How Procurement Can Guide Businesses Through the Changing Human Capital Environment

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The modern contingent workforce manager faces a challenge unlike any her predecessors have ever faced: innovate or die.

Disruptive technologies are battering old business models, eroding market share and feeding calls for procurement to tighten organizational belts. Stale operational hierarchies are stifling growth, causing executives to cling to predictable commercial models while emerging businesses create new market segments. The only constant in today’s business environment appears to be chaotic, frequent change.

All of this and more is forcing business to acknowledge that human capital requirements are also changing. In response, high-performing organizations are reinventing the way they approach their workforce, experimenting with new models for sourcing, structuring and consuming vital work, services and knowledge.

This effort has placed contingent workforce managers at the center of a critical enterprise transformation, one that sets as its ultimate goal the pursuit of innovation. To understand why, here are three reasons human capital needs are changing — and the implications for how procurement will lead workforce innovation going forward.

Technology is Changing Consumer Demand

As a result of recent technological innovations, consumers now expect products and services delivered faster than ever, increasingly through digital mediums. Many established businesses simply lack the talent on hand or the necessary organizational expertise to quickly pursue these opportunities before other digital native companies do. This is in large part because of human capital constraints.

Businesses will only be able to respond to rapid changes in a digital world if their workforce is agile, adaptable to new trends and flexible enough to adjust to ever-shifting consumer demands. Most companies, however, still plod through new product development with industrial era organizational structures, favoring familiarity and order while ignoring such a structure’s inherent inefficiencies.

Instead, procurement should propose alternative models for organizing work. One innovative example of this is what two Stanford professors described as “flash organizations.”

Flash organizations are a crowdsourcing technique that enables businesses to assemble a new organization from a paid crowdsourcing marketplace and lead that organization in pursuit of complex, open-ended goals. Quite different from traditional crowdsourcing or freelance arrangements, flash organizations execute a single, complex project — often intermediated through digital means — and then disband following the complete of the work.

Such a model for work offers numerous benefits, from access to badly needed talent and skills to cost-effective alternatives to using traditional third-party services for executing such projects. What’s more, as the internal authority on introducing and managing outside resources and services, procurement is ideally suited to driving the adoption of such a program.

Talent Expectations are Changing

The emergence of flash organizations brings up another interesting point about the changing human capital environment: Professionals today crave a new way of working.

The post-recession economy has changed the calculus of employment for many white-collar workers. Job security is hardly a guarantee anymore, corporate benefits are withering and despite the predictions of several late economists, today we actually work more hours than ever before, with some high-earning professionals expecting 80 hours a week as a baseline.

It’s no wonder, then, that people have begun to embrace alternative work arrangements. According to MBO Partners’ 2017 State of Independence in America report, over 40% of working adults in the U.S. are currently or have in the past worked as a freelancer, and that share is expected to increase to beyond 50% in the near future.

What’s even more interesting is that the percentage of high-earning full-time freelancers (defined by MPO Partners as earning more than $100,000 annually) has increased 4.9% since 2016, to almost 20% of the overall full-time freelance population. Today about 3.2 million full-time freelancers fall into the high-earner category, and this segment’s steady growth is only expected to continue.

The opportunity for businesses is clear. Badly needed expertise, whether for the vetting of a supplier contract or the design of marketing campaign to launch a new pharmaceutical product, can be accessed through digital platforms quickly and seamlessly, all for a lower cost and with added benefits such as project management and deliverable evaluation tools.

Most critical of all, the services and knowledge available from high-skilled freelance talent is potential font of innovative ideas for the organization.

The major obstacle, however, is a general lack of awareness and preparedness to utilize alternative work arrangements in a B2B context. Luckily, procurement is a natural fit to bridge this knowledge gap.

While contingent workforce managers must also get up to speed on developments in the gig economy, there are numerous available resources with which to do so fast. Procurement can then use its expertise in sifting through supply market intelligence to ensure fast-moving workforce opportunities don’t fall between the cracks of procurement and HR.

Solving Sluggish Growth Will Require Fresh Knowledge

The post-recession economy hasn’t just changed the economic picture for high-value talent. Businesses are grappling with their own set of new realities, as well.

It’s no secret that meager wage growth and sluggish productivity have weighed on the economy since the Great Recession. The result is that while businesses are hoarding more cash than ever, they’re not innovating, and thus growing, as much as they could.

This situation is also causing organizations’ human capital requirements to shift. In order to spur innovation, companies must be willing to reimagine their organizational models, embracing project-focused, network/ecosystem-based approaches to talent management instead of deferring to traditional hierarchies.

Enacting such a model, however, has been far from easy for most businesses. One of the biggest obstacles has been resistance from the C-suite. According to Deloitte’s 2017 Global Human Capital Trends report, many consulting firms working on such organizational redesigns report that up to 70% of reorganizations fall short because of “creative disobedience” from the executive team.

The solution is to tap individuals who can introduce a new way of thinking. Traditionally, businesses have looked to consulting firms for this outside insight, but this has also proven costly and time consuming — far outside the needs and desires of many companies.

New alternative professional services firms, however, are offering engagements from single consultants to flexible, personally-assembled teams of experienced professionals who have exactly the knowledge and experience needed to address a specific business issue. And because they can be sourced based on the client company’s specific needs, these projects can be structured in a business’ required time frame and within its budget, instead of holding them hostage to a big name consulting firm’s exorbitant fees and intricate processes.

Finally, procurement can parlay its experience sourcing and managing prior professional services relationships into engaging these new alternative firms. By sanctioning these new talent sources and including them in their programs and processes, procurement, too, can be the source of fresh thinking that leads to innovation.

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