As discussed in my previous article, organisations are shifting to a “project” model of work which allows them to be innovative and to also rapidly take advantage of sudden opportunities and to quickly respond to unforeseen problems.
This flexible workforce strategy allows:
Reduced labour costs – under an integrated system, the cost of contingent labour can be more accurately tracked. An integrated process also means that a higher percentage of contingent labour will be working under competitive contracts. The majority of the cost savings come because you only utilize contingent labour when it’s needed, there and, as a result, there will be less idle worker time. It’s also true that contingent workers can be cheaper because they don’t expect sophisticated and expensive benefits. Taken together, these cost savings may result in as much as a 15% decrease in the corporate-wide expenditures on all types of labour.
New skills can be rapidly added – when competition requires innovation and speed, developing current workers may be too slow. So contingent labour can bring in experienced workers that have already developed the needed skill set.
You can increase labour volume to match company growth – when an organization is growing in a particular product area or geographic region, contingent workers can be added to fit that expansion. Fortunately, surplus workers can also be released if the growth rate isn’t actually as high as it was projected to be.
Labour volume can be increased for peak time periods – there may be times during the day or week where a higher volume of labour is needed due to spikes in customer demand. And continued workers can provide that help during “peak time periods”. In addition, if the firm faces a busy season (like Christmas or summer), contingent labour can fill that need for a month or more.
Contingent Labour Options
Here are my list of the various types of labour that can be quickly added when more work or new skills are needed.
Workers that you hire with the intention of keeping them and providing them with full benefits. Regular employees can be made “contingent like” if they are working under a multiyear contract that allows the firm not to renew it after it expires (much like baseball players).
These workers put in less than the standard workweek because it’s their preference or because only a limited number of work hours are needed.
They are hired for assessment purposes and to convince them that they want to join your firm as a regular employee after graduation. Incidentally, they may also bring new ideas and a knowledge of technology.
Regular employees that are no longer needed can be redeployed or released.
Generally these professionals are highly skilled and they are under contract until a project is completed. A consultant may be an even higher level talent that is hired for their experience and knowledge, usually because of their high expense, for a short period of time
These workers fill-in when there is an unexpected spike in the work that must be done. These can include non-employees who only want to work for brief spurts. In some cases regular employees that can “postpone” their current work can also serve as overload workers.
These workers may work full time but only for the duration of the season. Seasonal workers frequently return each year.
When you hire a vendor to do the needed work for you. With a scalable vendor contract, you can rapidly increase your capacity when needed and reduce your costs when your requirements go down. A vendor may also have technology that you cannot afford to buy on their own.
There are an increasing number of firms that use contingent executives. Not just because an executive left. But also because they needed a particular executive skill (i.e. merger or IPO experience) that is hard to learn but is only needed for a short period of time.
This group knows your culture and your customers. They may be an ideal source of short-term labour.
Employees at subsidiaries
Even if your subsidiaries are relatively independent, this is a great talent pool to draw from because they already understand your culture.
Vendor employees on site
These workers are actually paid by a vendor or temporary agency, but they work on your site. Not having to handle payroll and terminations make this type of contingent worker desirable.
Labour at strategic partners
Many firms now have a number of strategic partnerships. And both “your” employees that are assigned to the partnership and the employees of your partner firm should be considered for contingent assignments.
There are many robot, hardware and software solutions that allow you to use technology to get work done, without having to utilize even contingent labour (e.g. call-center employees versus utilizing an IVR automated system).
Even under the traditional approach of managing contingent labour, it can’t be said that contingent labour is insignificant. That is because, at many firms, over 40% of labour costs are spent on some form of contingent labour. Even when the amount that an organisation spends is right, there is a real issue around why contingent labuor is often unmanaged or mismanaged. The mismanagement continues because it is rare for contingent labour to be a data-driven function and it’s certainly not managed strategically.
Contingent workforce management certainly isn’t managed strategically.
I predict that the percentage of work that is not done by permanent employees will eventually exceed 50% of all corporate work, and yet literally no one measures the ROI of contingent labour or uses data to determine which jobs should be filled with contingent labour and which should be filled with permanent workers.
What is needed is a modernized workforce strategy and a process that can use data to determine when a particular type of work needs to be done by a “regular employee”, by the best type of contingent worker or even by a robot. This will never happen if senior executives continue thinking of contingent labour as “only temps”. HR must seize the opportunity to develop a strategic plan and to build a strong business case for having a “flexible workforce”, and finally emulate the kind of agility and flexibility that is commonplace in other functions.
If you want to learn more about managing your contingent workforce function, and implement a future focused strategy, join us at this year’s Contingent Workforce Conference in Sydney 22-23 September.
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