To become more agile, organisations are re-evaluating their workforce strategies. Although strategists often talk about ‘total workforce management’, what their business functions – procurement included – need most is something much simpler: total workforce optimisation (TWO).
For most business functions, human capital is the most important asset and its largest single operating expense. It is also a constant concern for executives who fear they do not have, and cannot acquire, the right mix of top-tier talent to compete and succeed, says Doug Leeby, CEO of Beeline, which provides software solutions for sourcing and managing the extended workforce.
TWO is the process of determining the right mix of employee and non-employee talent to meet operational requirements. It ensures that a function and the organisation have the skills it needs as well as the flexibility to anticipate and respond to market changes.
What TWO is, and what it’s not
TWO is sometimes confused with Total Workforce Management (TWM), also called Total Talent Management (TTM), which is a much larger and more comprehensive process. TWM/TTM not only incorporates the engagement and management of employee and non-employee labour, but also issues such as training and succession planning, which are outside the scope of TWO.
TWO is also different from Total Talent Acquisition (TTA), which is a subset of TWM/TTM. However, TTA is compatible with, and can be incorporated into, a TWO programme.
TWO is nothing more than looking at your organisation’s entire employee base and your non-employee base, putting them together and determining the right mix to achieve your desired business outcome.
The focus on business outcomes is one reason TWO is more specific and easier to achieve than TTM. While TTM has the potential to offer great long-term benefits, which are often somewhat abstract, TWO is concerned with finding the most cost-effective, highest-quality way to accomplish specific tasks and achieve specific outcomes.
TWO is the process of modelling and sourcing the right mix of employees, contractors, freelancers, and consultants – all viable labour options – to achieve the outcomes that are important to your business.
To get there, there are six key steps you need to take.
Step 1: Get the data in one place
To implement TWO successfully, you must start by getting all of your workforce data in one place. It is all about visibility.
Most organisations are already doing a great job in terms of employee visibility. You probably have human resource platforms containing all relevant employee data. So, the missing link tends to be non-employee data.
With the advent of vendor management systems (VMS) about 15 years ago, we started collecting data addressing the contractor population. About 7 years ago, organisations started managing statement-of-work (SOW) based activity and putting that data into their systems.
With the advent of the gig economy, freelancers represent another large labour pool whose data must be gathered and put in one place where it can provide visibility.
This can be accomplished using your VMS or possibly another system, but the important thing is to gather this non-employee data and make it visible.
Step 2: Risk-proof the workforce
The second step is to risk-proof this workforce, both employees and non-employees. This means ensuring proper classification of every individual worker. Every organisation has a governance model in place to protect against co-employment and statutory compliance risks. To risk-proof your workforce, you must ensure that every worker is in the proper employment bucket.
Next is to ensure that they’re in the right sub-bucket – temporary staff or contractors, outsourced labour, freelancers, interns or retirees. Then you can confidently put them to work and not worry about what the legal, compliance, or security consequences are going to be.
Step 3: Ascribe quality to all workers
The third step is very important, and for some reason, it appears to be very elusive for many companies. It is simply the process of ascribing quality to all workers and all work efforts.
Organisations do that already when it comes to full-time employees. Virtually all organisations require periodic performance appraisals, as well as quarterly KPIs or similar processes.
So, the concept isn’t foreign, and implementing it is not a challenge. The challenge is to extend this process to contractors, to consultants and even to freelancers. Sometimes clients tell us that they’re afraid to measure non-employee quality owing to co-employment risks; but this is only an excuse, because there are ways we can assign quality measurements to the work effort and even to individuals without getting into co-employment trouble.
So, organisations must correct this misconception internally. Once you become comfortable with ascribing quality to all workers and all work assignments, you can rate the work and tie the cost equation to the quality equation.
For years, organisations have been so focused on costs and the lowest bill rate. While this is valuable, it is also short-sighted. To optimise the workforce, it is absolutely essential to factor quality into the mix.
Step 4: Merge the data
If your organisation has good employee data, and makes a serious effort to bolster your non-employee data, what’s next? The next step is to merge those two together.
It does not necessarily have to be one database. Organisations have separate Applicant Tracking Systems and a VMS. Analytics programs available today can consume data from both sides with ease. By analysing and comparing this data, organisations can get to what is really interesting and fun, which is the modelling. Modelling leads to predictions, forecasting, and what-if scenarios. That is the next step.
Step 5: Analyse the data for decision-making
Once the employee and non-employee data is merged, the next step is to analyse and apply the data. Artificial intelligence (AI) and the spectrum of the analytics available today allow organisations to use visualisations to discern where changes in the workforce mix will produce the most benefit.
For example, you may traditionally be working with 80% employees and 20% contractors. On a specific task that will deliver a specific outcome, what would happen if you changed the mix to 50% full-time staff and 30% consultants, 10% freelancers, and 10% contractors, based on skills? How would that compare to other possible blends of resources?
Modelling also allows you to factor in scarcity of talent, core and non-core positions, and other considerations. Once you start to bring these factors into play, you can engage in a variety of what-if scenarios to determine what would best fit your business strategy.
Step 6: Take action
Of course, the last step is to do it – simply execute a workforce optimisation programme. Create a model and try it.
Your procurement function is probably closer to TWO than you imagined. You already have a tremendous amount of data. What you lack (probably the performance-quality data from certain elements of your extended workforce) can be obtained with a little effort and the right technology.
Of course, implementing TWO cannot be accomplished by snapping your fingers. It will take resources and commitment, but your procurement workforce mix is surely critical to your organisation’s agility and competitiveness?