Staffing Equations: ‘What should be’ the right balance and leverage?

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Staffing needs analysis: We all know that people costs in organizations are usually the largest costs. In some knowledge-intensive companies, people costs account for more than 75% of total costs. One way to become more analytical and fact-based about these substantial costs is to examine staffing equations that identify how people are deployed and distributed across the organization, both now and in the future.

Staffing Equation #1

Perhaps, the simplest staffing equation, especially in today’s growing gig economy, is the percentage of employees versus contingent workers in an organization. Some experts estimate that by 2020, fully 50% of the workforce will be project-based. There are advantages and limitations to each staffing option. Contingent workers provide flexibility in an increasingly turbulent marketplace, while engaged employees can be the head, heart, and soul of the company’s purpose. There are certainly timing, cost, intellectual property and legal factors to consider, but the growing size and importance of the contingent workforce cannot be ignored.

Key Questions:

1) What is the current distribution percentage of employees and contractors in the workforce? 

2) What should this percentage be in the future to optimize business results? 

A clear future implication is that HR needs to broaden its focus to the total workforce, not simply just employees.

Staffing Equation #2

A second staffing equation is the subject of a previous HR Lever series post: Global Staffing Choices. As companies pursue global markets and revenues, they need to develop a supporting global organization and workforce. The global staffing equation for international assignments usually consists of three types of workers: expatriates, local nationals, and third-party nationals. Each staffing option has its own strengths and limitation that must be understood; and while conditions for global success are complex, technical and country-specific, it is best to transition from reliance on expatriate skills and leadership to third-party and local nationals. This transition affects both market acceptability and costs. Expatriate costs, for example, can be 10 to 20 times those for local nationals doing the same job.

Key Questions:

1) What is the current distribution percentage of expatriates, local nationals, and third-party nationals?

2) What should be this distribution for optimum leverage?

A clear future implication is that HR can make a huge impact by accelerating the transition away from expatriates, strengthening local national development programs and improving local talent pipelines.

Staffing Equation #3

A third staffing equation is not so widely known, possibly because it doesn’t pertain to employees yet. But the ingredients are familiar. It is the hiring equation, and it includes the following types of hires: external candidates from outside the organization, internal candidates from within the organization, external candidates referred by internal employees, and alumni seeking to return to the organization. Again, each type of candidate has its own advantages and limitations. External candidates likely bring a wider variety of skills and experiences than internal candidates, referrals or alumni. But as articulated in another previous LinkedIn HR Lever post, internal candidates (and by extension referrals and alumni) have faster learning curves, less turnover, reduced recruiting costs and quicker fill rates. These advantages can be monetized to be 33% to 50% less cost than external hires. See also the writings of John Sullivan for insights about each of these candidate types.

Key Questions:

1) What is the current distribution of external, internal, referral and alumni candidates?

2) What should this distribution be to achieve the greatest leverage and cost/time effectiveness?

Staffing equations are useful tools because they provide essential descriptive data.

Every HR professional should know, for example, what the percentage of employees versus contractors is. Every global organization should have a scorecard that assesses the balance among expatriate, local nationals, and third-party workers. But more importantly, than providing these current-state data, staffing equations lead to more strategic discussions of “what should be” the right balance and leverage. It enables HR to take a step back and ask more far-reaching questions that can be vital to the future success of the organization, such as: Are the organization’s most important and costly assets being deployed wisely? Most would agree that this is not just a relevant question to ask, but an essential one. Leading discussions around staffing equations is a great a way for HR to express a point of view, challenge convention, and become more Fearless.

Read David’s other articles on Market Valuation and HR, HR as Force Multiplier, Optimizing Mergers and Acquisitions.

Author: David C Forman, Fearless HR

Make sure you don’t miss David at the HR Congress in Brussels, 28-29th November 2017. His keynote and masterclass are highly anticipated.

Check out his best-selling book, Fearless HR, here.

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