Organizations are under unrelenting pressure to reduce costs. Research from consulting firm Aberdeen found that roughly three in four companies (74%) face calls to reduce operating costs.
Because labor is often the biggest single cost category, reductions in workforce are often a key target. The report found that, among companies trying to reduce operating costs, 47% are focused on reducing labor costs. However, they might not be looking at the whole picture.
A short-term view: Contract and contingent labor
Aberdeen’s report found that 85% of companies allocate talent resources at the department level depending on forecasted product or service demand, creating siloes and inefficiencies that are difficult to identify from a top-level view. Under pressure to reduce costs and be more productive, individual cost centers often turn to contract and contingent labor.
In a separate survey, Aberdeen found that this “workaround” has led 51% of companies to expand their use of contract and contingent workers hired on an as-needed basis. Contracted labor is typically hired “out of house” per project for a term of 1 year or less with an option to renew. Contingent labor is hired “in-house” for a term of 1 to 3 year to fill a defined