Companies across the globe are embracing the “open workforce” model, a trend that has been fuelled by globalisation and digitisation. Firms increasingly rely on external staff as well as their permanent in-house employees to meet their business needs.
The flexibility of the model enables organisations to be more agile, react faster to new opportunities, and drive competitive advantage. But the shifting talent base also brings challenges, with new approaches to performance management, risk management, and decision-making required to meet them, according to a new CGMA report, New Ways of Working … Managing the Open Workforce, which is based on a survey of more than 1,100 senior executives.
“The workforce is evolving into a mixture of full-time employees, contractors, freelancers, and, increasingly, people with no formal ties to your enterprise at all,” Girish Bhat, FCMA, CGMA, the CFO of Gammon India, told researchers. “You have to work with people who move more freely from role to role across the organisation and across geographical boundaries.”
The trend is most established in the Americas. Thirty-eight per cent of respondents in the US and Canada said that at least half of their workforce was made up of external talent, followed by 36% of those polled in Latin America. In Europe, this was the case for 27% of the companies represented in the survey, 21% in Asia, 17% in the Middle East and North Africa, and 14% in Sub-Saharan Africa.
The shift looks set to continue over the coming years, with 45% of those in the US and Canada and 36% of respondents in Latin America and Europe predicting that more than half of their workforce will be external in five years’ time.
Cost is considered to be the main benefit by leaders in Europe and North America, while respondents in Asia Pacific gave greater priority to the increased exposure to new ideas and specialist knowledge that the model brings, as well as improved organisational agility.
The ability to tap into global expertise and do so quickly is one advantage to the open-workforce model, said Christian Meloni, ACMA, CGMA, global controlling manager for Solvay Specialty Polymers, a division of Solvay Group and a CGMA speaker at the World Congress of Accountants (WCOA), held this week in Rome.
“The greatest potential benefit of having this kind of open workforce is that you can access a much larger set of competencies, knowledge, and talent than you can [by] only developing internally,” Meloni said. “There is no way even the most advanced company can cover all the technologies, all the trends, all the knowledge needed to succeed.”
This agility is of paramount importance for Tencent, China’s largest internet service provider, according to John Lo, FCMA, CGMA, the company’s CFO. “In the internet industry, everything moves really quickly, and we have to react to changes nimbly because the first mover usually wins,” he told researchers. “This means we need access to a diverse mix of talent both locally and internationally.”
Challenges and risks
Managing a complex and constantly shifting network of employees, collaborators, and business partners also poses significant challenges.
The risk of data security breaches was of greatest concern to respondents, followed by disclosure of competitively sensitive information.
Another concern is the potential disclosure of sensitive company information – secrets that are much harder to keep when they are being shared all over the world.
Ken Goldman, CFO of Yahoo, speaking Tuesday at WCOA, said that all-hands meetings at Yahoo are off limits for contract workers so that the company’s leaders can be open and transparent without worrying about leaking competitive information. “You can only do that if people really feel tied to the company,” he said.
The potential for cultural mismatches and communication difficulties amongst the workforce was a further issue highlighted in the CGMA study, while some respondents were worried about the effect on their organisation’s ability to make timely decisions.
The capacity to retain oversight and control over the performance and productivity of the external workforce is a significant challenge for managers. Of those polled, just 32.6% said that their company had struck the right balance between control and empowerment.
According to Merike Henneman, CPA, CGMA, controller at Destination DC, the key to achieving that balance is “being able to articulate the vision of the organisation very clearly to everyone, making sure that the staff are on board and that they understand the organisational goals.
“If that’s the case, then you should end up with effective local decision-making,” she told researchers.
Carol Calandra, CPA, CGMA, Group CFO – Markets at EY, said clarity is critical to success in an open workforce. “It’s important to have executive sponsorship. It’s important to understand where you are along project milestones; understand where each component fits in and just really stress that communication,” she said in an interview at WCOA. “And then hold people accountable for delivery.”
Participants also reported difficulty in ensuring consistent decision-making across the organisation, creating the right incentives to attract and retain talent, fostering effective collaboration, and ensuring that both the internal and external workforce are working towards the company’s goals and vision.
“You need to understand your team well enough so that you can create a vision that everybody can bind to,” said Jason O’Malley, finance director of markets and business reporting for British Telecom Wholesale in the UK. “So for someone that has been there for a very long time, it is around the legacy that they’re passing on to the next generation. For someone that is going to be with you for nine months, it is very much about how do you achieve what you want on your CV, how do you get the most out of your project so that you can move on to what you want to do next.”
Implications for management strategy
To overcome these risks and challenges, corporate structures need to change. The report outlines five characteristics businesses will need to thrive in this new environment, and the steps towards achieving them.
1. Openness. To cultivate an outward-looking approach to sourcing talent and exposure to innovative ideas:
- Create new ways of measuring performance.
- Implement enhanced risk controls and security mechanisms.
- Embed cultural change to establish more transparent ways of working.
2. Agility. Capacity to adapt to local needs and respond rapidly to market pressures requires:
- Close alignment with HR to forecast talent and knowledge needs.
- Decision-making structures that enable local autonomy yet maintain control.
3. Innovation. The ability to share knowledge, insights, and innovation processes between teams and across multiple players in the value chain involves:
- Mastering the new tools and technologies required to help capture innovative ideas and streamline innovation processes.
- Exploiting tools and techniques that drive open innovation.
4. Collaboration. To knit together an increasingly diverse workforce and a range of external partners:
- Lay down principles and frameworks to guide interaction between in-house and external teams.
- Develop ways to share internal information with the external workforce, including setting up shared workspaces.
5. Automation and digitisation. Greater use of machines, robotics, and information technology on tasks previously not thought to be susceptible to automation or digitisation involves:
- Redeploying skilled workers to more value-adding activities.
- Integrating new internal systems with external partner systems where necessary.
- Maximising the potential of digital and mobile technologies to create value.