HOLISTIC TALENT SUPPLY CHAIN MANAGEMENT

HOLISTIC TALENT SUPPLY CHAIN MANAGEMENT AS MARKETS, TECHNOLOGIES, AND PRODUCTS quickly adapt and shift, companies are scrambling to have the right talent in the right place at the right time. To meet the challenges, more organizations are turning to the external workforce contingent workers, independent contractors, or former employees who can help them meet their talent needs. But are companies so focused on the short-term filling of gaps that they miss opportunities to fully leverage these talent communities? Harvard Business Review Analytic Services recently surveyed 316 senior executives and managers online to understand the talent challenges organizations are facing and most importantly identify the best practices among leading companies working with external talent. This report found that by using a talent supply chain management approach, human resources leaders can acquire talent from multiple sources and deploy it for maximum business impact. A holistic talent management approach looks through a wide lens to see the whole talent picture, using analytics to optimize all the talent available to an organization. It seeks to incorporate the external workforce into workforce planning, employment branding strategies, learning and development systems, and succession planning. To do so, it must overcome legacy organizational barriers, such as outdated policies and practices or legal concerns. But the result is the ability to leverage a highly skilled, motivated, and flexible workforce a distinct strategic advantage for any company in any industry. HOLISTIC TALENT SUPPLY CHAIN MANAGEMENT 1

FINDING THE RIGHT TALENT AT THE RIGHT TIME In the Harvard Business Review Analytic Services survey, almost a third of organizations reported they struggle to find the talent they need, and nearly 60 percent anticipate talent shortages in the next three years. figure 1 It is no surprise, then, that organizations see value in using external workers. That value lies in the flexibility for the organization, access to talent, and lower total cost compared with using full-time employee equivalents (FTEs). John Boudreau, professor of management and research director at the University of Southern California s Marshall School of Business and Center for Effective Organizations, forecasts a shift, where companies will be motivated to hire external workers less for cost reduction and more for the expanded pipeline of talent they bring to an organization. Boudreau, who is also author of Retooling HR: Using Proven Business Tools to Make Better Decisions About Talent (Harvard Business Review Press, 2010), advises organizations to go beyond the concept of employment when thinking about engaging the optimal workforce: Should you hire as if your workforce will stay a month, a year, or their entire career? The answer makes a big difference in the qualifications you set, how well candidates must fit with the job, the team or the organizational culture, and the deal you offer. FIGURE 1 TALENT SUPPLY, TODAY AND THREE YEARS FROM NOW Which of the following best describes your organization s (current) supply of talent? Over the next three years, what do you anticipate your organization s supply of talent will be? TALENT IN SHORT SUPPLY 13% 24% It is/will be adequate to meet our needs Have/foresee shortages in some areas 56% 59% Current Next 3 years 17% 31% We struggle to find talent we need/see talent shortages ahead 2 HARVARD BUSINESS REVIEW ANALYTIC SERVICES

RESPONDING WITH AGILITY TO MARKET DEMANDS Some 70 percent of respondents to the survey said they agree that using external workers allows their organization to meet market demands and maintain efficiency that would otherwise be difficult. And more than half see the value of the external workforce increasing in the next several years. figure 2 Nasdaq is one such company. Currently, says Rebecca Arnold, vice president and global head of talent management, external workers compose about 20 percent of Nasdaq s workforce. But Arnold and her colleague Doug Kortfelt, vice president and global head of strategic sourcing and procurement, say they expect to deploy an even higher percentage of external workers in the future. We ve been growing at a rapid pace, through acquisitions or new products, Arnold says. Our objective is to develop a workforce that enables the organization to identify and respond to talent needs and organizational constraints so as to forward our business strategies in both the short and long term. FIGURE 2 ATTITUDES ABOUT EXTERNAL WORKERS Please rate the extent to which you agree with each of the following statements. (Percent somewhat/strongly agree) BENEFITING FROM THE EXTERNAL WORKFORCE Using external workers allows our organization to meet market demands and maintain efficiency that otherwise would be difficult 69% 66% Using external workers is beneficial to our organization and the external workers Using external workers allows us to bring in expertise that our full-time staff lacks 53% Using external workers will be increasingly valuable to our organization in the next two to three years 52% 39% We would use more external workers if it were easier to manage them HOLISTIC TALENT SUPPLY CHAIN MANAGEMENT 3

