Beyond Contingent Workforce Management: Embracing an Agile Workforce
Today, when it comes to talent — especially highly skilled or expert talent — organizations are at the beginning of a new phase of workforce innovation. In the coming years, organizations will be going beyond the well-established practice of sourcing external contingent workforce to augment, or even replace, parts of their “permanent” employee workforce. The next phase of workforce organization innovation is embracing an agile workforce model.
For organizations, the implications are far-reaching. The adoption of an agile workforce model will provide a strategic advantage to organizations in the years ahead. But adoption is at a very early stage. And while technology (including digital platforms) is a necessary condition to achieving an agile workforce, it is not a sufficient one. To realize all of the benefits of an agile workforce, organizations will need to think differently about how work is done and managed, how workers are engaged and how their skills and knowledge are applied, and, lastly, how managerial know-how and behavioral patterns must change across different parts of an organization.
At this stage of the game, some senior executives may feel reluctant or unable to commit attention and resources to such a significant organizational transformation. That is the case even though they may be well aware that the current and future business environment requires new models for accessing, managing and maximizing the value of their workforce — in particular, critical, high-cost knowledge workers who are often in short supply and difficult to retain.
Even though most executives know they are already facing a high stakes, human capital game in which losing is not an option, they may find many ways to rationalize staying on the sideline. But failure to process information and uncertainty could lead to a miscalculation of when and to what extent to enter the workforce innovation game. The reality is that a significant percentage of organizations have at least taken the first step of understanding the agile workforce model, why it is compelling and what it entails. Executives that do not lead their organizations to follow suit do so at their own peril.
Contingent vs. Agile Workforce
To understand the agile workforce model, it is important to understand the difference between the contingent workforce and agile workforce models, as well as their relationship to one another.
The contingent workforce model was designed to source temporary or project workers (from outside of an organization’s boundaries) and slot them into specific internal roles (staff augmentation) or well-defined projects (statement of work/SOW). Depending upon the industry and the organization, a contingent workforce could include almost any kind of worker, from warehouse pickers to locum tenens physicians.
Today, almost all large organization have some kind of formal contingent workforce management program that, more often than not, is controlled by procurement. The contingent workforce “sourcing/supply chain” model — initially designed to address organizations’ needs for low- to medium-skilled temporary workers — has been operative, accepted and productive for decades. But over the past years, business managers have begun to conclude that it does not meet all of their needs, particularly their needs to access and maximize the value of often scarce, costly, high-skilled and expert knowledge workers.
The contingent workforce model is almost entirely focused on the sourcing of external temporary workers and only marginally focused on how those external workers are slotted and managed in an organization. In contrast, while access to and engagement of external talent is a part of the agile workforce model, it is only one aspect. The agile workforce model is significantly focused on what happens inside of the organization — in effect, how work gets done — as well as how both internal and external independent workers can be blended into (and released from) transient projects and teams to achieve specific value-added outcomes.
Whereas the contingent workforce model is a generic one that can address, more or less effectively, a broad set of work categories, the agile workforce model is really focused on knowledge workers with specialized skills and areas of expertise. From an organizational standpoint, specialized skills and expert knowledge can be found in both internal employees and external independent (the unifying concept is talent–or more specifically the skills and knowledge that can be applied and orchestrated to achieve desired business outcomes).
As such, the agile workforce model is very much focused on positively engaging that talent to access and leverage the embodied skills and expertise into dynamic work/project structures. Among other things, the agile workforce model entails an organization-talent relationship that is substantially different from the contingent workforce model, where the relationship is transactional and analogous to that of a distributor sourcing products or materials and supplying them to a buying organization.
For a variety reasons, it is also essential for executives to understand that the agile workforce model does not supersede the contingent workforce model. Rather, the agile workforce model is an innovative solution to a different problem — that is, optimizing an organization’s access to and application of internal and external talent (specifically, knowledge workers and their skills and expertise) to achieve specific, critical business outcomes in high velocity, continuously shifting markets and competitive environments.
Agile Workforce: Who and Why
An agile workforce is defined not only by its unique, non-traditional organizational architecture but also by its specific make-up. The agile workforce is made up of “knowledge workers,” whether internal employees or external independents. Therefore, understanding the knowledge workforce both sheds light on the make-up of an agile workforce and helps explain why the agile workforce model has become compelling at this time:
- According to the Wall Street Journal, in 2016, “31 million people [20% of the civilian labor force] had nonroutine cognitive jobs, what is often called ‘knowledge work,’ consisting of varied intellectual tasks such as professional, managerial or technical occupations”
- Knowledge work occupations have been adding more jobs than any other year since the 1980s — about 1.9 million per year more recently
- These knowledge workers do not come cheap, and their skills and knowledge are not efficiently utilized: “the average annual cost of one is $92,000, but on average, only 39% of a knowledge worker’s day is spent doing their job”
- Knowledge work is inherently based on specialized knowledge and skills, and specialization in the knowledge workforce has been increasing since the 1980s (e.g., consider software development today compared with 50 years ago)
- The increase of specialized knowledge and skills means projects can require specialists that are needed only for that project and sometimes only for a part of it. When projects are urgent and big opportunities can be missed, the time it takes to engage, onboard and integrate talent into a project can be critical
- It appears that knowledge workers (especially, specialists at the high end) are increasingly interested in working as independents for a variety of reasons. According to MBO Partners, 3.2 million full time independents make more than $100,000 annually, up 4.9% from 2016. And organizations will increasingly need to turn to this independent workforce to operate successfully
Understanding that an agile workforce is, by definition, a knowledge workforce goes a long way in explaining what an agile workforce is and why the agile workforce model is becoming increasingly relevant and compelling.
