Contingent workers are expected to make up about half of the workforce by 2027, so it’s essential to include them in workforce planning. But managing contingent workers — or even assembling basic data on them — can be challenging for companies still using outdated systems or cobbled-together spreadsheets.

A vendor management system (VMS) can bring order to this chaos while also giving companies the insight they need to plan and manage their workforce. But it may not be the right solution for every organization. How do you know it’s right for yours?

Dan Smoker, director of extended workforce strategy for Workday, suggests starting with what he calls the 30-Second Test (see box), a set of five questions that contingent workforce managers should be able to answer quickly. If you can’t easily discover how much money is spent on contingent workers or where contract hires are located, for example, a VMS may be the answer.

Yet even once it’s clear a VMS is the solution, choosing one can create its own major challenges.

“One thing that can be daunting is that the market is very crowded with VMS providers, and that makes it hard to tell the difference between them,” Smoker says.

To make the right choice, it’s important to start with a clear assessment of your current system for managing contingent workers — and then follow an organized process for choosing and implementing a new system. Here are five steps that can help.

Step 1: Identify Your Current State, Hurdles and Gaps

The first step in choosing a VMS is identifying baseline key program metrics, starting with the questions in the 30-Second Test. Baseline metrics may include: How many workers do you have? What are you spending on them? How do you allocate access? How many suppliers do you have in place? Is the program in compliance with relevant laws and regulations?

“Gathering accurate and comprehensive data on your current workforce can be hard,” Smoker says. “We hear from a lot of Gen 1 customers that they’re managing their extended workforce via Excel files, so it’s offline and disconnected. This does not really give the visibility to the entire company that’s needed. And inaccurate data can lead to incorrect assessments and poor decision making.”

Step 2: Define Desired Business Outcomes

Everyone who uses the VMS or whose job is affected by it has a stake in the decision. This includes front-line daily users, such as hiring managers and contractors, as well as vendors and managed service providers. Others who will be impacted include stakeholders in human resources, procurements, IT and finance departments.

All these people will have their own list of problems they want the VMS to solve — and there needs to be consensus on the desired business outcomes. A singular focus on the cost savings goals of finance and procurement, for example, could lead to a VMS that does not support the company’s global workforce or one that falls short on workforce quality and compliance.

“Defining outcomes is really critical,” Smoker says. “If you’re defining the incorrect outcomes, you will ultimately push in in a direction that is not aligned with where you need to go as a company.”

Step 3: Determine Stakeholder Involvement

In many companies, procurement has traditionally handled contingent workforce management. But as the contingent workforce grows, others will want to weigh in. It’s important to make sure before a decision is made that all stakeholders have been consulted.

“Identifying who the stakeholders are can be difficult and complex,” Smoker says. These people include decision makers, like HR and the MSP, as well as influencers, such as business leaders and representatives from the IT, finance and legal departments.

Step 4: Evaluate Vendor Management Systems

With the desired outcomes and stakeholder input in hand, it’s time to evaluate the different VMS solutions on the market.

The evaluation starts with a list of questions based on critical capabilities. These may include:

• How will system support reduced time to hire?
• How will it improve manager experience?
• How will it strengthen cost controls?
• Can it meet the company’s global needs now and in the future?
• How often does the vendor release new features?
• How customizable is the system?
• Does the VMS integrate with systems the company currently uses?

It’s also important to get the most out of demos. Because demos don’t show the customer’s specific configuration, it can be difficult to envision how the VMS will — or won’t — fit into existing workflows. Smoker recommends asking to see the process from beginning to end.

“Ensure that they’re going through a full life cycle of a contingent worker — what we call ‘rec to check,’” he says.

Step 5: Making the Business Case for Change

Once a VMS is chosen, it’s time to make the business case.

“There are tangible benefits, like cost savings and efficiency gains, but also intangible benefits, like improved vendor relations or better compliance,” Smoker says. “You should be able to present clear, measurable metrics showing an expected ROI based on those tangible benefits.”

The business case should also include an analysis of the risks, costs, and timeline and plan for implementing the system.

“Change management is a critical piece so that people understand that you can no longer just call your best buddy that has a staffing agency and get your contractors from them — that you have an official process,” Smoker says.

Smoker’s last point, an official process, is key. Onboarding a VMS allows your organization to manage its contingent workforce efficiently, transparently and accurately. Picking the right one is tricky, but if you follow the five steps above, you can be confident you have not only made the right choice but also have taken the correct internal steps to ensure widespread acceptance.

To learn more about identifying the best VMS for your organization, see Workday’s Vendor Management System Buyer’s Guide.

To read more articles on the topic, see Why you need a VMS and How to get your C-suite on board with a VMS.