Magazine article Workforce Management

A Flexible Force

Magazine article Workforce Management

A Flexible Force

Article excerpt


A QUICK READ of any newspaper reveals that the economy is down and many corporations are entering a cost-cutting cycle. It only makes sense that when a business is facing a downturn that all major cost centers contribute to containment efforts. While no one likes cost cutting, it's important to realize that people costs are likely to be a major focus.

In many industries, up to 60 percent of all variable costs are related to employee costs such as salaries, benefits and training. Unfortunately, HR has a bad habit of waiting until it is told to react and, as a result, is often forced to use the last-resort tool of layoffs to adjust labor cost. Avoiding large-scale layoffs should be a key priority, because even when done correctly, layoffs can have legal implications as well as a dramatic impact on recruiting, morale, retention and overall workforce productivity. Fortunately, there is a workforce strategy that can significantly reduce people costs without much of the associated pain. That strategy is to develop a contingent workforce.

Having a contingent staffing strategy helps HR avoid traditional (and flawed) approaches such as the freezing of hiring, promotions, pay or budgets. Each of those measures can have tremendous negative impacts on top performers. Nothing frustrates top performers and innovators more than freezing projects that excite them and that allow them to remain on the leading edge. In the same light, the common practice of freezing raises or promotions reduces their motivation. Such efforts cause retention problems among top performers because they can look outside the firm to organizations that would fully fund and reward their work even in the toughest of times.

Contrast those painful choices with a contingent labor strategy, in which a portion of the workforce is easy to scale back (or ramp up). This allows organizations to shift resources rapidly from low-return to high-return areas. The concept is relatively simple. Instead of hiring everyone as permanent, HR develops an approach that designates a percentage of all positions to be contingent. When labor costs must be reduced, this more flexible percentage of the workforce can easily be manipulated.

Because contingent workers are designated in advance as contract workers, part-timers or temps, their numbers can be reduced more easily by just not extending their contracts. While many firms currently use some form of contingent labor, few have developed a strategy to help ensure that such deployments maximize the organization's return. …

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