Art and science to flexible staffing

Solution can be tailored to peaks and valleys of business

Many large organizations deliberately plan to have a reasonable portion of staffing requirements filled with contingent workers. But companies often ignore the question of whether these workers are needed all the time. They do not consider how flexible staffing, tailored to business peaks and valleys, can save money and maximize profit.

Flexible staffing is a strategic business concept in which companies analyze the dynamic business workload and hire contingency staff to strategically supplement the permanent workforce to maximize profits and productivity. Contingency staffing is most valuable when used strategically as a supplement to the permanent workforce and not simply as a quick fix for absent employees or as a replacement for permanent employees due to downsizing or restricted budgets.

“Employers that have flexibility in adjusting labour requirements to meet product and service demands have a competitive edge over those with less flexible human resource policies. Flexible staffing arrangements undeniably increase business competitiveness,” said the United States. Department of Labor in its 1999 Report on the American Workforce.

Employers should consider the following questions:

• How many permanent staff versus flexible staff are employed at the organization?

• How does the organization know the mix is right? Will it be right next week, next month?

• How does the organization know the total number of staff required?

• Does it have a good understanding of when peak periods are?

• How does the company forecast its need for flexible labour? Who is responsible for doing this?

• Is the organization forced to let go of top performing, permanent employees during slow periods?

• Does the company know the real cost of employing and training contingency staff at each peak period?

• Does the introduction of contingency staff during peak periods distract management and existing permanent staff?

3 steps to maximize benefits of flex staffing

Maximizing the benefit of flexible staffing can be achieved through three simple steps:

Understand current workforce: Analyzing the permanent workforce to determine pivotal workers is something organizations often do haphazardly. To determine the value a job family plays and the value impact an individual has within that job family, consider:

• What job families make up the workforce?

• How critical is that job family to the business?

• Within the critical job families, which individuals create significant value?

Understand dynamic workload: Every business experiences workload peaks and valleys. Specific industries and job functions experience “swings” of being alternatively busy and slow.

Many companies do not step back and analyze the patterns of the workload and, more importantly, how the staffing strategy embraces these workload swings. Executives who proactively blend the use of permanent and contingent workers to staff flexibly will shift a company’s use of labour from one of cost to one of maximizing profit and return on investment.

Balance workforce with workload: Managing the balance between a workforce and its associated workload is challenging. Companies often staff for peak periods. When the workload declines, staff are not able to use their time effectively.

Flexible staffing considers who the employer should use in its workforce on both a permanent and contingent basis and when it should use those people. The key to achieving measurable results and cost savings is to strike the perfect balance between varying workloads and staffing levels.

Continuous monitoring of workload and commensurate staff requirements are the key to sustained productivity and profit gains. First-line managers are then able to manage more effectively and contribute to the achievement of cost reduction and increases in quality and service levels.

As the marketplace becomes increasingly competitive through expansion and constant change, businesses cannot be held to the limitations of temporary and contingent staffing. While they were once useful, they should truly be considered concepts of the past.

Rather, a “flexible staffing” solution can be tailored to meet the normal peaks and valleys of a business’ processes. It is this strategic concept that holds the key to delivering a measurable shareholder value.

The above article is excerpted from the white paper Art and Science of Flexible Staffing: Delivering Shareholder Value, published by Drake International, North America. For more information, visit www.drakeintl.com or call (800) 463-7253.


To flex or not to flex

Benefits of flexible staffing

Many corporations are realizing the benefits of using a flexible staffing model and beginning to build them into the organizational structure. These companies are permanently staffing to meet the minimum requirements of the workload and supplementing permanent staff at peak times with contingency staff. This practice enables companies to enjoy four distinct benefits:

Cost savings: Corporations save costs by directly reducing the fixed overhead associated with employees, such as benefits, equipment and facilities. Indirect cost reductions include the expense of complying with regulatory employment issues.

Market flexibility: A company can respond more flexibly to competitive pressures. If business is booming, contingent workers can be added as needed to handle the extra work until the company is confident the business will sustain additional employment. If profits are significantly down, contingent workers can easily be removed without the loss of morale associated with permanent staff layoffs. If a company wishes to get into a new line of business with a minimum of investment and start-up time, contingent workers can be a quick, low-risk staffing alternative.

Specific expertise: If a company’s need for specific expertise is irregular, contingency workers may be a sensible alternative to hiring permanent staff who will ultimately be underutilized. Contingency workers often provide cross-fertilization, introducing working methods or technologies the company might not have considered before.

Test run: One out of three temporary assignments lead to full-time work, according to the U.S. National Association of Tempo­rary Services. Hiring a contingent worker can be an ideal strategy for determining an individual’s skills, knowledge and behaviours before hiring him permanently.

Minimum level of performance: If a company is not satisfied with a contingency worker’s output, it can replace that worker with someone else until satisfied with his performance.

Source: Art and Science of Flexible Staffing: Delivering Shareholder Value, Drake International, North America


Doing the math

Sample ROI calculation of flexible staffing

With a strong understanding of the base, permanent workforce, dynamic workload and the number of flexible staff a company requires at the right time, it’s possible to calculate the measurable impact on the bottom line.

In measurable terms, return on investment (ROI) is defined as reduced costs, avoided costs and potentially increased revenues.

There are three key areas to evaluate flexible staffing ROI. (The dollar amounts used are examples. Individual organizations can come up with specific amounts to plug into the calculations.)

Cost of rapidly staffing up: In this example, the costs of recruiting, screening, interviewing and payroll orientation add up to about $2,000 per employee. Multiply that by the number of hires to determine the cost of staffing.

Scheduling: To schedule the new employees, the cost per worker, per week is $3.73 — assuming a supervisor, being paid $45,000 a year with a benefit rate of 17 per cent, is spending about eight minutes per week per employee in scheduling and resolving conflicts.

Business commitments: The cost of having too many, or too few, workers from a productivity perspective can be broken down into two categories:

• Productivity savings from increased output by optimizing workforce staffing levels. For example, multiply total compensation of $30 million by the workforce optimization savings of five to 15 per cent for a total of $1.5 to $4.5 million.

• Statutory compliance costs from the termination of internal workers on payroll. For example, based on providing one week’s notice, multiply the rate per hour of $18 by 40 hours per week for a total of $720.

If an organization has a workforce of 300 employees where 60 per cent are deemed critical to the operation and 40 per cent are variable with an average hourly wage of $18 including fringe costs, the ROI would be as follows:


Workforce optimization

   

Workers:

300

Optimization reduction:

X 10 per cent

Workforce reduction:

30

Annualized wages:

X $37,440

Total compensation savings:

$1,123,200

Costs of staffing

   

Hiring costs per worker:

$2,020

Number of workers:

X 108 (300 – 30 reduction x 40 per cent variable)

Total savings:

$218,160

Scheduling

     

Cost per week annualized:

$193.96 ($3.73 each worker x 52 weeks)

Number of workers:

X 108

Total savings:

$20,948

Statutory compliance

                      

One-week notice:

$720

Number of workers:

X 108

Total compliance savings:

$77,760

Total savings:

$1,440,068


Source: Art and Science of Flexible Staffing: Delivering Shareholder Value, Drake International, North America

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