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Farai Mugabe, Content & Research, The HR Congress
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Leaders are now beginning to think more expansively about who makes up their workforces. The quality of hire for suppliers, consultants, and independent contractors is also part of your company’s talent ecosystem because their efforts determine the success of your business.
Over the past years, issues of how people are organized in the way of work have been one of the greatest debates influencing agility, flexibility, cost management, profitability, and performance of businesses. Management guru Charles Handy proposed an organization centered on essential core staff, outside contractors, and part-time staff to meet its objectives.1 This model has influenced how companies manage people who deliver work for the organization to function fluidly. Leaders are now beginning to think more expansively about who makes up their workforces. The quality of hire for suppliers, consultants, and independent contractors is also part of your company’s talent ecosystem because their efforts determine the success of your business.
What is a workforce ecosystem?
A workforce ecosystem can be defined as “a structure focused on value creation for an organization that consists of complementarities and interdependencies. This structure encompasses actors from within the organization and beyond, working to pursue both individual and collective goals.”2
The workforce ecosystem is a paradigm shift from the traditional view of the workforce, which views a company’s workforce as limited to full-time and internal employees. The workforce ecosystem extends beyond the internal workforce to stretch toward the external workforce.
It is a known fact that to deliver its strategy and meet customer needs, companies require internal and external talent. Companies have outsourced key components of the value chains to external service providers in the form of independent contractors, gig workers, labor brokers, independent companies, suppliers, and consultants as ways to become more flexible, manage costs, become more compliant with employment law, and tap into scarce talent.3
While companies have control of their core staff, they often have less visibility of the external staff who might not seem part of their company but directly influence key business outcomes, such as profitability and sales. Given such, there has been a rising concern about issues related to culture, diversity management, performance, and productivity of external talent.
The Big Ideas Report reveals that 93% of managers view some external workers as part of their organization’s workforce. 74% of managers agree that effective management of external contributors is critical for their organization’s success.3 Big global brands such as McDonald’s, Coca-Cola, Unilever, Nestle and Uber rely heavily on that model.
Unilever has a staff complement of over 150 000 dotted across the globe. Joeren Wels, Unilever’s Executive Vice President who is responsible for human resources, indicates that it has about 3 million people who form Unilever’s outer core. “You have responsibility for the inner and outer cores. If you want to build more fluidity, you need to understand where those people sit and how they work for you,” said Jeroen Wels.
A number of other companies such as Uber, Airbnb, and WeWork have managed to generate millions and billions of revenues through the use of external talent in the form of agents and independent contractors. These independent contractors and agents at the business’s outer core are critical for the delivery of the business strategy. For example, Uber cannot deliver service without its strong network of independent drivers. Media companies cannot push volumes of print newspapers without independent street vendors. Companies such as Coca-Cola have managed to dominate certain markets such as India because they use independent salespeople such as vendors, suppliers, and distributors. Coca-Cola employs, and its nearly 225 independent contractors employ more than 700 000 people. This helps Coca-Cola sell its products to customers at a rate of 1.9 billion services per day.4
External staff is often difficult to control due to employment, contractual, and commercial laws. For example, HP, Sony, and Acer were accused of relying on Chinese student laborers who work long 12-hour shifts. The students, some of whom are allegedly as young as 16, have their graduation and funding at risk if they do not comply.
Mihaly Nagy, Partner and Head of Content and Strategy at The HR Congress, asked this question on LinkedIn, “How do you control your culture when more of your work is done by people who are not part of your value system and culture?” This is a critical question that HR and business leaders should consider answering. This article will address the question and provide more thoughts on it.
How can companies close the gaps?
The Big Ideas research report indicates that labor laws may prevent managers from controlling and directing issues related to the performance management of contractors. However, other areas can be managed, such as developing and nurturing a more integrated culture across the company’s workforce ecosystem. This can be supported by having corporate events with suppliers and their staff together.
Companies can also factor into commercial contracts that suppliers are obliged to meet minimum ethical and legal standards. To force compliance, companies will not have access to markets if they do not comply. For example, for one to supply to the EU, suppliers from areas Africa and Latin America should be complemented with international standards. These standards include ethical management of their people in areas such as working hours, humane treatment, and access to clean water. If suppliers do not comply with these standards, including SMETA and Global GAP, they will not be allowed to export to the European Union.
COVID-19 taught us that we could communicate and visit each other digitally without physical contact. We can collaborate and communicate using platforms such as Zoom and Teams. In that way, companies can generate more value through technology and digital platforms to communicate and collaborate. Companies can also make sure that they integrate their software platforms so that they can communicate.
Worker preferences are changing. More and more employees want to go independent. Most employees now favor flexible work arrangements, purpose, and work-life balance over job security. A report by MIT Sloan and Deloitte indicates that many workers are now considering themselves as ‘free agents’ rather than ‘loyal employees.’ There has been a rise in employee apathy, and employees are no longer as loyal to employers as they used to be.6
Companies have to consider remodeling their talent management practices and incorporate more flexible work arrangements to attract scarce talent. More staff would want to work remotely, have flexible work arrangements, and not be attached to one company. To attract such talented staff, companies can opt for gig workers, independent contractors and consultants.
Companies can also offer training and development opportunities to their suppliers as well as employees within their workforce ecosystem. This will help companies influence their product and service quality, sales revenue and customer retention. Global businesses that offer franchise services understand this better. They train staff from their franchise businesses on key aspects such as product knowledge and customer service. This helps brand owners deliver seamless and standard service across different parts of the world.
As the father of modern HR says, “HR must rise today’s opportunities.” The COVID-19 pandemic has placed HR at the centre of business transformation and success. HR continues innovating and leading the business through talent, leadership, and organization.7
1The shamrock organisation, by Charles Handly, London Business School
2Workforce ecosystems: A new strategic approach to the future of work, by Elizabeth J. Altaman, Jeff Schwartz, David Kiron, Robin Jones and Dian Kearns-Manolatos, MIT Sloan Management Review in collaboration with Deloitte
3 Big ideas research report. Orchestrating workforce ecosystems: Strategically managing work across and beyond organisational boundaries, by Elizabeth J.Altman, David Kiron, Robin Jones and Jeff Schwatz
4How many bottling partners and employees are part of Coca-Cola’s business?, by The Coca-Cola Company, The Coca-Cola Company
5 How do you control your culture when more of your work is done by people who are not part of your value system and culture, by Mihlay Nagy, Linked In
6Workforce ecosystems: A new strategic approach to the future of work, Elizabeth J. Altman, Jeff Schwartz, David Kiron, Robin Jones, and Diana Kearns-Manolatos, by MIT Sloan Management Review Report
7How HR must rise to today’s opportunity, by Dave Ulrich, Linked Inhttps://www.linkedin.com/pulse/how-hr-must-rise-todays-opportunity-dave-ulrich/
Written by: Farai Mugabe
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