For example, internal and external knowledge workers may be expensive, but they are essential to an organization’s performance. While they arguably contribute the highest per capita value to an organization (or at least have the potential to) the maximization of that value depends upon how that knowledge workforce is organized and managed. The agile workforce model actually accomplishes this and transforms an organization’s underutilized, organizationally suboptimized internal and external knowledge workforce into an efficient, flexible, high-impact agile workforce.
A Workforce Unchained
An agile workforce is not only a collection of specific kinds of workers or talent. It is also those workers organized under a unique innovative work architecture or workforce model that, unlike the contingent workforce supply chain model, integrates work execution with access to skills and expertise that may reside inside the organization or be found outside of it.
The agile workforce model can be described in different ways. For example, Catalant, an online workforce intermediary that connects enterprises with specialized business expertise and services, has described an agile workforce model as being “made up of smaller, cross-functional teams, reducing bureaucracy to get work done faster. Leaders in an agile workforce have visibility and access to both internal and external skills and expertise, wherever it is. Workstreams of an agile workforce look like mission-based projects, with the right people working on the right projects — both aligned with the company’s strategic goals and priorities.”
From a more operational perspective, the agile workforce model boils down to having access to specialized expertise and capabilities provided by both internal or external talent which is then applied and orchestrated within well-defined, output-specific projects (see “Maximizing Enterprise Value of an Agile Workforce with the Talent-to-Value (T2V) Model.” The essence of agile is the ability to act quickly in response to some need. Comparatively, the model can outperform an organization’s traditional way of organizing and managing knowledge workers by rapidly and efficiently:
- Initiating projects, often based on previous project artifacts
- Accessing internal and external talent from online talent pools
- Managing project execution, including facilitating collaboration
It is critical, however, to understand that an agile workforce cannot happen without state-of-the art technology; that means utilizing a fit-for-purpose digital platform is essential. A digital platform will not only function as an operational process enabler and data capture and management solution. At the crucial initial stage of adoption, it also will serve as a foundation, business architecture and toolkit that will catalyze the adoption process and substantiate the agile model within the organization. Though the purpose and goal of an agile workforce model is ultimately driving organizational optimization and value maximization, the outcomes and associated concrete benefits cannot be achieved without technology.
To Be or Not to Be
Over the past few years, some organizations, including major companies, have already started down the agile workforce path. It would therefore appear that the overwhelming majority of organizations have not yet started their journeys — whether because of lack of awareness, financial or organizational constraints, risk aversion or something else.
However, a recent Catalant of survey of enterprise executives indicates this is not really the case. For example:
- Over 50% of respondents said agile workforce was a top priority, while only 20% of respondents cited AI and automation as a top priority
- Over 60% of respondents said their organizations had formal programs
- Over 50% of those respondents whose organizations (about 30% of all survey respondents said CHRO/chief talent officer and CEO were the key program stakeholders)
It is understandable that making a do-or-die decision under considerable uncertainty can be difficult for executives in many organizations. On the one hand, they already know they need a new talent strategy that will alleviate talent scarcity, leverage external talent, improve execution of critical activities, increase workforce flexibility and productivity and, lastly, take operational performance to the next level. The obstacle is less the desire and will to act but more the uncertainty and not knowing what to do and where to go.
Fortunately, the agile workforce model now provides a map. In addition, Catalant’s survey-based report, “Reimagining Work: How Winning Executives Are Building An Agile Workforce,” offers helpful information for paralyzed, reluctant or hesitant senior executives. Based on the survey findings and Catalant’s experience with organizations already moving down the path an agile workforce, the report prescribes steps to take and identifies challenges to anticipate as well as suggestions of how to address them.
Most organizations have systematized and scaled their use of a contingent workforce. The contingent workforce model is well-established and will continue to provide business managers with a way to source temporary workers across a wide range of work categories. However, business managers — the folks who are charged to get work done and achieve concrete results — are realizing that something else is needed beyond the contingent workforce model. They need to engage specialized, highly skilled, often expert talent (knowledge workers) and gain access to critical skills no matter where or in whom they may reside. They also need to rapidly, efficiently and repeatedly configure that talent into any number of different goal-specific projects. In other words, they need an agile workforce.
But an agile workforce is not only needed to achieve tactical outcomes. It is also required for strategic reasons. At that level, organizations increasingly must respond to shifting markets and compete on a playing field by engaging critical talent (specialized skills and expertise) and leveraging new technology. Nearly all senior executives are aware of and concerned about being able to access talent and about organizing and executing in a challenging business environment. They also know that when the status quo is pitted against the future, the future always wins.
But with regard to workforce, the future has already arrived, and the contest has already begun. Consequently, senior executives must not only make the decision to begin the journey to an agile workforce. They must also step up now and lead. If they don’t, the show won’t even get on the road, let alone reach the destination.
The decision to embrace an agile workforce is similar to Pascal’s wager (making a choice between two alternatives with different, but uncertain, costs/benefits). In the first, the benefits–though uncertain–can be boundless, while the costs are clearly limited. In the second, the benefits are limited, while the costs can be catastrophic.
Senior executives, the choice is yours.
CORESAP Fieldglass Takes Center Stage at SAP Ariba Live (Part 2) — Product Roadmap Insight + Procurement & HR Recommendations04/11/2019
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