Companies across the globe are embracing the “open workforce” model, a trend that has been fueled by globalization and digitization. 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 organizations 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 New Ways of Working … Managing the Open Workforce, a CGMA report 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 organization and across geographical boundaries.”
The trend is most established in the Americas. Thirty-eight percent of respondents in the United States 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 United States 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.
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 organizational agility.
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. The potential for cultural mismatches and communication difficulties among the workforce was a further issue highlighted in the study, while some respondents were worried about the effect on their organization’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.
The key to achieving that balance is “being able to articulate the vision of the organization very clearly to everyone, making sure that the staff are on board and that they understand the organizational goals,” said Merike Henneman, CPA, CGMA, controller at Destination DC. “If that’s the case, then you should end up with effective local decision-making.”
Participants also reported difficulty in ensuring consistent decision-making across the organization, creating the right incentives to attract and retain talent, fostering effective collaboration, and ensuring that both the internal and external workforce are working toward the company’s goals and vision.
A complete version of this article, “How to Meet the Challenge of the Open Workforce,” by Samantha White and Kim Nilsen, and a link to the full report are available at tinyurl.com/CGMAOpenWorkforce.
—Jack Hagel, editorial director, CGMA Magazine
Implications for management strategy
To overcome the risks and challenges of the open workforce, corporate structures need to change. The CGMA report New Ways of Working … Managing the Open Workforce outlines five characteristics businesses will need to thrive in this new environment, and the steps toward 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 digitization. Greater use of machines, robotics, and information technology on tasks previously not thought to be susceptible to automation or digitization involves:
- Redeploying skilled workers to more value-adding activities.
- Integrating new internal systems with external partner systems where necessary.
- Maximizing the potential of digital and mobile technologies to create value.
CGMA Magazine is published in conjunction with the Chartered Global Management Accountant designation, which was created through a partnership between the AICPA and CIMA. The magazine offers news and feature articles focused on elevating and emphasizing management accounting issues.