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Contigent Workforce Management
How a workforce strategy and segmenting the workforce support contingent workforce management
This blog is the second blog within a series of blogs where we share our insights on how to reimagine and implement your contingent workforce strategy. In the first blog we stressed the importance of contingent workforce management and introduced the five key questions: Why, where, who, what and how. In this blog we will dive deeper into the added value of using contingent workforce and where in your organisation you can utilise it.
This blog has been written by Bram van der Veen and Judith Eickhoff
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- Why organisations should use contingent workforce, and where to start?
- How to identify where to use contingent workforce in your organisation?
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Why organizations should use contingent workforce, and where to start?
Making deliberate choices about why, when and where to add contingent workers to the existing workforce composition can be a powerful tool to achieve strategic business goals. There can be various reasons for organisations to explore the options: flexibility, the right mix of skills, cost reductions, creating competitive advantage, and many more.
In order to link business and workforce strategy, Deloitte uses the integrated workforce strategy approach. A workforce strategy always uses external influencers and the business strategy as starting point. Below questions from the Business Strategy CascadeTM can help to structure the thoughts around this:
- What are our winning aspirations and goals?
- Where to play? Which customers will we serve with which products and where?
- How to win? What is our unique right to win, and what are our differentiators?
- How to configure? What capabilities are required to win?
Answers to these questions differ per organisation, but there can be various reasons for organisations to explore the options: one might find that the nature of the demand for their work fluctuates a lot, demanding increased flexibility in how much work they deliver. Another might have trouble building the right capabilities internally, or find it too costly to build skillsets that are not used as part of their core business. Conversely, organisations that do not ask themselves these questions, might lack the flexibility or cost competitiveness compared to competitors who have given thought to these issues.
Organisational capabilities and the way to achieve these are unique for each organisation and therefore key to understand before shaping your (contingent) workforce. Once you have an insight into what these factors are for your organisation, you can have a closer look at your workforce. Who in your workforce contributes the most in establishing them?
Contigent Workforce Management
Read the first blog in our series here
How to identify where to use contingent workforce in your organisation?
Subsequently, the question is where to use contingent workers and where they can add the most value. There are multiple ways to approach this question. You can start by setting skills gaps vs. demand gaps, short term vs. long term planning, or by having a closer look into what workers to buy, build or borrow, where to “bot” (think of automation, robotics or the application of AI) and where to partner. Workforce segmentation can be a powerful tool to structure your thoughts around which parts of your workforce contribute most to your organisational capabilities, and how that links to your contingent workforce strategy. This is what we want to elaborate on in more detail in the following part of this blog.
In order to segment your workforce, the various roles are evaluated along two axes: (1) criticality and (2) scarcity. Criticality is determined by the contribution to the identified capabilities and the risk if an error is made. Scarcity is defined as the difficulty of replacing skills, as in how hard it is to train an individual and how hard it is to acquire the required skills externally.
Flexible labour: At the bottom left you will find the workforce that is easily trained, does not have a high barrier of entry requirements and has a relatively low direct impact on the organisation’s value chain. A lot of these functions are often classified as ‘hygiene factors’ to organisations: they are needed for the organisation to function well, but have a relatively low or indirect impact on the core value chain. IT/HR helpdesk workers, blue collar workers and other operational segments of your workforce population fall into this segment. These types of functions are prime candidates for utilising contingent workforce and also often have a high potential for outsourcing and the application of automation and AI.
Specialists: The second segment is the specialists. These workers are much more specialised with rarer skills that are harder to replace, but don’t score high on criticality. Examples of workers in this segment are lawyers with a very niche specialty or IT specialists. This worker segment can be considered to use contingent workers for, since their very specialised skills are not always consistently needed for full-time employment. Organisations tend to maintain some internal workers for these roles, while also utilising contingent workers like consultants, freelancers or gig workers, depending on the forecasted needs for these skills in a certain timeframe. Especially for this segment it is important to keep a close eye on expected (role) changes in the future (e.g. changes in required quantities, or roles becoming more or less scarce or critical, depending on business strategy and needs), and to set up partnerships and processes around knowledge transfer and capability building, either by partnering with preferred suppliers or building a contingent talent pool owned by the organisation itself.
Core workforce: The core workforce is the segment that can be classified as the ‘backbone’ of the organisation. It consists of the workers that significantly contribute to the core value chain. Their skills are however more easily replaceable and trainable in a short timeframe. Examples of roles in this category are customer service workers, project managers or recruiters. Given the relatively higher criticality of these roles, organisations often choose to fill these roles internally, as a higher criticality often goes hand in hand with required in-depth organisational knowledge or working with confidential information. However, freelancers or contractors are frequently seen to fill these roles on an interim basis, and the ratio of own workforce and contingent workforce also depends on the function, labour market conditions and desired level of flexibility.
Critical workforce: The final segment is the critical workforce. This segment consists of highly skilled workers that have a disproportionally large impact on the value chain. These are the people in an organisation that are hard to replace, both due to their knowledge of and experience in their field as well as the organisation itself. Examples include researchers in organisations that thrive on innovation, or key account managers that drive a disproportionate amount of sales. Organisations often aim to develop and retain these workers internally. However, just like in the core workforce, sometimes contingent workers are employed to fill a key role on an interim basis, to ensure building capabilities, or to increase flexibility and career opportunities.
An important remark is that while workforce segmentation is a very useful exercise to develop sourcing considerations for different roles, organisations have been moving away from the strict paradigm of ‘outsourcing flexible workforce & insourcing critical workforce’. Finding the balance between building capabilities and knowledge internally, utilising contingent workers and building strong partnerships with flexible talent pools and contingent workforce suppliers for each workforce segment is a challenge that cannot be answered in the same way for each organisation.
After reading through these considerations, take a moment to reflect on what you are currently doing in your organisation. How have you currently organised your contingent workforce? Have you deliberately thought through the steps of your business strategy to understand the organisational capabilities your workforce is meant to achieve and did you think about the criticality and scarcity of different roles in your business?
If you are interested in finding the answer to these questions for your organisation, contact us directly to participate in a free of charge “CWM Quick Scan Workshop”, where you will, together with our multidisciplinary team, assess your maturity and identify areas where you can start your reimagination.
This blog provided insights in how workforce segmentation can help to identify the key roles in your organisation to engage contingent workforce. In our next blog in this series of blogs we will do a deep-dive on the various groups of contingent workers and also explain what to consider from a tax and legal perspective. Linking your workforce strategy to your business strategy, defining capabilities and segmenting the workforce does not only help in defining your contingent workforce strategy and identify options to use contingent workers, but also provides input for other talent processes. Defining capabilities and segmenting the workforce are the first steps in strategic workforce planning. Understanding the different workforce segments can help to prioritise interventions and investments. How do we retain our critical workforce segments? What learning and development activities are needed? How to stimulate internal mobility, and how do we do our succession planning? Next to answering these questions, it is also advised to involve the workforce in the question: What does our workforce need to deliver the work of the future, and to stay engaged? The fourth blog in this series focuses on the worker experience, and you can already read more here . Want to know more about integrated Workforce Strategies? Read the chapter in our book “De HX Factor” or reach out to us!