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Talent & transformation Transformation

Which members of your workforce are you overlooking? 

Over the last two decades, the combination of digital transformation, globalization, and hybrid work has blurred the lines separating employees, contractors, and partners. Yet even as the workforce becomes more blended, many HR systems covering payroll, HCM, benefits, and policies remain anchored in outdated models built solely for full-time employees. 

At a glance

  • The workforce is increasingly blended, but HR systems and strategies are still designed primarily for full-time employees.
  • Contingent workers provide critical skills, flexibility and scale — yet they often remain invisible in workforce cost, skills, and capacity planning.
  • Siloed ownership between HR and procurement creates fragmented data, duplicated spend, cultural divides, and unmanaged risk.
  • To build agility, resilience, and inclusion, organizations can apply the Total Cost of Work model across all worker types.

That disconnect is becoming harder to ignore as AI and automation drive work redesign and reshape critical business functions — from IT to manufacturing to HR. Closing this gap is essential for businesses to innovate, scale their operations, and build fluid teams.

As organizations look to increase agility to navigate today’s challenges, contingent talent can be a powerful lever. But when it comes to managing costs, culture, and planning in HR systems, contractors, consultants, and gig workers are often left out of the equation. 

The workforce is increasingly blended — but HR strategy often isn’t.

    How did we get here?

    HR’s limited visibility into the contingent workforce is largely structural. Historically, procurement has managed contingent workers, while HR has owned the employee lifecycle.

    When these silos persist, both functions end up operating with fragmented strategy and unclear accountability, leading to:

    • No consolidated view of total workforce costs
    • Limited skills visibility and planning gaps
    • Redundant spend and duplicated hiring channels
    • A cultural divide between employees and non-employees

    The imperatives reshaping workforce strategy

    Before HR can redesign talent management, it must account for the changing nature of work. The imperatives below point to a different way of organizing work and talent pools — in the form of a new operating model.

    The new work operating model

    Work is no longer defined by static jobs. Automation, AI, and shifting business priorities are reshaping what work needs to be done, how it’s done, and how value is created. As a result, workforce strategy can’t start with jobs as they exist today; it must start with the work that needs to be delivered now and in the future.

    As AI creates opportunities to rethink and redistribute tasks, organizations need to deliberately design how human capability and technology work best together. This requires a more granular view of tasks, skills, and cost than traditional workforce models allow.

    The contingent workforce is increasingly a core part of an organization’s talent mix. Yet many workforce strategies still focus narrowly on internal employees, leaving some talent effectively invisible. Failing to account for all forms of contribution undermines planning and creates gaps in cost, capability, risk, and culture.

    In a dynamic environment, work needs to be matched to skills as demand changes. Organizations building a gig economy often introduce talent marketplaces that prioritize internal opportunities because they have visibility into employees’ skills. But there’s an opportunity to broaden these models to include the growing population of contingent workers.

    The strategic advantage of an integrated contingent workforce

    Integrating contingent workforce management into HR systems can spark fears of an administrative headache, but that misses the point. Without true visibility, businesses can’t unlock the strategic advantage that comes from a complete view of the available talent pool.

    The benefits of integrating contingent workforce management

    A two-step solution: Total Cost of Work and Total Talent Planning

    You can’t plan strategically for a workforce you can’t see — and you can’t optimize it if part of that workforce sits in a separate system, governed by a different function, and accounted for on a different balance sheet. Typically, HR sees salaries and benefits for permanent employees, while procurement sees invoices and supplier fees for contractors. Both sides miss the full picture.

    In a fluid, skills-powered model of work, visibility into skills and costs go hand in hand. That’s where the Total Cost of Work (TCoW) model becomes critical.

    TCoW ensures skills and costs are fully integrated, providing a single view of workforce-related spend across worker types.

    A TCoW model captures:

    • Direct compensation
    • Benefits
    • Vendor and agency fees
    • Technology and overhead allocations
    • Opportunity costs
    • Short- and long-term incentives

    With an accurate TCoW, HR can better answer questions such as:

    • Is it more cost-effective to hire or contract this capability over the next three years?
    • Where are we duplicating spend across business units?
    • How does automating a task — or shifting it to a different worker type — change our costs?

    Once leaders have a unified view of workforce costs, they can apply that insight in a single talent planning model that includes employees, contractors, freelancers, and gig workers.

    With the TCoW in place, a Total Talent Planning model brings together cost, capability, and capacity data to help organizations deploy the right skills where they’re needed.

    The benefits of a Total Cost of Work (TCoW) model:

    • Build a unified skills and cost inventory
      HR, procurement, and finance data lives in one place — supporting better build/buy/borrow decisions.
    • Forecast demand more accurately
      With skills, cost, and capacity data in one ecosystem, leaders can model scenarios and make smarter choices about where work should sit and who should deliver it.
    • Enable internal and external talent mobility
      When contractor and employee data sits side by side, mobility increases and hiring can become faster and more efficient.
    • Strengthen succession and capability planning
      Many business-critical roles are held by long-term contractors. Including them in planning can reduce operational risk and strengthen continuity.
    • Make better strategic workforce decisions
      The TCoW model gives leaders clearer financial insight to balance agility, cost, risk, and capability through Total Talent Planning.

      The internal barriers holding businesses back

      The level of transformation requires a new mindset to overcome internal barriers. Champion adaptive principles (not rigid rules) to stay on track. 
      From To
      Draconian policies driven by fear (e.g., “contractors can’t attend all-hands meetings”) Principles-based governance that fosters flexibility and trust
      A rigid, rule-bound HR mindset An adaptive HR mindset grounded in core principles
      Excluding certain worker groups from visibility in workforce data Transparency with all contributors visible in workforce data
      Unequal access to communication, recognition, and development Accessible communication, recognition, and development opportunities
      Fragmented ownership and unclear responsibilities Alignment across HR, legal, and procurement
      Cultural exclusion of non-traditional workers Respect and inclusion for everyone contributing to the company’s mission
      Focus on strict policy compliance Emphasis on risk-informed inclusion

      Practical next steps

      HR can no longer manage only part of the workforce and expect to achieve full organizational impact. The cost of inaction continues to rise — showing up as inefficiency, increased risk, and loss of competitive advantage. 

      By adopting a Total Workforce mindset, HR leaders can increase organizational agility, optimize costs, strengthen culture and inclusion, and future-proof talent strategies. In the future of work, siloed talent management doesn’t hold up. 

      Improve visibility of your contingent workforce with these steps:

      1. Audit the workforce
        Who works for you — how, where, and under what contracts?
      2. Quantify the total cost
        Bring HR, finance, and procurement data together.
      3. Integrate in talent planning
        Include contingent workforce in headcount planning, forecasting, and skills intelligence.
      4. Modernize policies
        Update policies across onboarding, DEI, and communication to include all workers.
      5. Enable leadership
        Train managers to lead mixed employment teams effectively.
      6. Leverage technology
        Use platforms that unify data, cost, and compliance.
      7. Measure progress
        Track cost savings, engagement, and agility metrics.
      About the author(s)
      Paul Habgood

      Partner, Global Skills Solutions Lead

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      [1] Astute Analytica. “Contingent Workforce Management Market to Hit Valuation of US$ 429.90 Billion By 2033,” available at https://finance.yahoo.com/news/contingent-workforce-management-market-hit-163000693.html.