Nasdaq finds value in this workforce, Arnold and Kortfelt say, because using external workers allows time to assess candidates skills. What s more, some of the skillsets a position or project requires are highly specialized and difficult to find in the FTE talent pool. Our sourcing approach is undifferentiated, meaning we focus on a joint go-to-market approach to acquire the most qualified talent. Our teams are unified in establishing best-in-class sourcing programs while being fiscally responsible, says Kortfelt. OWNING THE PROCESS In a plurality of organizations, HR owns the process for hiring external workers, with some 40 percent of survey respondents anticipating that HR s role will increase in the next three years. A similar proportion of respondents reported that the business units were in charge of engaging non-ftes. Procurement handles this process in just over 10 percent of organizations represented in the survey. figure 3 Forward-looking organizations practicing talent supply chain management, such as Nasdaq, have HR and procurement working together to source and manage talent. Until recently, though, procurement alone handled non-ftes at Nasdaq. Procurement recognized that a best-practice solution demanded a strong partnership with HR to jointly engage business stakeholders, says Kortfelt. The vision of the program involved expanding the partnership to include HR and a best-in-class managed services program (MSP) with a vendor management system (VMS). Effectively, procurement manages the construct of the program, including the MSP/VMS and supplier relationships, while HR delivers operational excellence to the business partners. FIGURE 3 WHO OVERSEES EXTERNAL WORKFORCE Who oversees the process for engaging external workers? OWNERSHIP OF PROCESS FOR ENGAGING EXTERNAL WORKFORCE HR 45% The business unit 39% Procurement 12% Other 4% 4 HARVARD BUSINESS REVIEW ANALYTIC SERVICES

69%of respondents say using external workers allows their organization to meet market demands and maintain efficiency that otherwise would be difficult Arnold adds, We partner with each other to ensure we create a well-balanced workforce for our business s needs and goals. The talent acquisition team is responsible for partnering with the business to attract and hire the most qualified talent for the company based on its needs and objectives. The talent acquisition team is able to assess the external talent supply and labor market, and provide guidance to the business based both on the role requirements and on where the talent pool may be greater. INTEGRATING THE EXTERNAL WORKFORCE Considerable variation exists among organizations in terms of how fully they integrate external workers into their workforce as a whole. More than a third of respondents organizations include contingent workers in learning and development programs and about a quarter give them performance reviews. But nearly 20 percent of organizations do not include contingent workers in either team or departmental meetings. What stands in the way of integration? For nearly one-half of respondents, corporate culture is the largest barrier. Almost as many organizations find that resource limitations stand in the way, with legal concerns a third leading reason the contingent workforce is not fully integrated. At Nasdaq, external workers are often included in critical role assessment, talent reviews, and learning and development programs, says Arnold. It s increasingly important for organizations to align their external workers with their corporate culture and integrate them into it, says Phil Fersht, chief executive officer of HfS Research. The more culturally integrated their external workers, the more they will feel invested, and the greater likelihood they will devote extra effort to support the business, as opposed to operating like contractors who only put in the bare minimum of effort, adds Fersht. He advises that companies considering expanding their use of external workers, or looking to more fully engage them in their core business, should take the issue of corporate culture seriously. Is the corporate culture a highly mandating one or a more dynamic, autonomous one? In recent research conducted by his firm, HfS Research, Fersht says, the latter strategy clearly correlated with higher levels of engagement among external workers. More regimented cultures simply restrict the room for external workers to thrive and contribute all they can. HOLISTIC TALENT SUPPLY CHAIN MANAGEMENT 5

