In “Talent Disruption: Strategic Workforce Planning in the Age of Labor Shortages,” a new report by Harvard Business Review Analytic Services sponsored by SAP, Professor Hatim Rahman from the Kellogg School of Management at Northwestern University makes a bold statement with implications for the future of work.
“The pandemic has allowed for a once-in-a-generation – or even a once-in-100 years – opportunity to question some of our long-held assumptions about how we work,” he says. “Assumptions like needing to work on-site have been reshaped, and we have an opportunity to rethink things at a very fundamental level.”
Once in a hundred years is a pretty long stretch.
But I think he’s right. As the Harvard Business Review Analytic Services report observes, the pandemic and other unprecedented global disruptions have created “seismic shifts” in how we work, where we work, and with whom we do business.
Workers sense these shifts and feel empowered. Likewise, events haven’t escaped the attention of business leaders. Last year, a survey of 232 global executives by Harvard Business Review Analytic Services revealed that 96% of respondents have made or are making alterations to workplaces because of recent business disruptions, while 92% said organizations need to adopt new workplace strategies to remain competitive.
We are in a historic moment, a “once-in-a-generation” opportunity to rethink workforce management at a fundamental level. What do we do with this opportunity? The Harvard Business Review Analytic Services report offers some valuable insights, of which I would like to highlight a few.
Procurement Function for External Workforce Emerges from Its Silo
We’ve been talking about this for a while – the idea that as businesses come to see the strategic value of procurement in external workforce management, it is emerging from its silo.
You might make the same case about human resources’ involvement with the external workforce. The integration of HR and procurement is exactly the kind of change we need. As companies increasingly rely on services procurement and contingent labor, HR and procurement will collaborate more closely and rely on the expertise of each other.
The collaborative process would go like this: HR works with internal departments to identify requirements and validate compliance and how external workers are going to be engaged and managed. Meanwhile the procurement team finds the right sources for talent and creates the contracts with rates and other terms and conditions. Then, the business uses these artifacts to engage the personnel, governed by these contracts. HR, procurement, and other departments can then monitor performance and compliance and report back to the appropriate parties.
Of course, while this type of collaboration is important, it is mostly moving the tactical aspects to the business while setting up necessary guardrails. Moving forward, businesses will need these functions, and other business functions, to collaborate in developing workforce strategies designed to achieve specific business outcomes.
Insourcing versus Outsourcing
It’s one thing for a business to decide it will use more external labor. It’s another to make strategic decisions about when and where to use this labor to achieve business outcomes.
“My sense is that many businesses are still handling hiring and recruitment tactically as opposed to what is the right approach for the business,” says Philip Ideson, managing director of Art of Procurement, in the report. “They should be asking, ‘What are the outcomes we’re trying to drive? What’s our position on insourcing or outsourcing services?’”
The Harvard Business Review Analytic Services report concludes that “companies will continue to grapple with the pros and cons” of outsourcing versus insourcing. This is another area where HR, procurement, and other business functions need to engage in strategic discussions.
Of course, any such discussions will undoubtedly come around to the topic of business flexibility. If the past few years have taught us anything, it’s that flexibility gives businesses “superpowers” that enable them to stay resilient in the face of disruption. Outsourcing is a source of flexibility, for example, allowing businesses to incur fewer fixed costs than with full-time employees. It also helps them adapt quickly to surges in demand, slowdowns, or unexpected events that could derail their success.
The Role of Technology in Strategic Workforce Planning
As the Harvard Business Review Analytic Services report observes, “Digital solutions have long been used to boost efficiency and savings in other areas of the business, and their value is equally key in enhancing external workforce outcomes.”
Vendor management systems like SAP Fieldglass solutions enable organizations to search a wide employee landscape to find and hire the external workers they need to fill roles and staff projects. These solutions can also show where the business is using temporary labor and whether it’s relying too heavily on one supplier or region. This enables proactive action to minimize service disruption.
SAP Fieldglass solutions can open opportunities for procurement professionals to focus on strategic, value-add work instead of manual processes that can be automated. Ideson envisions a scenario where “technology will move us to more of a self-service environment where business stakeholders can procure the services they need faster and more efficiently without the involvement of the procurement function.”
As Ideson says, procurement teams could see technology as “an existential threat to the profession or an opportunity.” However, given our “once-in-100 years” opportunity, I hope you choose to focus your expertise on strategic workforce planning, not repetitive processes. As you find new ways to use services procurement and contingent labor strategically, you’ll realize significant benefits, including:
- Budget flexibility through fewer fixed costs associated with full-time employees
- The ability to create workforce capacity on demand and scale up or down to meet changing project needs
- Less risk for the business as responsibility for worker results shifts to services companies
- Better value from the ability to actively manage every aspect of external worker engagement
- Optimized results with tools that enable outcome-based performance assessment
This is the promise of vendor management system technology. It can free you from a sometimes overwhelming amount of tactical work, allowing you to realize greater benefits with true strategic workforce planning.
Vish Baliga is chief technology officer at SAP Fieldglass.
