Workforce and Sourcing Strategy – Overview

Overview

It’s been nearly 20 years since I first worked on workforce and sourcing strategy for IT at Allstate Insurance and I’ve had this topic in my backlog for quite some time.  Unfortunately (or fortunately depending on how you want to see it), in organizing my thoughts on the various dimensions that come into play, it became clear that this is a large landscape to cover, mostly because you can’t establish a workforce and sourcing strategy without exploring your overall IT operating model, so I’m going to break it down into a series of articles that will hopefully make sense independently as part of the whole.

Overall, this series should address a set of fundamental challenges facing IT today, namely:

1. How to address emerging technologies in relation to an existing portfolio of IT work
   • Advances like Artificial Intelligence (AI), Cloud Computing, and Cyber Security have added complexity to the IT landscape that isn’t easy to integrate into organizations effectively without a clear strategy
2. How to optimize value/cost in a challenging economic environment
   • Cost consciousness can drive adjustments in workforce and sourcing strategies that can have detrimental impact on operating performance if it not handled in a thoughtful manner
3. How to leverage sourcing to drive competitive advantage and enable relentless innovation
   • Sourcing capabilities in a thoughtful manner creates organizational agility whereas an ineffective strategy can do the opposite
4. How to monitor, govern, and manage change over time
   • Finally, even if all of the above are identified and approached effectively, technology capabilities continue to advance more rapidly than any organization can integrate it and the ability to evolve a strategy is critical if there will be sustainability over time

The remainder of this article will provide a brief overview of each of the areas I will explore in future posts.

Where You Are

Like any other strategy work, a foundation needs to be established on the current state, both in terms of internal and external capabilities.  Without transparency, managing the overall workforce and understanding the labor components of operating cost becomes extremely difficult.

Some key questions that will be addressed in this area:

• How to organize information around the mix of skills in place across IT and where they are coming from (internally, externally)
• How and when a competency model becomes useful for core IT roles (business analyst, PM/Scrum Master, architect, data engineer, data scientist, etc.)
• How organizational scale and demand fluctuation affects an IT operating model
• How organizational design influences an IT operating model
• How to think about the engagement of third-party providers (augmentation, consultants, integrators, product/service providers)
• How to think about the distribution of resources against an overall IT portfolio of work
• How enterprise standards and governance play a role in a sourced IT environment

As one would expect, laying the foundation for understanding the current IT operating model is a significant step in setting the stage for transforming and optimizing it and, consequently, how the data is organized can be important.

What You Need

This is the “crystal ball” step, because it involves a blend of the tangible and intangible, the combination of what you know (in terms of current and projected business demand and your overall technology strategy) and what is based on a level of speculation (in terms of industry/competitive strategy and technology innovation/trends).  The good news is that, if you think about your workforce and sourcing strategy as a “living” thing you manage, govern, and adjust over time, the need to establish direction doesn’t need to be a cumbersome, time-consuming process, because it’s a snapshot meant to inform near-term decisions based on longer-term assumptions that can be adjusted as required. This is where a lot of strategy work breaks down in my experience: over-analyzing past the point of value being created, with a significant loss in agility being created in the process.  “Operating with Agility” (as I refer to it in my Excellence By Design article) is really about understanding how to build for resiliency and adaptability, because change is a constant reality that no “long-term planning” is ever going to address.  The goal is to build an IT operating model and associated culture that flexes and adjusts continuously, with minimal friction as changes in direction inevitably occur.

Some key questions that will be addressed in this area:

• How to think about the relationship of internal needs and external business conditions in establishing demand for IT capabilities
• How to align technology strategy and ongoing marketplace trends to evaluate the mix of capabilities and skills required in the near- and long-term
• How to determine where it makes sense to retain versus source various capabilities required of IT over time
• How to think about the level, role, and importance of standards and governance in an overall portfolio, especially where sourcing is involved

Again, the critical concept from my perspective in establishing strategy is not to ever assume it is a static, fixed thing.  I think of strategy development as establishing goals and an associated operating framework that allows you to adjust as required without requiring a disruptive level of change, because the more disruptive a change is, the more likely it will have a negative impact on your ability to deliver meaningful business value, potentially for an extended period of time.  Culture is an important component to all this as well because I’ve experienced situations over the years where, because a strategy has a significant investment associated with it (financial or otherwise), there is a reticence to evolve or adapt it.  This is predicated on the presumption that evolution is a sign of poor leadership or a lack of vision in the original articulation of an opportunity when, in fact, the ability to adapt to changing circumstances is exactly the opposite, provided the overall value to be obtained is still there.

How You Supply It

In establishing a strategy, I think of it in three basic components: what you do yourself (your workforce strategy), what you leverage partners for (your sourcing strategy), and how you purchase those products/services (your procurement strategy).  Again, my experience has been varied in this regard, where I’ve seen fairly developed and defined strategies in place and then ones that are not well defined.  The consequence of a poorly defined strategy in any of these areas translates directly into adverse performance, excess cost, lost agility, or some combination of those things based on the circumstances, governance model, and partners involved.

Some key questions that will be addressed in this area:

• How to think about the capabilities and skills that should be retained within an organization versus those that can be supplied by external providers
• How to structure and organize a sourcing strategy to manage cost/quality, as well as provide resiliency and agility in relation to an IT portfolio
• How to think about captive IT scenarios by comparison with outsourcing or working in a distributed team environment
• How contracting and procurement decisions play a role in influencing quality and sustainability

The good news is that a workforce and sourcing strategy isn’t and doesn’t need to be rocket science.  The bad news is that developing one takes a level of discipline and transparency that isn’t always easy to manage, especially in larger organizations.  I would argue that the cost efficiency and quality/service level gains easily justify any necessary investments to having them established, but the hurdle to overcome, as with many things with pursuing excellence in IT, is in having the leadership mindset to make deliberate choices at an enterprise- (rather than at a transactional/project- or program-) level.

