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Total Workforce Management in a Post-COVID World

By Hans Dau (Mitchell Madison Group) & Gregg Spratto (PRO Unlimited) - May 21, 2021

HR managers will face complex challenges and opportunities

Global contingent workforce spending is estimated to be well over $5 trillion annually and often poorly managed. In the global post-COVID recovery, the contingent workforce share of total labor will likely increase dramatically, making sophisticated total workforce management imperative for cost savings and winning the war for talent.

When COVID-19 hit in the first quarter of 2020, businesses were forced to operate with a remote workforce, leveraging video conferencing technology and relying on fast network access speeds at home. This significant change took place without any ramp-up, compressing what may have been a natural, decade-long adoption S-curve into days and weeks.

COVID was essentially a large-scale forced trial of remote working for employers and their employees. The first-order effects are clear and largely positive: Employers liked the ability to operate without interruption and the reduced real estate footprint while employees by and large enjoyed the flexibility to work from home and the ability to relocate, independent of their employers' location. Additionally, employers now had the flexibility to draw on national or global talent pools to find the best talent at the most competitive wages.

With 200M vaccine doses administered in the US, it is prudent to consider the post-COVID environment incorporating new practices, rather than going back to 2019 operating models. Vaccinations, pent-up consumer demand, and unprecedented levels of fiscal and monetary stimulus all point towards massive growth for the second half of 2021, approaching 8% on a Q4 basis (Morgan Stanley, Goldman Sachs).

It is worth noting the scale of the monetary stimulus, which contributes to growth much more quickly than fiscal policy: During the 2008 financial crisis, the Fed's balance sheet grew from under $1 trillion to $4.5 trillion over 7 years, while in 2020, it took less than 3 months to add another $3 trillion in liquidity, with the Fed balance sheet now approaching $8 trillion. Even if the various infrastructure bills in Congress do not pass or are spent over many years or counterbalanced by tax increases, the economy is operating with unprecedented levels of extra liquidity.

The US economy will almost certainly expand strongly by the summer, but labor market shortages are already emerging, which could hamper growth. This recovery is evident in the contingent workforce sector where professional staffing has already recovered to its pre-pandemic peak. This recovery occurred in approximately one-third of the time it took to recover during the 2008 financial crisis.

Not only did the US workforce shrink by 5 million, many discouraged by long-term unemployment, lack of job training, and focused on child and family care issues, lower-end jobs also now compete with generous unemployment benefits and stimulus payments, further depressing supply at the lower end. Complicating the situation further are significant local imbalances, as states come out of the pandemic at different rates and with different policy prescriptions regarding reopening.

The situation likely faced by HR professionals in the latter half of 2021 will therefore be characterized by:

  • A strong rebounding economy and fierce competition for talent

  • Shortages of specific skills amidst a diminished total workforce

  • A significant part of the workforce accustomed to or preferring remote work

  • A workforce that more highly values health care benefits

  • Continued growth of the 'gig economy' - i.e., an increasing number of workers want to work independently and part-time

  • Growth in the percentage of contingent workers in a company from approximately 15% in 2010 to an expected 50%+ in 2030

Yes, workforce management is becoming even more complex for HR managers, but some key imperatives are emerging.

1. Sourcing Talent at the National and Global Level

The dispersion of the workforce in the wake of COVID-19 is likely permanent and employers will now have to grapple with sourcing talent from all over the country. The most talented workers will have the most leeway in the decision of where they want to live and how they want to contract with employers. Interestingly, this increased acceptance of remote work for just about all types of knowledge work may lead to another wave of globalization and offshoring of higher-end knowledge work, beyond the lower-end KPO/BPO tasks typically associated with offshoring. There is good news for employers as well. Talent can now be sourced based purely on qualification, availability, and costs without having to also consider proximity to a local workplace. Employers who utilize emerging market rate intelligence tools will have the best ability to take advantage of finding high-quality, available talent at far more competitive rates.

2. New Normal: Managing a Dispersed Hybrid Workforce

The highly dispersed workforce with hybrid in-person and remote operating modes will be the new normal, as it is inherently more productive and maximizes the available talent pool. Countless hours of productivity lost in commuting, childcare complexities, etc. are being freed up for productive work. The technology is in place - filing cabinets with confidential documents have largely moved to the cloud, enabling office hoteling across companies. Clearly, there is a requirement for high bandwidth in-person interactions, psychological needs of community and human interaction, as well as security, local licensing, and other location-dependent legal issues, but these issues can be effectively addressed with technology and careful planning. This may lead to an increase in business-related travel, the emergence of flexible shared workspaces, group working arrangements, etc.

3. Blurring Workforce Boundaries

Productive talent comes in all types of legal and term modes, ranging from traditional W-2 employees, 'pay rolled' temps, 1099 contractors, to project staff governed by SOWs, etc. Given the rise of the gig economy, acceptance of contingency intermediation as a career path, and COVID accelerated the remote working trend, it is important to consider a unified management approach to the entire workforce, as opposed to management through arbitrary silos, such as HR, procurement, legal, etc.

What is critical is to integrate the various modes of workforce management, leveraging cross-platform data sources for maximum productivity. In other words, employers will need to have a well-thought-out strategy that successfully blends all forms of workers into a cohesive total talent workforce. Decisions on whether to hire permanent, contingent, or third party should be made at a strategic level and not just as needed by the hiring manager. A cohesive corporate workforce strategy also allows employers to achieve goals around diversity hiring, succession planning, business continuity, and several other important initiatives.

4. Leveraging the Totality of Available Workforce Data

There is more data available than ever to assess and evaluate workforce performance. In the gig economy, there are rich datasets generated every time a worker enters or exits a job, while platforms like Upwork and LinkedIn generate additional data about potential talent. Smart employers need to leverage this data across the various modes of "employment" to fairly compare and assess their options. Further complicating the picture is the geographic dispersion of the workforce, which requires more local knowledge about prevailing compensation rates, as well as associated benefits; for example, healthcare costs that can vary widely from location to location. As mentioned earlier, the utilization of market-rate intelligence tools will allow employers to make data-driven decisions to meet all of their workforce needs.

To compete effectively for scarce talent across the nation and the globe, employers need data and analytics about talent availability, cost, and outcomes, need to manage the workforce across all modes of relationships, be it traditional W2, contingent, or intermediate all the way to SOW-governed contractors. Given the size and scope of this challenge, managing the workforce well could be one of the most effective levers to improve earnings and win the war for talent. However, this is a complex and analytically intensive challenge with mission-critical implications for most corporations. We suggest leveraging data, experience, and analytical capabilities from specialized service providers to accomplish the task effectively.

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