out cost savings.

But a key question is: Who owns and manages the extended workforce? 

HR vs. Procurement

In today’s business, Human Resources (HR) and Procurement have differing and often competing goals. HR focuses on benefits, while Procurement focuses on value. And while HR brings policy guidance, strategic workforce planning, and recruiting expertise, Procurement specializes in contracting across the supply chain, managing vendors, and overseeing successful outcomes.

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Hot button issues Between HR and Procurement

The two issues that always come to mind where there are often loggerheads between HR and Procurement are executive search and benefits. 

For various complicated reasons, it’s difficult to negotiate on the cost alone in these two areas. For example, in executive searches, if a search firm has an ideal candidate for two prospective placements, but one company tries to nickel-and-dime the search firm, the natural inclination is for them to place that individual with where they're going to get more money. So, while HR may want the best talent, but Procurement is trying to lower costs, there is naturally going to be some head-butting. 

In a recent podcast on Contingent Workforce Radio, two former executives from Levi’s went head-to-head. James Hudson, Former Director of Global Talent Acquisition, stated that “we just have to get this through the process, which annoys everybody. HR doesn't want to be forced to work with a vendor. And Procurement doesn't want to be forced to have a process that's not a process,” 

One solution may be to set up an incentive program based on volume, going through earning rebates and other considerations, contractually.

The other point of contention is offering benefits to outsourced workers through the company. Although many companies may want to provide nonemployees with benefits, there’s a Catch-22 with compliance and the issue of co-employment. As Dan Beck, Co-Founder and COO of Utmost, stated in an interview, “If you're an employee, you have benefits. If you're an independent, you don't. There’s a lot of energy around having a third category of workers. It shouldn’t be so binary. I think that genie is out of the bottle.”

Who owns and manages the extended workforce?

A best-in-class external workforce program defines roles and responsibilities for both parties along with strategies, plans, and business objectives. When looking at the big picture, HR brings more qualitative metrics to light, such as engagement, productivity, or quality of hire. Meanwhile, Procurement’s quantitative metrics focus on contract compliance and financial outcomes such as cost savings or reducing rogue spending.

Naturally, both sides are essential to the business, and both equally want to be considered strategic advisors. Therefore, it's incumbent on both bodies to come together to develop a broad perspective to set realistic goals, acknowledge interim victories, and continuously make incremental improvements for enduring success. 

“We may have different intentions or outcomes or goals within our business units. It's that often we can be working on very different time horizons. So many of the initiatives that we may choose to put in place in HR may have an 18-month, two-year, [or] three-year time horizon, and sometimes squaring those medium-term outcomes with the Procurement team that may be quarterly- or annually driven is an additional source of the tension of trying to align to different department goals,” says Hudson.

As we delve deeper into this matter, we need to look at two key things: the type of workers and how core they are to the business, and which department has the staffing to own it.

Types of workers

As companies become more agile and adaptable to market pressures, how they can respond in real-time to those challenges becomes paramount. Being reactive just won’t cut it in the business world anymore. Days or weeks without a worker can mean the difference between being number one in your space and being left behind. Businesses need to be able to pivot and pivot fast. 

In the podcast mentioned above, Hudson’s sparring partner, Dean Edwards, former VP of Strategic Sourcing at Levi’s, claimed that Procurement is “looking at the facility providers, the consultants, everybody, and trying to mash that in. And then, we will sometimes find that there's a disconnect with how HR is perceived and even with how finance groups may classify those workers, that they may have a different perspective based on the type of work it's doing,” 

Departmental manpower

Since HR already owns the employee workforce, some would argue that it only makes sense to move the nonemployee workforce under the same umbrella. But the questions are: Do they have the departmental manpower to own it? 

Each organization must figure this out for itself. There are too many variables to make a blanket statement about staffing in one organization versus another. 

Utmost’s informal surveys indicate that the consensus among those who have run HR and Procurement programs is that HR should ultimately own the nonemployee workforce under its umbrella. However, Procurement still plays a part with contracts. 

Hudson and Edwards advocate working together to define a program that considers both party’s needs. According to Hudson, “HR should own it because HR is in the best place to deliver a strategic advantage from understanding the makeup of the entire workforce...But to be a truly effective partner to the business, I think you'll have to have an enterprise-wide view of all of the resources that make up your workforce.” 