How You Develop It

“People are our greatest asset”… I’m sure at least half the readers of this article have heard that said (or seen it written) at least once if not many, many times if you’ve worked enough years and/or in multiple organizations.  Unfortunately, the number of times I’ve seen either that or a variation of it expressed where no actual commitment to employee development or associated framework to provide for learning and development was in place is why I can’t write or say the expression without cringing.  Again, the good news is that having a talent strategy isn’t complicated, the bad news is that the leadership commitment to living into one is generally the issue.

Some key questions that will be addressed in this area:

• How to think about specialization versus core skills in the context of an IT operating model
• How to organize an education curriculum in terms of just-in-time versus mandatory training
• How to frame education needs in relation to ongoing delivery work
• How to integrate employee development as part of a workforce strategy
• How to think about demographics in the context of a workforce strategy

From my experiences of education requirements in my software development days at Price Waterhouse thirty-two years ago to the TechFluency program that was part of my team’s responsibilities (most recently) as the CTO of Georgia-Pacific, including what I experienced in various consulting and other organizations along the way, I’ve definitely seen a lot of variations in approach.  What I would say at an overall level (connecting to “Investing in Employee Development” in my Creating Value Through Strategy article) is that, however structured and defined a talent strategy is, what shows up to employees is the commitment to their development in practice.  Classes and coursework that no one is given time to take and development that isn’t supported as a core part of an organization’s culture will definitely have a negative impact on retention and operating performance over time.

Where You Want to Be

While the majority of topics (and associated articles) to this point will likely focus on concepts, structure, and operating mechanics related to people, this area is where I mostly likely will lean towards a point of view on “what good looks like” in terms of an IT operating model and how I think about it being constructed based on various scenarios/business needs.  As with anything, there is no “right answer” in how to structure, staff, and source a technology organization, the point is thinking about how to do so in a way that is thoughtful, deliberate, and is aligned to the needs of the organization it supports.

Some key questions that will be addressed in this area:

• How to think about the mix of skills (existing and emerging) in relation to your workforce
• How to align partners to the right work in the right way to enable innovation and agility, while optimizing value/cost
• My point of view on cloud computing, analytics, and cyber security in relation to an IT talent pool

Again, as there is no “right” way to define an IT organization, likely the way I will approach this topic is to consider a few different scenarios in terms of organizational/business needs and then offer ways to think about staffing and sourcing IT to support and enable those needs, likely with some core elements (like courageous leadership) that are critical for establishing a culture of excellence under any circumstance.

How You Manage It

With a model being establish for how to structure and operate an IT organization, there is a need to establish the ongoing mechanism to evolve over time.  From an IT operation standpoint, this is made up of three primary component from my perspective: how you ensure you’re creating business value and desired outcomes (your IT governance processes), how you manage internal talent (your performance management process), and how you work with third-party partners (your vendor management process).  There is a nuance on the third dimension where captive entities are involved, but for the sake of simplicity at a high-level, it’s reasonable to assume that can be managed through either the second or third capability or some combination thereof, depending on the operating model.  Again, in my experience, I’ve seen and helped establish fairly robust processes for each of these things but also seen far less structured models as well.  As with any form of governance, my personal bias is to focus on how these things enable delivery and create value, not to create administrative overhead.

Some key questions that will be addressed in this area:

• How to clarify the relationship between workforce and sourcing strategy and business metrics that matter from an IT standpoint
• How to think about where standards and governance are important in overall IT performance in relation to a portfolio of work
• How proactive versus reactive performance management affects IT effectiveness and value/cost from a business standpoint
• How to structure and approach partner governance in a consistent manner that promotes overall service and product quality

In my article on Optimizing the Value of IT, I write about the continuous improvement cycle that begins with transparency and governance that ultimately inform changes that will subsequently lead to future improvement and so on.  There is little as important to establishing excellence in IT as managing the workforce and sourcing of work effectively.  That being said, since technology is an ever-evolving landscape of change, the ability to monitor and adjust the various levers influencing operating performance is equally important.  To the degree these dimensions are considered (e.g., “how are we going to measure that attribute/decision on an ongoing basis” or “how will we know that’s been successful”) when establishing the strategy itself can help promote the learning and adjustments needed to remain agile and responsive to change over time.

“Peeling the Onion”

With all of the above questions established, here is a quick preview of the next layer of the model being described above.  What has been covered in the previous section is largely a level below each of the boxes presented, but this framework represents how I’ve broken down the topic for future exploration and discussion.

Wrapping Up

Having even written this overview, it’s probably clear why workforce and sourcing strategy has been on my backlog for such a long time.  It’s a topic akin to describing the ocean.  There isn’t a way to define and explore it at a high-level that does justice to the nuances and complexities involved, particularly if you want to develop one in a disciplined way that creates the most value.  That being said, I believe having a structured approach is well worth the investment in the business value it unlocks (at the right level of cost).

How the subsequent articles will unfold is to be determined, as I haven’t written any of them yet, but I’m looking forward to seeing where the journey will lead and discussion that may ensue.

I hope the ideas were worth considering.  Thanks for spending the time to read them.  Feedback is welcome as always.

-CJG 01/17/2024