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How to make your workforce work

By Kirsty Barnes , 30-Mar-2006

No company likes to hire and fire unnecessarily. When used correctly, outsourcing can be the key to maintaining the proper balance of fixed and variable staffing and allow the right staffing resources to be rapidly shifted to the right place at the right time.

Hard times have seen drug companies cut 70,000 jobs in the last three years - 17 per cent of the workforce and more than the entire previous decade.

At the same time, there has been a massive shift towards outsourcing entire business functions in order to cut operating costs, however, companies this is not a step that should be taken blindly.

When it comes to workforce outsourcing, pharma companies should look to the semiconductor industry - one of the most volatile marketplaces - where firms have learned how to outsource appropriately to meet volatility with minimal disruption to their workforces and operations, Michael Fritsch, COO of BPO outsourcing company, Confoe, told delegates at Interphex, New York.

For the outsourcing of a technical workforce to be successful, Confoe recommends that companies follow seven steps: develop an overall workforce and staffing strategy; analyse the elements and nature of the work; build the workforce model; build the outsourcing model; identify and qualify outsourcing providers/partners; execute the workforce strategy; monitor results and make corrections.

"The following techniques brought a 2x-3x improvement in workforce flexibility for one fortune 500 semiconductor company," said Fritsch.

When it comes to developing an outsourcing strategy, be aware that it should integrate with the overall business strategy, taking into account both the current environment, results and goals of the company, said Fritsch.

"In addition, its important to try and keep the workforce strategy flexible, so as not to unnecessarily fire employees that you have already invested a lot of money in," he said.

The next step is to take a look at the workforce activities on both a micro and macro level and class the various work components as either core or context.

Core components should be guarded closely, and include functions that add to competitive advantage, and differentiators that are difficult to imitate.

Anything that is not a core competency is contextual, and a potential outsourcing target.

Next is important to categorise tasks and competencies into four different skill levels based on their complexity and then work out the current skill set versus the skill that is required.

In this way the state of the workforce can be viewed according on specific skills rather than simply headcount. Using this method, companies can keep the highest skilled work inhouse and outsource whatever else they see fit.

Finally in order to assess whether outsourcing certain components of the workforce is a feasible option, a volatility assessment should be performed, factoring in issues such as how much lead-time is required for the work, how much warning of demand changes there are and how fast could the work start and stop based on the market.

Through these assessments companies can accurately build a workforce model based upon its financial and resource requirements.

Once a company has developed its workforce model, it is time to develop an outsourcing model according to the identified labour supply versus demand.

Firms can choose various strategies according to their needs, but one popular strategy being adopted is to keep fulltime employee levels just below average and fill the labour gaps when needed, both internally through overtime or retraining staff, and externally by sourcing temporary staff or outsourcing the function altogether.

Once all the strategies are in place, several factors should be considered when choosing outsourcing partners, particularly whether they supply labor to any competitors and if so, how is intellectual property protected?

"It is also wise to look at how well their company culture fits with yours and whether they are looking to be true partners or simply vendors and decide what you prefer," said Fritsch.

"Further things to consider are whether the partner you choose is happy for you to take back any of the outsourced functions if there is a downturn in the market and if so, is it diverse enough in other areas to survive downturns without either turning into a competitor or going out of business," he said.

On the flipside, it is useful to find out whether the partner is capable of meeting future needs as some the core skills of today become the contextual activities of the future?

Finally, once the deal is in place, do not relax and forget about it!

It is good practice to continually reassess the outsourcing strategy, as over time it may change, and what is defined as core and context may contract or expand.

In order to increases the chance of an outsourcing success story, many companies run quarterly head count model and an annual strategy review in order to make updates if the business model changes.

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