Edward agrees, “the giveaway is in the functional title, Human Resources. But my challenge to HR is expanding it beyond contingent workers to the entirety of the third-party workforce because I think that's where HR and sourcing working together can have a much larger impact in terms of the effectiveness of organizations, how they're constructed in FTEs versus gig workers, etc., and how you transmit them the values of your organization.”

Since the workforce in sum is distributed across multiple categories, there has to be a part of the enterprise that can look at the extended workforce holistically and add value internally. 

Aligning internal relationships to exploit strengths

If HR and Procurement aren’t in alignment, it leaves the door open for internal and external exploitation. Both HR and Procurement have strengths to offer the business. Competing for attention in the business only weakens the relationship between the parties and the organization and creates internal strife. Working together creates more value.

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The key comes down to communication. Communicating in each other's languages and understanding each other’s goals concerning the company is imperative. It’s essential that HR and Procurement are proactive and engaging with the business while recognizing that both parties have the neutrality of interest while also wanting what is best for the organization as a whole. 

Using data is one way to overcome many of the obstacles between the parties and the business, but even reaching a consensus regarding quantifiable outcomes can be tricky. Hudson says that might be because HR practitioners are not always good at building a business case in a way that makes sense to quantifiably-driven partners in Procurement. 

When you come from different backgrounds and operational viewpoints, it may be difficult to see things from the other party’s vantage point. There’s often miscommunication because each function looks at things differently when it comes to data, ultimately creating confusion. 

Yet building a data-driven program in which all parties have a say will help your program mature and develop into one with a common point of understanding built on a solid foundation.

Adopting technology solutions to help solve visibility issues

Adopting technology can help your organization to centralize many elements of an extended workforce program. It can help you organize your external workforce and give you insights that you can’t get with an ad hoc system. 

The right technology can enable your organization to meet its business outcomes, including worker visibility, including people data and skills, financial information and contracts, and real-time reports and analytics. But again, cobbling together various disparate systems can be just as confusing as using a spreadsheet and perhaps more frustrating if the systems don’t “talk” to each other. 

That’s why a single system of truth is essential. The knowledge exchange, insights, and visibility from HR and Procurement collaboration is highlighted when a single tool is adopted. For example, Utmost Extended Workforce System (EWS) seamlessly supports the external workforce program in conjunction with the Workday employee population to help both teams find success in their roles. This gives you transparency into your entire workforce, ensuring that you are capturing every person working for your company, their skills, and how they fit the overall picture from a financial and contractual perspective. 

Visibility of all workers, including people data, financials, and contracts

When the C-suite is looking for information on the total workforce, and you have one system for employees and a legacy VMS, or worse – a spreadsheet – for nonemployees, how do you get them the data they’re looking for? How do you easily collect it? How do you assimilate it? How do you present it? 

For example, enterprise leaders often ask for a count of how many people they have in-country A or geography Y. But first, what do you mean by ‘people’? Is it how many people are getting work done, or how many people are in the building? Or do we want to know how many people are on the payroll? Hudon says, “it's supposed to be trying to understand what the question is, but then that begs the larger questions of: How is the work getting done in that country or geography? What is the makeup of that workforce? And do we know? And sometimes the answer is we don't know!”

There can be a misalignment without ever intending to be one when it comes to the data. Sourcing hears it one way, HR hears it another way, and Finance may have another perspective.  

“Where you need a lot of data coming in, you've got to analyze it and pull it together right now because we're getting it from so many different sources,” says Edwards. “And we can get this level of information, but it's never to the level of completeness that necessarily meets with what each is looking for.”

The criticality of HR and Procurement alignment

 In today’s economic climate of uncertainty and volatility, organizational change is necessary to remain viable and to grow even stronger. Successful organizations are the ones that are agile and leverage their most important resource – their talent – with the cooperation of HR and Procurement to meet their ever-evolving market needs. 

It is incumbent that Procurement will learn the needs of HR, including the roadmap for upcoming full-time employee hires, and can then support them through strategically sourcing workers with an eye on possible conversion to full-time employees. And then, HR will learn how better to manage vendors, suppliers, and market intelligence. 

As this moves forward, we will also see streamlined onboarding/offboarding, invoicing, finance, and payment processing for contractors and services. This strategic partnership between HR and Procurement, supported by modern technology that reflects how work is done, will standardize traditional contingent workforce management processes and provide a view into your total external workforce in conjunction with your employees.

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