Contingent labour forms an element of most organisations’ total talent sourcing strategy, requiring contingent workforce planning to be a core capability of strategic human resource management functions.
There are multiple benefits of accessing specialist skills on a short-term basis for project work, securing additional capacity during busy times, or even using contingent labour as part of a risk management approach.
But how do you know what level of extended workforce you will need in three years’ time, or even three months’ time? Especially during the ‘new normal’ of the pandemic and its aftermath. How can you deliver the right talent, at the right time, for the right price, both now and in the long-term?
Understanding your historic contingent workforceA good place to start when developing a strategy and plan is to look at what has gone before. If you have historically used particular classifications of contingent workers and there’s a pattern repeated year after year, it is likely that you will use the same level of resource. Using a simple example, let’s say you are staffing a series of petrochemical plants with welders who maintain pipework. You can review your past use of welders across your business, assuming you have that data visibility. If production is stable, your maintenance plans are on track, and no major outages are scheduled, it is fairly safe to plan for a similar level of contingent workforce need. Building new plants? You can plan, or your subcontractors can plan, for an increase in demand. However, there is a caveat. Market / global shocks, such as the global financial crisis in 2008 and the coronavirus pandemic in 2020, mean this approach should not be used in isolation. Airline operators could accurately predict contingent workforce requirements right up until March 2020, when the skies emptied. So, relying entirely on historic data is unwise.
Current and new business – what is in the business plan for the next three years?Of course, your business or organisation will have a strategic business plan that will include future work that’s already booked, i.e., what’s in the order book already, and the forecasts by your colleagues in sales, marketing, and finance. This will have an operational resource requirement, which will include human resources and workforce planning. You can use the historic data from your previous resourcing of specific deliverables together with the business plan forecasts to create a reasonably accurate picture of resources required over the longer term. Obviously, work in the order book could span the next decade, and unless there is a high risk of cancellation, its demand is fairly certain. However, once again there is a caveat. For the element of the contingent workforce planning that does not include the existing order book, or if your organisation works very tactically, then you have less certainty. You may be depending on forecasts from elsewhere in the business, and do you understand the assumptions underpinning these?
Using data and analytics for forecastingA step further is using various statistical tools to forecast your likely demand for contingent workers. This depends in part on historic data, so remember the caveat above about market shocks. It also depends on you having access to high quality about job quantities, types of skills and other data specific to your industry or business. If the answer is yes, you do have granular time series data, then you can use statistical modelling tools. These include approaches like simple and multiple linear regression, moving averages and the Box-Jenkins method/Auto Regressive Integration Moving Average (ARIMA).
How a vendor management system enables you to create long-term plans
The approaches to developing a long-term contingent workforce plan outlined above depend on multiple factors.
- Visibility of your extended workforce within your organisation
- Granularity, so detailed records of who you’ve hired, what they do, where, at what costs, from what kind of vendor, and so on
- Quality and accuracy, as long-term plans founded on poor quality datasets with missing fields, or data that’s just wrong, not only won’t help, but may result in lack of resources, the wrong skills, the wrong price and the wrong location.
To learn more about what a vendor management system is, what its key features are, and what benefits they can bring to your organisation, download our free guide. It’ll give you all the information you need to understand how they can aid in contingent workforce planning, forecasting, management, and even procurement.