Embrace an elastic workforce

Companies are increasingly turning to a concept known as elastic demand to help make their workforce more flexible and responsive in a less certain world

This article is taken from the Managing the Unpredictable report, published in association with Columbus.

Elastic demand uses a range of tools and techniques to enable companies to scale up and down, and react quickly to external events, while avoiding some of the associated risks.

The concept has existed for a few years, but is gaining popularity due to the enabling effects of technology. However, many companies are still misinterpreting elastic demand or using it ineffectually. Effective approaches rely on sophisticated technology such as business intelligence and analytics.

Elastic demand can help organisations optimise their workforce planning processes and even turn these changes to their advantag

Finding talent to react to external events, while also supporting long-​term strategy, is one of the biggest challenges that companies face. This has been exacerbated by dramatic increases in uncertainty over the last few years, as measured by the World Uncertainty and Global Economic Policy Uncertainty indices, and longer-​term changes such as ageing populations, shrinking birth rates, automation and digitisation.

But elastic demand can help organisations optimise their workforce planning processes and even turn these changes to their advantage.

To plan their workforce needs, many businesses still rely on spreadsheets, which are time consuming, error prone and difficult to analyse for strategic insights.

So-​called smart human resources and workforce planning and analytics packages now claim to enable faster, more informed people decisions.

And many other technologies enable elasticity, from cloud-​based remote working to talent pooling consortiums (a database of individuals created during the application process), cross-​skilling, which allows workers to shift to where there is peak demand, freelancer platforms and other adaptive working tools designed to manage workforce flexibility.

Workforce planning can embed business intelligence tools into all HR processes from recruitment to retention, assessment and learning. These systems analyse HR measures such as vacancies compared with budget, attrition rate, hiring of early talent by location and learning activities’ return on investment.

Providers claim they can analyse trends in hiring, churn, retirement, diversity and performance. Also, by accurately and rapidly forecasting talent supply and demand, creating what-​if? scenarios and building financial models, these systems can ensure companies stay ahead of hiring trends and have the right people with the right skills at the right time and cost.

Workforce planning can model scenarios to see how potential decisions impact staffing levels and available budget. In turbulent times, there is a more pressing need for such timely information, providers claim.

Ralph Fernando, author of Agile Strategy, says elastic demand is seeing much greater uptake as technology enables far greater possibilities and introduces new mindsets and management practices.

“The elastic demand concept is coming of age, especially for sectors that experience varying demand over different periods, for example healthcare services in winter or toy brands around Christmas,” he says.

With the growth of freelancing and the jobbing economy, enabled by remote working, freelancer platforms and specialist interim agencies, the potential for accessing flexible staff has increased significantly, says Mr Fernando. Using all these through cloud computing enables organisations to increase capacity at the flick of a switch.

Management practice is also changing to allow decisions to be delayed to the last responsible moment.

More companies are starting to examine their contingent workforce strategy and labour demographics

“Elastic demand requires responsiveness and adaptability. Responsiveness is the speed of reaction to organisational or market stimuli, for example Zara producing clothes from catwalk to shop floor in four to six weeks,” he says.

“Adaptability is the ability to change processes, structures, systems and people to enable responsiveness. An example is changing a traditional casual dining model to respond to digital disruptions from delivery companies.”

Yvonne Sonsino, partner and innovations leader at consultant Mercer, says the concept of elastic workforces in particular is gaining traction, though some call it “liquid” or “adaptive” workforces.

However, she was also more cautious about how successful the concept has been so far. “Some companies handle it badly by hiring and firing at will, which is costly,” she says. “Others don’t handle it at all. But a few smart companies are carefully planning organisational structures that can give them adaptivity and flexibility.”

More companies are starting to examine their contingent workforce strategy and labour demographics, and finding some interesting results when they look closely, says Ms Sonsino. Results differ by company, so the secret is to explore your own data and dynamics, and plan accordingly.

“However, elastic demand is hard to plan and to do,” she concludes. “You have to get very specific. Using strategic workforce planning and analytics is the smart way to do it. Real-​time analytics dashboards can use scenario planning to forecast outcomes. This is the future of work.”