Back to BlogWhere Workforce Governance Breaks Down: VMS Limitations, SOW Leakage and Reporting Gaps
Workforce governance rarely breaks down in one dramatic moment. More often, it weakens gradually, through disconnected systems, unclear engagement routes, unmanaged spend and data that does not give leaders a complete view of who is working for the organisation.
On paper, the controls may appear to be in place. The VMS is live, suppliers have been onboarded and processes have been documented. Yet significant parts of the extended workforce may still sit outside the programme, hidden under statement of work arrangements, local supplier relationships or finance systems that do not connect neatly to the global model.
That was one of the strongest themes to emerge from my conversation with Brenda Monaghan, EMEA Program Manager for Contingent Labor at Medtronic, at CWS Europe 2026.
Brenda spoke candidly about the limits of technology, the scale of unmanaged SOW spend and the pressure that follows when executive teams suddenly want a clear, consolidated view of the entire non-employee workforce.
This is the third article in our four-part series exploring the hidden complexity of global contingent workforce expansion. In part one, I looked at why expansion is not a copy-and-paste rollout. In part two, I explored why change management, compliance and local expertise determine whether a programme succeeds in practice. Here, I look at where workforce governance often begins to fail: the point where systems, spend and reporting no longer reflect the full reality of how work is being engaged.
A VMS is essential, but it is not the operating model
Vendor management systems are essential tools for global contingent workforce programmes. They centralise approvals, supplier activity, workflows and reporting, while giving programme teams a level of visibility they would not otherwise have.
For any organisation operating across multiple countries, that visibility matters.
But a VMS is not the programme itself.
The system can support the operating model, but it cannot replace local compliance knowledge, stakeholder engagement or country-specific process design. It cannot tell you whether a local invoicing process will fail, whether a supplier relationship is likely to sit outside the programme or whether the workflow being configured reflects how the market actually operates.
During our discussion at CWS Europe, Brenda made the point that internally managed programmes are often ahead of where VMS providers are. The systems are improving, but they are not always advisory. They do not necessarily understand every local nuance, and they cannot always identify where a technically sound configuration will collide with an operational reality.
This is not a criticism of the technology. It is a reminder of what technology can and cannot do.
A VMS can enforce a process once that process has been designed correctly. It cannot decide what the right process should be in every country.
The Italy invoicing lesson
The Italian invoicing example illustrates this clearly.
Brenda’s team spent around six months trying to solve local invoicing complexity within the VMS. Italy has strict invoicing requirements, tight monthly deadlines and a large number of line-item payment types. The team worked to configure the standard process so that it could absorb those requirements.
Eventually, it became clear that the local operating process needed to happen first, with the data then reconciled back into the system.
The problem was not that the VMS was unnecessary. The problem was that the programme had tried to make the market fit the system, rather than designing the operating model around what the market required.
That distinction matters.
A global programme needs technology, but the technology has to follow the process, not define it. Before configuring a new market, programme teams need to understand how invoicing works locally, which systems finance teams use, what supplier workflows already exist and where legal or tax requirements create exceptions to the standard model.
If those questions are not answered first, the organisation can spend months building a process that is technically complete but operationally unworkable.
Governance weakens when activity sits outside the system
Even when the VMS works well, it only governs what enters it.
That is where many programmes develop blind spots.
Some engagements continue through local suppliers. Others sit under procurement categories that are not fully connected to the contingent workforce programme. In many organisations, a significant amount of work is placed under statement of work arrangements, even when the engagement behaves much more like staff augmentation or contingent labour.
The system may be reporting accurately, but only on the part of the workforce it can see.
This creates a dangerous form of confidence. Leaders believe the programme is under control because the VMS data looks clean, while a large proportion of non-employee labour sits elsewhere.
The real governance question is not simply whether the system is working. It is whether all relevant activity is entering the system and being classified correctly.
What SOW leakage looks like
Statement of work arrangements are designed for deliverables-based activity: a defined piece of work, a clear output and an agreed scope.
They are not designed to house someone who has been working in the same role for years, managed on a day-to-day basis by a hiring manager and performing work that looks very similar to that of a contingent worker or permanent employee.
Yet that is exactly what happens in many large organisations.
SOW leakage occurs when work that should sit under contingent labour, staff augmentation or another workforce route is placed under a statement of work arrangement. This often happens because the SOW route feels faster, avoids headcount controls or requires fewer approvals.
