Is Workforce Optimization a Myth? | DCR Workforce Blog

Is Workforce Optimization a Myth?

Over the last five years, virtually every company has reduced the size of its employee base to reflect the decline in business opportunities.  Most companies avoided the term “layoff”, describing their efforts as “right sizing”.  But did they actually achieve the right workforce size?  If Dr. Phil were to ask, “How’s that working out for you?” most companies would have to admit that their “right size” isn’t right for their needs.

How does one optimize one’s workforce? How do you build a team that has both the skills and bandwidth needed to support corporate initiatives? How do you know that you have too many – or too few – workers? It is an abiding question which has no ready answer. Hiring more people than necessary will eat into one’s revenues and threatens the very survival of the business. But, having a lean and mean staffing structure could quickly strain at the seams when business flourishes beyond expectations – seriously impacting productivity and output.

Let us look at the different strategies employers utilize to go make a little go a long way, which is an acknowledged practice in prudence.

Do more with less. Believing that they had excess capacity, many companies reduced the size of their employee base, expecting the remaining workers to take on additional responsibilities.  Unfortunately, the law of unintended consequences kicked in.  Many workers quickly experienced burn out.  Human capital experts opine that overloaded workers report to work sick as they worry about the loss in pay, an increased workload on their return to work after taking leave, missing deadlines, , and fear of losing the job. A lowered morale often has a contagious effect on others at the workspace. The result: lower productivity.  As the economy began to improve, these employees pursued job opportunities somewhere else, leaving the employer to start the process of recruiting and training someone to take over the task.

Companies also experienced significantly higher expenses as hourly employees were compensated at overtime rates for additional hours worked.

Build an extended workforce.  To respond to dynamic shifts in demand, many companies have increased their use of contingent workers.  These individuals, who are employees of a staffing agency, are retained for a specific project or time period.  In many cases, staffing agencies have provided “talent pools” of pre-qualified workers who can be available on demand, reducing costs as well as ramp up time.

By creating a blended workforce consisting of permanent employees and contingent workers, companies can dynamically respond to changing conditions.  But, can they plan for the future, modeling the right mix and number of each worker type?  Is it possible to truly optimize one’s workforce? In truth, workforce optimization is still in its pioneering stage.  However, there are actions you can take now to rapidly move toward comprehensive workforce optimization.

  • Examine your organizational structure.  Where, if at all, does responsibility for forecasting and budgeting permanent employees come together with those same responsibilities for contingent workers? These groups must work together to develop a cohesive labor plan and budget.
  • Agree on key performance indicators (KPI) of an optimized workforce, and ways in which these KPIs can be measured.  Establish protocols for regular measurement, analysis and reporting against these metrics, and use this data as a core component of your annual forecasting process.
  • Evaluate the vendor management system (VMS) used to manage contingent workers.  The market’s best VMS software will incorporate modeling tools to assess the impact of using different types of worker classes (employees, agency contractors, independent consultants, project teams) for each job.  The VMS should provide comprehensive reporting of worker costs, tenure, process cycle times, and other data that indicates worker productivity.  It should also include predictive modeling tools that allow you to overlay market data with your own results to establish benchmarks for worker productivity and cost.  DCR’s VMS, Smart Track will do all of this and also provide modeling tools to predict and prevent worker fatigue.
  • Examine internal talent management tools and HRIS systems to evaluate the productivity of permanent employees.  Again, evaluate whether your existing tool set is providing the performance data you need for workforce planning.

Through this blog, DCR will provide updates on advancements in workforce optimization.  Please share with us your experiences and needs in this area.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.