MOTIVATING ENGAGEMENT In the survey, retaining and acquiring talent were respondents main two priorities for 2015, with increasing employee engagement a close third. External workers tend to be clustered in operations and IT, but nearly a fifth of respondents say their organizations used these workers throughout the enterprise. Whether or not they work inside the organization, says Fersht, establishing that trust is critical to engaging them and ensuring the relationship is productive, collaborative, and ultimately beneficial to both sides. Having direct and frank conversations is the starting point for establishing more dynamic working relationships across the extended workforce. Be honest about what the company wants and can offer, and about projected tenure. If you cannot promote someone or offer job security, you need to consider the person s personal goals and objectives to engage them effectively, says Fersht. Boudreau says that external workers change the nature of employee engagement and that s a good thing. If you are not offering contingent workers a regular paycheck, then you have to give them something to keep their loyalty, such as learning and development programs. These programs benefit the workers by imparting valuable experience while benefiting the organization itself. Similarly, some organizations see employment whether of FTEs or of external workers as a series of engagements. In The Alliance: Managing Talent in the Networked Age (Harvard Business Review Press, 2014), authors Reid Hoffman cofounder and chairman of LinkedIn Ben Casnocha, and Chris Yeh argue that organizations need to invest in their employees, even if those employees may soon walk out the door. By offering defined engagements and articulating the skills the individual will develop, the organization is able to attract talent, keep engagement high, and welcome alumni back into the fold at some future date. Although the book is written primarily about FTEs, its advice applies to external workers as well. There is a fundamental paradox about such tours of duty, write Hoffman and his coauthors: Acknowledging that the employee might leave is actually the best way to build trust, and thus develop the kind of relationship that convinces great people to stay. BUILDING THE FUTURE TODAY For HR to help their organizations meet an uncertain future and thrive there, retooling is necessary, says Chris Yeh. Trends changing the world of work are challenging the traditional employer/employee model and are transforming how work gets done. These include tours of duty, task-based and project work outsourced to freelancers found on online markets, and problem solving by online communities of competing experts who work more for glory than for pay. To respond, he says, leaders need to infuse HR with tactics from other fields that will widen its vision and expand its influence. These include risk-mitigation strategies from the supply chain, portfolio-diversification strategies from finance, and segmentation strategies from marketing. For instance, says Yeh, instead of treating all employees the same, there will be segmentation and differentiation, in which employment value propositions may change to personal value propositions, as compensation packages are customized to individuals or employee segments. Holistic talent supply chain management is a sophisticated approach to talent sourcing and deployment that enables companies to respond more nimbly as markets, technology, business needs, and the talent pool change. Its motto is, in essence: Deploy the right talent from the right source in the right place at the right time. As the HBRAS survey demonstrates, leading organizations are already there, employing multiple sources to acquire the talent they need to drive their strategy forward and deliver business results. 6 HARVARD BUSINESS REVIEW ANALYTIC SERVICES

METHODOLOGY AND PARTICIPANT PROFILE In November of 2014, Harvard Business Review Analytic Services conducted a web-based survey of 316 executives among the HBR.org audience. The global study included respondents from North America (30%), Asia/Pacific (36%), EMEA (24%), and Latin America (8%). More than half (55%) of respondents were C-suite and senior management, slightly more than one-quarter (28%) were managers, and less than one-fifth (17%) were from other grades. Half of respondents (49%) were from large organizations with 5,000 or more employees, onequarter (25%) from organizations with 1,500 4,999 employees, and one-quarter (25%) from organizations with 500 1,499 employees. Respondents in companies with fewer than 500 employees were screened out. A broad group of industries were represented, with 16% from healthcare/pharmaceuticals, 14% from manufacturing, 13% from technology/telecommunications, and 13% from financial services. Respondents from all other industries amounted to less than 7%. One-quarter of respondents (26%) work in the HR function, with one-quarter (24%) in general management/strategic planning, one-fifth (20%) in marketing/sales/business development/customer service, and 8% each in finance, operations/production, and IT/software engineering/knowledge management. Respondents from other areas added up to less than 6%. HOLISTIC TALENT SUPPLY CHAIN MANAGEMENT 7

ABOUT KELLYOCG Talent is a strategic asset that poses unique challenges. Gaining access to the right talent can be problematic, and supply and demand are hard to predict. Visibility across all the different types of talent working on your company s behalf not just full-time employees is imperative, but merely quantifying non full-time talent is no longer enough. Competitive advantage lies in understanding where the different types of talent come from, how to attract and engage them, and most importantly how to design a roadmap for incorporating talent into a company s business processes, decisions, and planning. Talent Supply Chain Management, also referred to as holistic talent management, is a framework that can help companies fully leverage talent across all categories: full-time employees, temporary employees, freelancers, independent contractors, and service providers, as well as alternate sources of workers like retirees, alumni, and online talent communities. KellyOCG is the leading global advisor of talent supply chain strategies that enable companies to achieve their business goals by aligning talent strategy to business strategy. If you want to learn more, visit www.kellyocg.com/tscm or contact us at tscm@kellyocg.com. 8 HARVARD BUSINESS REVIEW ANALYTIC SERVICES

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