From the hiring manager’s perspective, the immediate problem has been solved. Work can begin.
From a governance perspective, the organisation may have created a much larger one.
Visibility is reduced. Cost control weakens. Worker classification becomes harder to assess. The engagement may sit outside established supplier and compliance processes, while the invoice appears simply as a service cost rather than a workforce decision.
Calling an engagement SOW does not remove the risk if the reality of the work says otherwise.
The scale of unmanaged spend
At CWS Europe, Brenda described the scale of the challenge Medtronic faced when it began expanding its global programme.
The organisation could see approximately $1.7 billion in total spend, with roughly half of it unmanaged. A significant portion sat under SOW arrangements.
That figure is large, but the underlying problem is not unusual.
Many global enterprises have built relatively mature contingent workforce programmes while leaving SOW activity fragmented across procurement, finance and local business units. The organisation may have strong controls over one category of non-employee labour and very limited visibility over another.
This is where workforce governance becomes inconsistent.
One part of the organisation is subject to detailed onboarding, supplier, compliance and reporting controls. Another part may be governed primarily through purchase orders, project codes and invoices.
The work may be similar, but the governance is not.
Why SOW leakage happens
SOW leakage is rarely caused by one team deliberately trying to create risk. It usually emerges because the organisation has made one route easier than another.
A hiring manager needs work completed quickly. The contingent labour route may involve headcount restrictions, supplier controls or approvals that feel slow. A statement of work can appear to provide a faster path.
The engagement is then placed under SOW, even when the individual is effectively working under the direction of the business.
Once that behaviour becomes established, it is difficult to unwind.
The programme team may later identify the issue, but by then the engagement is embedded in the business, the supplier relationship is established and the budget may sit somewhere outside the contingent workforce function.
This is why SOW governance needs to begin before the engagement is created.
Trying to recover visibility after leakage has occurred is far more difficult than preventing it at the point of decision.
The decision needs to happen upstream
One of the most effective ways to reduce leakage is to help hiring managers choose the correct engagement route before work begins.
Some organisations have introduced decision tools within platforms such as ServiceNow or Salesforce. A hiring manager answers a series of questions and is directed towards the most appropriate model, whether that is permanent employment, fixed-term employment, contingent labour, staff augmentation or SOW.
This type of routing is valuable because it moves governance upstream.
Instead of asking programme teams to identify and remediate a misclassified engagement months later, the organisation creates a structured decision at the point where the requirement is first raised.
The technology itself does not need to be complicated. What matters is that the questions reflect how the work will actually be performed.
Is the supplier responsible for a defined output? Who directs the day-to-day activity? Is the requirement for a role or for a deliverable? How long will the work continue? Is the individual integrated into the business team?
Those questions help the organisation classify the engagement based on substance rather than label.
SOW governance is also a finance conversation
SOW leakage is often treated as a procurement or workforce programme issue, but finance has a critical role to play.
Brenda described how the arrival of a new CFO changed the level of attention given to unmanaged spend. Once the CFO named the initiative and made it a priority, senior leaders responded in a way they had not when the programme team was driving the issue alone.
That shift is important.
When SOW governance is positioned only as a process improvement, it can struggle to gain traction. When it is connected to cost, risk, visibility and financial control, it becomes an executive issue.
The CFO does not need to understand every detail of worker classification or supplier routing. They do need to understand that a large proportion of spend may be sitting outside the organisation’s established workforce controls.
Once that is visible, the conversation changes.
Programme teams are more likely to receive the mandate, data access and senior sponsorship they need to address the problem.
Executive visibility changes expectations
For years, many contingent workforce programmes operated with limited executive attention.
The programme team understood the value it was delivering. It could see the compliance risks being managed, the rates being controlled and the supplier performance being improved. But getting senior leaders to focus on non-employee labour was often difficult.
That has changed.
C-suite leaders and finance teams are increasingly asking who is working for the organisation, where they are located, how much they cost and under which engagement model they sit.
That attention is welcome because it brings sponsorship, resources and authority. It gives programme teams a stronger mandate to address issues that may previously have been ignored.
But visibility also creates pressure.
As Brenda put it during our discussion, “We got what we wanted, but be careful what you wish for.”
