Welcome to this issue of The Contingent Compass. Each week, I send two essays to help you navigate the complex world of the Contingent Workforce. If you need support on your journey, upgrade to a paid subscription where you’ll instantly be able to interact with the community through group chat, live Q&A’s, gain access practical program tools and useful how-to guides.
If you ask most CEOs how many people work for their company, they’ll give you a number.
If you ask them how many people actually work for their company - including contractors, consultants, SOW teams, outsourced staff, freelancers, and “strategic partners” - they’ll pause. Then they’ll guess.
And that’s where the problem begins.
Every organization today has two workforces.
The one they can see… and the one they can’t.
I learned this lesson the hard way while leading in-house contingent workforce programs at Goldman Sachs and Citigroup. We had every governance process imaginable: global PMOs, VMS platforms, compliance layers thicker than a Sunday newspaper. Yet even with all that structure, hidden headcount kept creeping in through the cracks - shadow projects, consulting engagements, “temporary” SOWs that somehow lasted three years.
If it happens in highly regulated banks with world-class oversight, imagine what’s going on in companies with half the structure and twice the speed pressure.
The Blindspot at the Top 🕶️
The C-suite rarely sees the shadow workforce because, on paper, everything looks fine.
There’s a contingent workforce report in Procurement.
A consultant tracker in Finance.
A third-party roster in Risk.
Each looks tidy in isolation. Together, they form a fragmented mess that hides millions in invisible labor cost.
💡 Reflection time: When was the last time your CFO and CHRO looked at the same workforce data set and agreed on the total number of people doing work for your company?
Most can’t.
And it’s not because leaders don’t care - it’s because they’re flying blind. Visibility tools weren’t designed for today’s hybrid workforce ecosystem. The result is a business that thinks it’s running lean but is actually running opaque.
The Hidden Costs of Invisible Labor 💸
Let’s be clear: the shadow workforce isn’t a conspiracy. It’s a consequence.
Business units move faster than governance can keep up. When the system slows them down, they find shortcuts. “Let’s just get this SOW in motion.” “We’ll use my favorite consultant; no need to go through HR.” “We’ll call this a project, not a role.”
Sound familiar?
These workarounds create short-term wins but long-term pain.
Financial Leakage: One Fortune 500 client I advised found $60 million of untracked SOW labor buried under departmental budgets. They were paying more for contractors than full-time employees doing the same work.
Compliance Risk: A European pharma company was fined after regulators discovered contractors embedded full-time in operations but labeled as “independent suppliers.”
Security Exposure: I once saw a cloud migration project run entirely by consultants - none of whom appeared in HR systems, all of whom had admin access to core infrastructure.
💡 Reflection time: How many people have access to your company’s systems right now who don’t appear in your headcount data?
The Mirage of Technology 🧩
Companies often assume their Vendor Management System (VMS) or HRIS will solve the visibility problem. But here’s the reality: technology only enforces the boundaries it’s told to see.
If contingent headcount flows through the MSP, you’ll see it.
If SOWs run through procurement, you’ll see that too.
But when business units route work through “preferred partners” or “strategic consulting agreements,” your VMS is completely blind.
The problem isn’t bad tech - it’s bad architecture. You can’t manage what the system isn’t designed to track.
💡 Reflection time: Does your visibility stop at the VMS, or does it extend into who’s actually doing the work behind every contract?
Why CFOs Should Care 📊
The shadow workforce isn’t just a governance issue. It’s a profitability issue.
Every untracked consultant, unmanaged project, or rogue SOW is a silent drain on EBITDA. CFOs are losing margin not because the market is tough, but because their company doesn’t know where its labor dollars are really going.
Here’s what that looks like in numbers:
Hidden workforce costs can add 5–15% of total labor spend.
Duplicate vendor markups inflate project costs by up to 20%.
Poor visibility can slow financial forecasting cycles by weeks, delaying decisions that could save millions.
And yet, these issues rarely reach the boardroom - because they’re buried three layers deep in procurement dashboards.
💡 Reflection time: If 40% of your workforce cost isn’t visible in real time, how confident are you in your financial forecasts?
Why COOs Should Care ⚙️
Shadow labor destroys operational agility.
It’s the reason business units over hire because they can’t redeploy talent fast enough. It’s why transformation programs stall - not from lack of vision, but from lack of transparency about who’s doing what.
