Why Your FTE Number Isn’t A Useful Measure Of Anything Good Anymore
Do you remember how pre-2000’s every RFP measured FTEs as a default? Back then it was presumed that if you employed lots of people that was a good thing. It charted your growth. It demonstrated that you were robust, that you could afford a large payroll. All that stuff.
But that was before companies like WhatsApp did a trade sale and sold for $19 billion with just 55 employees and companies like Carillion that employed 43,000 when they hit a wall. How the world has changed. What does a big FTE number say about an organization today? That it operates an old-fashioned resourcing model? That it’s inflexible?
I’d argue the size of your FTE workforce isn’t a great measure of anything anymore. It doesn’t make you big and clever. And it definitely doesn’t mean you’re any more robust than a well-funded start-up.
Why not? Because markets are changing rapidly, and into new forms.
Keeping a business alive and on-track in the digital age is about brand purpose, growth, risk management, and agility (which also means dodging bullets as markets evolve).
Competitors can jump out of completely different markets and into yours and eat your lunch. It means the Boston Matrix type of competitive comparison is being thrown out with your FTE number. When your business model is in a constant state of flux, what matters more is how your business deals with disruption.
Fat, flabby, inflexible organization structures and resourcing methods can’t adapt anything like quickly enough for a digital age running at the speed of light.
Business leaders are thinking more about Blue Ocean Strategies than their Boston Matrix these days, and in light of rampant market structural changes, Business Modeling has become a thing.
Leadership teams are re-visiting their business model every quarter (at least) whereas, back in the ‘90’s it was a two or three-year review at best.
Operating with a large full-time workforce has become a competitive hand-brake. It stifles agility because organizations aren’t able to adapt or tune their competencies and resources to discharge their business models in the most effective way. Labor laws also make structural changes costly and painful when FTEs are concerned. If enterprises are to compete in a digital era, they need an optimal resourcing profile, which may not be ultimately good for consumerism (you need customers with money in their pockets to buy your products), or humanity, but it is a ‘live or die’ characteristic of digital markets.
One of the earliest examples of a ‘seeker’ and ‘solver’ on-demand workforce market — i.e. a ‘do-work-for-cash’ and/or ‘sell-knowledge-for-cash’ resourcing model — is INNOCENTIVE. Innocentive was the brainchild of Dr. Alf Bingham and his team that recognized how impractical it was to resource pharma R&D with a full-time workforce. Since then, many more examples have cropped up including UPWORK, TOTAL, FREELANCER, DIGITALOGY, and now HUDDLEJAM. All of these seeker/solver platforms are getting the same job done; to source talent on-demand with the lowest frictional cost. Thought-leaders like Manoj Agarwal, the CEO of USTECH SOLUTIONS are using their passion for technology and access to global talent to break down commercial obstacles that have prevented organizations previously from sourcing a workforce on-demand.
It raises the question, how many FTEs do you need on your payroll? Across many industries we are seeing the FTE roles consolidating down to body corporate roles such as leadership, governance, legal, systems, finance etc. and then a layer of project managers to specify resources. Buy a new house these days and the building company you’re buying from is likely to be little more than a contracting body with a corporate leadership ‘head’ and a project management ‘body’.
I expect we’re going to see a progressive reduction in the size of FTE numbers, where the majority (not the minority) of work will be performed for organizations by contractors and specialists on contingent working contracts.
Running your enterprise with an ‘FTE hand break’ permanently raised up to the third click just doesn’t work in a hyper-competitive digital marketplace.
The first step to re-visiting how your organization thinks about its workforce sourcing approach is to reset the behavioral norms that exist in the HR and senior management teams. That can be a difficult sell. Nobody likes change, and the presumption is, if it’s worked for years, why change now? That’s why I spend a lot of time these days working with management teams on business models and orchestration. I find it helps to take a couple of steps back in the process of change to NOT focus on organizational design and workforce challenges first. Sure, you’re going to have to tackle them at some point, but it’s so much easier to justify change for a REASON. Having base-lines and clear, compelling and measurable outcomes is where any transformation needs to begin.