For the last couple decades, we have read at length about the impending talent shortage as baby boomers reach retirement. The reality is that approximately 26% of the workforce will be 55 or older by 2022 (Bureau of Labor Statistics, 2015), and 2 out of 3 organizations already report having difficulty recruiting full-time regular positions (SHRM, 2016). Making matters even more challenging is the decreasing labor participation rates across virtually every demographic, an ever higher demand for skilled and STEM workers, and a frequently cited projection that 50% of US workers will be freelance by 2020 (Freelancing in America: A National Survey of the New Workforce, 2014). Our reality is that the pipeline of talent is running at a mere trickle, especially if one’s definition of talent is limited to a full-time regular employee.
The way organizations are thinking about the labor pool is drastically changing, and so are the traditional ways in which the workforce is defined. There are new buzz words like “21st Century Workplace,” “Talent Relationship Management” and “Thriving Indexes.” We are seeing organizations across industries striving and struggling to create a talent strategy that achieves the right balance across labor segments. Successful companies are changing the paradigm and paying for what they need, when they need it. They don’t have underutilized talent or staff on the bench. They’re not experiencing a gap in skills or expertise. They are accessing a broader talent pool and tapping into innovation networks. They are demonstrating the ability to flex their workforce and achieve both efficiency and cost control by asking some critical questions, and acting upon the answers. They are implementing a Total Workforce Strategy (TWS).
What does a Total Workforce Strategy (TWS) entail? Total Workforce Strategy looks at all the ways that work gets done in an organization and optimizes capability, availability, and cost across both internal and external talent pools. TWS makes On Demand Talent a reality. There are multiple considerations, but the first step is defining the tiers of talent based on their value to the organization:
– Tier 1 – What capabilities give you true competitive advantage?
– Tier 2 – What capabilities are unique requirements for your organization’s success?
– Tier 3 – What capabilities are commoditized or not-mission critical?
Now, consider the risks and benefits of different sourcing strategies, from full-time regular employees, to contractors and suppliers and consider how various sourcing strategies impact factors such as capability levels, cost, scarcity/availability of the talent, competition, scalability and perishability of skills (once hired). It may seem like a lot, but it translates into a very clear picture of how to invest in talent. For example, is the capability or skill under consideration one that makes or breaks your competitiveness? If it is, then it’s a Tier 1 capability. If you hire a person as a permanent employee in pursuit of this Tier 1 capability, what will they cost you and how readily available are they? Do you really need to “own” this talent, or could you have better access to this capability through an innovation network and pay a one-time fee instead? Building a TWS is about systematically evaluating every component of your workforce, and determining the best sourcing method that brings the best talent for the job, just-in-time.
Of the few companies that have a robust TWS, many stumble in its implementation. The largest limiting factors in achieving the goals of the strategy are the rigidity of the current organizational design and HR policies and practices. Largely, organizational structures are static, and filled with predefined jobs and direct reporting relationships. In order for companies to reap the full benefits of a workforce strategy, they need to think about labor differently. Positions need to be redefined in terms of skills and hours. Functions need to be redefined in terms of outcomes and deliverables, and annual budgets will not be as meaningful as cost per outcome, project or deliverable. This is reshaping HR metrics, too. For example, time-to-fill becomes time-to-deploy, and resumes in the pipeline shifts to sourcing quality ratios. There are a host of other new metrics to consider because labor is less and less measured by total FTEs and more aptly defined as fluid pools of resources.
Organizations who can implement a Talent On-Demand approach through a Total Workforce Strategy will have access to the best talent for their needs when they need it, and will be able to ensure they always have a supply of the most relevant skills. They will have the flexibility to adjust their resource levels as they need them and will be able to optimize cost and capability. They can also access the best innovations around the world without the challenges of trying to “own” all the talent in-house. HR plays an important role in this as they need to create the Talent Ecosystem to be able to source and manage talent in this dynamic new world.
Today, TWS can provide organizations with a competitive advantage, but changes in the demographics and dynamics of the workforce will soon make a Total Workforce Strategy an imperative. Revolution Advisors has recently completed thought leadership that helps organizations make On Demand Talent a reality. Contact us today to find out more.