How reimagining the shape of your workforce can realize sustainable value

by Liz Fealy and Falco Weidemeyer

Organizations continue to face a period of hyper-turbulence in economic, labor and geopolitical terms, requiring careful consideration of today’s labor costs, while maintaining a workforce that’s agile, adaptable, and skilled for whatever comes next. My co-author of this article and I believe it is critical to understand the reality of this turbulent period in order to reimagine organizational cost and design with workforce strategy.

?

The latest EY CEO Outlook Pulse shows the cost pressures on organizations are being acutely felt: nearly all respondents say they are making changes to their talent strategy to manage costs, with 80% of CEOs recognizing macroeconomic or market volatility as a risk impacting their business.

?

In this dynamic climate, organizations need to act with intention as they consider their cost and investment strategies. This requires a multi-variate workforce assessment that can help build a roadmap to the future shape of their organizations, and help them excel in creating the desired workforce culture, skills profile and business growth.

The new calculus of cost

Organizations today are navigating uncertainty, while reassessing their balance sheets and workforce capabilities. It’s important not just to rely on old ways of thinking in the new post-pandemic reality of tight labor markets, a race for skills and talent, and a major shift in employee expectations.

?

Cutting cost can no longer be a sole objective for organizations. Even 20 years ago, reducing cost was often seen as a relatively straightforward exercise to balance financial cost (based on a profit and loss target) and social hardship. This exercise soon added an analysis of outsourcing opportunities. A further decade saw the rise of technology and automation adding further considerations to decisions around the size, structure and skills of the workforce.

?

But in the “next normal” of work, organizations need a more holistic view of their workforce. In the context of labor shortage and a need to be in a state of constant transformation, leaders need to make decisions that preserve key skills and cultivate an organizational culture that maintains trust, even through difficult times. The EY 2023 Work Reimagined Survey shows that organizations that are equipped to adapt to change, and build necessary skills for evolving business needs have notably better outcomes than those that don’t. These “thriving” organizations report better perceived outcomes in culture (4.3x better outcome), productivity (2.8x better outcome), and lower attrition rates (employees are 30% less likely to say they’ll leave in the next 12 months). This data bolsters the case for the benefits of reimagining internal skills-building and organizational design, as employers can’t always expect to be able to re-hire skilled workers if cost-cutting goes too deep.

?

Instead, organizations need to assess their current and future workforce needs, their present workforce capabilities and strategy, and discover how to make their organizational structures lean and efficient, while keeping their people at the center of actions and planning.

?

Rethinking how to reshape the role of people in transformation

?

Remaining agile in this labor market requires organizations to have a workforce strategy that focuses on capabilities and incentives, and not just organization charts. Rigid hierarchies and functional structures must make way for more fluid forms of collaboration, enabling rapid and ongoing adaptation to constant disruption, where teams are incentivized and measured collectively to achieve the right outcomes.

?

This is a mindset shift for CxOs, which emphasizes the critical need for a workforce strategy that supports constant transformation. There is no organizational transformation (whether it is designed to achieve digital, sustainability, resilience, performance, transactional, or other goals) without the need for associated workforce transformation.

?

Given the context of stacked crises and a foreseeable longer-term period of transformation over the next three to five years, CHROs should embrace an adaptive perspective to supporting the organization’s wider business strategy. This comprehensive perspective should account for the entirety of cost, skills, leadership, learning, engagement, communication — as the success of the organization in implementing its strategy will be underpinned by its agility in all of these areas and more.

?

Old models of going through phases of workforce investment and growth, with subsequent phases of “detox and diet”, aren’t fit for purpose. These phases are based on outdated data and thinking, not attuned to the reality of a “hyper-turbulent” market that we’re in now.

?

Leaders instead need to develop models of developing capability, engaging people and incentivizing performance, while also interpreting organizational performance in a holistic way, so it encompasses financial performance, along with sustainability considerations and the impact of geostrategic restrictions.

?

Two considerations for the way forward

?

As organizations chart the way forward, it’s important for leaders to keep two core ideas in mind while embarking on a reassessment and reimagining of workforce strategy:

?

1.?????? Experience leads to excellence, not the other way around: In the past, we rewarded people for excellent results, after the event. The whole construct has been turned around. Given the persistent role that digital and virtual working plays in the “next normal of work,” and the risks of team disconnection from limited in-person teaming, organizations need to provide an exceptional experience to create a basis for excellence, not the other way around.

?

2.?????? Ignore your talent strategy at your peril: It may seem simple, but it’s important to say that talent is a board-level issue, more now than it has ever been. Its importance needs to be reflected in how boards think and decide about labor cost, talent attraction and retention, learning and development, and more. A highly skilled workforce is what sets apart an adaptable and resilient organization from one that is falling behind.

?

Global organizations are in a constant state of flux, facing the convergence of multiple challenges. To excel in the uncertainty, organizations need to stay in a state of constant transformation. This drives the need for cost and workforce decisions to be based on a comprehensive, data-driven view of capabilities needed now and in the future. Data shows that leaders who maintain a people-first mindset through transformation can increase their chances of transformation success by 2.6x, while retaining skills that will help them maintain an edge over competition.

?

?

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.