Who makes up your workforce? Employees, contractors, crowdsourced innovators … maybe even robots?
As work continues to evolve, so, too, does the definition of the workforce. In a new study conducted by MIT Sloan Management Review and Deloitte, the vast majority — about 87% — of survey respondents said they consider external workers to be part of their workforce:
Today’s workforce comprises an array of players, including not only employees but also contractors, gig workers, service providers, external app developers and crowdsourced contributors, among others. Leaders use a variety of metaphors to describe the groups of workers who create value for their organizations, including a patchwork, a continuum, a set of concentric rings or a community.
While they have different ways of describing the broad range of contributors who create value for their organizations, leaders of forward-thinking organizations are in agreement that workforce management has become increasingly complex and calls for new ways of working and leading.
The Workforce Ecosystem
Our study introduces the concept of a workforce ecosystem, which we define 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. By complementarities, we mean that some members of the system (workers or organizations) work independently yet together offer value for their mutual customers. By interdependencies, we mean that some members rely upon one another for their shared success (or failure); they win or lose together.”
A variety of factors are driving this shift toward ecosystem thinking, including the nature of work, worker preferences, and how organizations use technology to engage with and manage the workforce. The trends driving workforce ecosystem adoption were at play well before the work-related shifts associated with the COVID-19 pandemic, and they will likely continue long after the pandemic has receded. As remote and flexible work took root in business practices over the past year, it likely accelerated the adoption of workforce ecosystems.
The phenomenon is real, according to interviews with a variety of leaders from a range of organizations — including Mayo Clinic, Workday and SAP — who are pursuing a workforce ecosystem approach. Yet our study found that most organizations are unprepared: Only 28% of survey respondents agreed that their company is “sufficiently preparing to manage a workforce that will rely more on external participants.”
The lack of preparation is understandable on many levels. Today’s organizations have a long history of hierarchies, employee-based development and rewards, and human resources (HR) systems that were built to accomplish functions that are different from the ones needed today. Laws and regulations have evolved to protect employees and to establish clear legal distinctions between employees and contractors.
Still, companies relying on new digitally-enabled business models are challenging that dynamic. For example, as the report highlights, software testing company Applause “doesn’t count a single software tester among its 400 employees. Instead, the company’s crowdsourced community — 700,000 strong, from 200 countries and territories — does its testing work.”
Adopting a workforce ecosystem approach has significant implications across organizations and in many domains, including strategy; leadership and culture; diversity, equity, and inclusion; and organizational governance. In each of these areas, it offers some provocative challenges to the status quo. For example, a company typically develops its business strategy and then hires the people it needs to carry out that strategy. But using a workforce ecosystem approach, the wide range of contributors that an organization can access might inspire it to explore new and different initiatives.
Seven Shifts in Management Practices
When an organization’s view of its workforce evolves from being primarily employee-centric to encompassing a diverse community that extends beyond its boundaries, core management practices must also evolve. Most traditional workforce management processes have been in place for generations and were designed and refined to support a traditional employee life cycle approach.
A workforce ecosystem approach calls for a shift in practices across seven areas: workforce planning, talent acquisition, performance management, compensation and rewards, learning and development (L&D), career paths, and organization design.
1. A Different Approach to Workforce Planning
Workforce ecosystem approaches use a broad definition of the workforce, including all work requirements across all functions, and are better able to handle unpredictability in hiring and quickly changing skills requirements.
2. A More Expansive View of Talent Acquisition
With a workforce ecosystem approach, HR works across silos, with functions such as information technology (IT) and procurement, to coordinate talent acquisition and access. The focus is on work types, not roles, and workforce analytics offer a consolidated view of internal and external workforces.
3. The Evolution of Performance Management Practices
Instead of focusing on annual reviews for employees, workforce ecosystems enable managers to concentrate on continuous goal-setting and feedback that improves performance and offers development opportunities for internal and external contributors.
4. A Rethinking of Compensation and Reward Practices
Workforce ecosystems encourage managers to move from traditional salary bands and employee-only benefits to compensation based on contributions, competence development, adaptability and potential. This approach may expand access to some benefits for non-employees and offer more equitable compensation arrangements.
5. A Different Training Approach
Training that is narrowly focused on job requirements and confined to internal groupings will not serve the whole workforce ecosystem. Instead, L&D should align skills, capabilities and competencies with future organizational needs and changing business strategies. This approach enables all workers to drive learning through community and knowledge-sharing.
6. Career Path Adaptation
In most companies, employees still follow a linear career path through a hierarchical organization organized around functions and business units. Internal and external talent marketplaces, such as opportunity marketplaces, reveal individual interest and experience and unlock opportunities for internal and external workers.
7. A Reworked Organizational Design
When silos persist between employees and external workers and communication modes are designed with only internal workers in mind, efficiency suffers, and the structure serves only some workers. Workforce ecosystems help managers reimagine an organization’s design so that it can organize efficiently around teams, projects and networks and ensure that its communication layers, reporting and decision rights account for all members of the workforce.
Leaders face a decision: They can either continue to manage employees and other workers through outdated, mostly linear systems and processes, or they can develop a new, holistic workforce approach that more effectively engages contributors across organizational silos and boundaries. Reframing from an employee-centric approach to a workforce ecosystems approach can drive significant strategic value.