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Organizational Challenges of the Open Workforce

Ethics, Cultural Values, and Effective Decision-Making in an Open Workforce Model  

One of the newly emerging structures in workplace organizations is the “open workforce” model, a trend that has been fuelled by globalization and digitization. Firms increasingly rely on external staff as well as their permanent in-house employees to meet their business needs. With this new model comes questions about the values of those who contribute to establishing an ethical organization environment that spans different countries and cultures. By calling on external staff who may not be aware of and/or committed to a common set of workplace values, those organizations that use the open workforce model risk behaviors that deviate from expected norms.

One reason that organizations turn to the open workforce approach is that the flexibility of the model enables organizations to be more agile, react faster to new opportunities, and drive competitive advantage. But the shifting talent base also brings challenges, with new approaches to performance management, risk management, and decision-making required to meet them, according to a report by the Chartered Global Management Accountant (CGMA), New Ways of Working…Managing the Open Workforce, which is based on a survey of more than 1,100 senior executives.

According to Girish Bhat, the CFO of Gammon India Ltd and a member of CGMA, “The workforce is evolving into a mixture of full-time employees, contractors, freelancers, and, increasingly, people with no formal ties to [an organization] at all.” Bhat told researchers that in today’s global business environment, the organization has to deal with employees who move more freely from role to role across geographical boundaries.

The trend is most established in the Americas. Thirty-eight per cent of respondents in the US and Canada said that at least half of their workforce was made up of external talent, followed by 36% of those polled in Latin America. In Europe, this was the case for 27% of the companies represented in the survey, 21% in Asia, 17% in the Middle East and North Africa, and 14% in Sub-Saharan Africa.

The shift looks set to continue over the coming years, with 45% of those in the US and Canada and 36% of respondents in Latin America and Europe predicting that more than half of their workforce will be external in five years’ time.

Cost is considered to be the main benefit by leaders in Europe and North America, while respondents in Asia Pacific gave greater priority to the increased exposure to new ideas and specialist knowledge that the model brings, as well as improved organizational agility. 

The ability to tap into global expertise and do so quickly is one advantage to the open-workforce model. This allows taking advantage of global competencies and technological knowledge that it might not be available otherwise.

Managing a complex and constantly shifting network of employees, collaborators, and business partners poses significant challenges. The risk of data security breaches was of greatest concern to respondents, followed by disclosure of competitively sensitive information.

A potential problem that may be overlooked is meshing the different cultural values of employees in an open workforce. For example, bribery is a way of life in some countries while it is prohibited in the U.S., although so-called “facilitating payments” (i.e., grease payments) are permitted. What would an organization do if an external member of the workforce bribes a local foreign official to win a contract for telecommunications work? Does the organization accept such behaviors or apply its own standards throughout the world? If different standards exist in different cultures, the result is to create a situational ethic that is unhealthy for the organization in the long run.

With respect to decision-making in an open workforce model, Merike Henneman, the controller at Destination DC who was interviewed for the research study, said the key is “to articulate the vision of the organization very clearly to everyone, making sure that the staff are on board and that they understand the organizational goals. If that’s the case, then you should end up with effective local decision-making.

Participants also reported difficulty in ensuring consistent decision-making across the organization, creating the right incentives to attract and retain talent, fostering effective collaboration, and ensuring that both the internal and external workforce are working towards the company’s goals and vision.

To overcome these risks and challenges of an open workforce, the report notes that corporate structures need to change. It outlines five characteristics businesses will need to thrive in this new environment, and the steps towards achieving them.

1. Openness. To cultivate an outward-looking approach to sourcing talent and exposure to innovative ideas:

  • Create new ways of measuring performance.
  • Implement enhanced risk controls and security mechanisms.
  • Embed cultural change to establish more transparent ways of working.

2. Agility. Capacity to adapt to local needs and respond rapidly to market pressures requires:

  • Close alignment with HR to forecast talent and knowledge needs.
  • Decision-making structures that enable local autonomy yet maintain control.

3. Innovation. The ability to share knowledge, insights, and innovation processes between teams and across multiple players in the value chain involves:

  • Mastering the new tools and technologies required to help capture innovative ideas and streamline innovation processes.
  • Exploiting tools and techniques that drive open innovation.

4. Collaboration. To knit together an increasingly diverse workforce and a range of external partners:

  • Lay down principles and frameworks to guide interaction between in-house and external teams.
  • Develop ways to share internal information with the external workforce, including setting up shared workspaces.

5. Automation and digitization. Greater use of machines, robotics, and information technology on tasks previously not thought to be susceptible to automation or digitization involves:

  • Redeploying skilled workers to more value-adding activities.
  • Integrating new internal systems with external partner systems where necessary.
  • Maximizing the potential of digital and mobile technologies to create value.

In an open workforce, organizations face the challenge of overseeing effective decision making that combines the need to empower managers and the need to develop appropriate controls. Business leaders must also be aware of new risks in terms of information leaks, a blurring of corporate values, and the possible reputational damage that might come about as a result of these issues. A common set of core ethical values should be developed for all those connected to the organization in order to avoid the problems of ethical relativism that often occurs when different cultures are mixed especially with the challenges of management oversight in an open workforce.

Blog posted by Dr. Steven Mintz, aka Ethics Sage, on January 8, 2015. Professor Mintz teaches in the Orfalea College of Business at Cal Poly San Luis Obispo. He also blogs at: www.ethicssage.com.

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