I’ve seen transformation projects burn months chasing data that should’ve been one click away. The irony? The “efficiency program” itself was run by consultants buried under a separate SOW.
💡 Reflection time: How many of your transformation initiatives are being delivered by a workforce you can’t fully account for?
Why CEOs Should Care 🧭
Because this isn’t just a visibility issue - it’s a control issue.
When you don’t know who’s doing the work, you don’t control the work.
That impacts strategy execution, brand risk, and resilience. Imagine a major breach, product failure, or regulatory event traced back to someone who technically doesn’t exist in your systems. It happens more often than you think.
One global tech company recently discovered that 30% of its product support was handled by outsourced contractors under a vendor’s payroll. When that vendor folded overnight, the company lost a third of its operational capacity in a week.
💡 Reflection time: If one of your “partners” disappeared tomorrow, how much of your business would disappear with them?
The Myth of Accountability 🧠
In theory, Procurement owns vendors.
In theory, HR owns people.
In practice, nobody owns the full picture.
That’s the trap. That’s the opportunity.
Everyone assumes someone else is accountable for the external workforce. Procurement tracks contracts. HR tracks people. Finance tracks spend. But the shadow workforce lives in the white space between those systems - a no-man’s-land where governance quietly fails.
💡 Reflection time: Who in your organization could, right now, produce a single report showing every person doing work for your company - FTE, contractor, consultant, and SOW resource combined?
If the answer is “no one,” then congratulations. You’ve just identified your biggest blind spot.
The Path to Visibility 🔍
Fixing the shadow workforce doesn’t start with technology. It starts with mindset.
1. Unify Data, Not Departments
Stop thinking in silos - HR data, procurement data, finance data - and build a unified labor visibility layer. You don’t need to merge systems. You need to merge insights.
2. Redefine Ownership
Create a joint accountability model where Procurement, HR, and Finance share stewardship of the external workforce. No more “that’s not my remit.”
3. Treat Work as the Unit of Measure
Stop managing headcount and start managing work. Whether it’s delivered by a full-time employee, contractor, or partner shouldn’t matter. What matters is: is the work being done effectively, compliantly, and profitably?
4. Embed Governance in Speed
Visibility doesn’t mean bureaucracy. The best companies design governance frameworks that move at business speed - clear rules, simple tools, and real-time reporting.
💡 Reflection time: Does your workforce strategy slow business down - or help it move faster with control?
The Global Dimension 🌍
The shadow workforce isn’t just a local problem. It’s a global epidemic.
In Europe, strict employment laws mean misclassified contractors can trigger fines and reclassification. One audit I reviewed found “independent consultants” who’d worked for the same company for five years - clear employment by any legal standard.
In APAC, layers of outsourcing blur visibility entirely. It’s common to find four levels of subcontractors between you and the person actually doing the work.
In LATAM, informal labor markets and weak supplier oversight make it almost impossible to know who’s really delivering the work on the ground.
Global companies love to talk about “total talent management.” But without visibility, it’s total guesswork.
💡 Reflection time: How global is your visibility - or do you only see the workforce where your systems happen to be strongest?
The Strategic Opportunity 🚀
Here’s the twist: the shadow workforce doesn’t have to be a liability. Managed correctly, it can become your greatest asset.
The external workforce is the ultimate agility lever. It gives companies the ability to scale up, innovate faster, and plug in niche expertise on demand. But that’s only possible when you know who’s out there, where they are, and what they’re worth.
Visibility isn’t just risk management. It’s performance optimization.
💡 Reflection time: If you could see your entire workforce ecosystem tomorrow, what would you do differently?
Closing Thoughts 💬
The shadow workforce isn’t new. It’s just bigger, faster, and better hidden than ever before.
The companies that will win the next decade aren’t those with the biggest headcount or deepest budgets - they’re the ones with complete workforce visibility.
Because if you can’t see it, you can’t manage it.
And if you can’t manage it, you can’t control it.
And if you can’t control it, eventually… it will control you.
The question for every CEO, CFO, and COO reading this is simple:
👉🏻 Do you actually know who’s working for you right now?
If you hesitated, you already know the answer.
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If you need support on your journey, upgrade to a paid subscription where you’ll instantly be able to interact with the community through group chat, live Q&A’s, gain access practical program tools and useful how-to guides.