Once executives recognise the value of the programme, they want more of it, and they want it quickly. They want cleaner data, broader coverage, faster expansion and a complete view of all non-employee labour.
The difficulty is that most organisations are not yet able to provide that picture.
Reporting gaps become urgent when the CFO asks
A fragmented reporting model can survive for years while executive attention is limited.
The contingent workforce team may have one set of data, procurement another, finance another and individual business units their own local records. The gaps are inconvenient, but they may not be treated as urgent.
That changes when a CFO or executive committee asks for one consolidated answer.
How many non-employees are working for us? Where are they? What are they costing? Which suppliers are involved? How many sit under contingent labour, SOW or another engagement route? Which parts of that spend are governed?
Most organisations cannot answer all of those questions cleanly.
The problem is not necessarily a lack of data. It is that the data sits in different systems, uses different classifications and is owned by different teams.
A VMS may provide a strong view of contingent labour, but not of SOW. Procurement systems may show supplier spend, but not how many workers sit behind it. Finance systems may show invoices, but not the nature of the engagement.
Each system holds part of the picture.
Workforce governance breaks down when no one can bring those parts together.
Executive-grade reporting needs to be built early
The programmes that respond best to executive scrutiny are the ones that build reporting before it is demanded.
That means creating a clear view across contingent labour, SOW, supplier performance, spend and location, rather than waiting for a senior leader to ask for it under pressure.
Executive-grade reporting is not simply a dashboard with more charts. It needs to answer the questions leaders care about.
Where is the risk? Where is the unmanaged spend? Which markets have low visibility? Which suppliers are creating concentration or compliance exposure? Where are engagement models being used incorrectly? What is the financial opportunity?
When reporting can answer those questions, it becomes a governance tool rather than an administrative output.
It also allows programme teams to move from describing the problem to making a recommendation.
Technology supports governance, but ownership makes it work
It is tempting to see these challenges as technology problems.
The VMS needs another module. Procurement needs a better dashboard. Finance systems need to integrate more effectively. A new analytics platform is required.
Technology may help, but it does not solve the ownership question.
Someone still needs to define which categories are in scope, how engagements should be classified, who owns the data and which team is responsible for acting when the picture reveals a problem.
Without clear ownership, additional systems may simply produce more disconnected information.
At CXC, we have seen that the strongest governance models bring HR, procurement, finance, legal and workforce programme leaders together around a shared view of the extended workforce.
The technology supports that view, but the governance model gives it meaning.
Where workforce governance begins to recover
Organisations can begin to strengthen governance by focusing on a few practical areas.
The first is scope. Programme leaders need to understand which parts of the non-employee workforce are visible and which sit outside the current model.
The second is classification. Engagement routes should be based on how work is performed, not simply on which budget or supplier route is easiest to use.
The third is decision support. Hiring managers need a clear way to choose the correct engagement model before the work begins.
The fourth is data. VMS, procurement, finance and local workforce information need to be brought together in a way that allows leaders to see the full picture.
The fifth is sponsorship. SOW leakage and reporting gaps are difficult to address without executive support, particularly where ownership crosses multiple functions.
None of these steps is simple, but they are more effective than assuming the VMS alone will create control.
Governance depends on what you can see
Workforce governance cannot extend to activity the organisation cannot see.
A VMS may be operating well, but if SOW activity, local suppliers or alternative engagement routes remain outside it, the programme still has significant blind spots.
The same is true of reporting. A clean dashboard is valuable only if it reflects the full workforce reality.
The lesson from my conversation with Brenda at CWS Europe 2026 is that visibility, classification and ownership are closely connected. When one of them is weak, governance begins to fragment.
The organisations that make progress are the ones that stop treating VMS, SOW and reporting as separate issues.
They recognise that each one is part of the same question: do we know who is working for us, how they are engaged, what they cost and whether the right controls are in place?
Until the answer is clear, the programme is not fully governed.
Coming next in the series
In the fourth and final article in this series, I will explore how organisations can build a contingent workforce programme that scales, including the role of internal ownership, specialist support, executive sponsorship and the growing governance challenge created by digital labour.
CXC has supported global contingent workforce programmes for more than 30 years, across over 100 countries. We’ll help you strengthen visibility, improve engagement governance and bring contingent labour, SOW and supplier activity into a clearer, more controlled operating model.
