Keith McCambridgePartnerkeith.mccambridge@oliverwyman.comSebastian KarwautzPartnersebastian.karwautz@mercer.com© Oliver Wyman & MercerEXECUTIVE SUMMARYWe live in an age of accelerating change fuelled by technological transformation, socialrevolution and macro-economic upheaval. In this context, organizations that relied onsystemic certainty and a degree of predictability, struggle to adapt to the ambiguity theynow face. The world has gone beyond any traditional sense of normality and those whoexpect this to return will be disappointed. Those who are capable of accepting this age ofacceleration as the new norm and can embrace a new definition of organizational discipline,will be the ones who establish themselves as fundamentally fit for thefuture.We do not believe that traditional cost-out programs deliver long-term, strategic valuefor any enterprise. They can often be the response of rigid institutions who are waitingfor the change to “settle down.” These programs rarely tackle the core inefficiencies of anenterprise and can often create unintended long-term damage. Fixing a number is of courseattractive but it is only one aspect of crafting an organisation to sustainably perform andflourish in this age of accelerations. The reduction of cost can be an informed outcome of aconscious process to enhance the ability of an enterprise to sustainably perform in this newworld – but it should never be a goal in itself.We fundamentally believe in driving organizational optimization in the service of sustainableperformance. This article presents an approach that sees workforce optimization as acontinuous and data-led discipline, owned by all leaders at all levels. It shapes the challengewith a mindset of optimism and growth, not one shaped by cuts, reductionsand fixedideology.This is not a program run every year. This is a transformation that equips leaders topositively drive continuous focus on the top and the bottom line, year in, year out.AUTHORS Stephan PieronczykPartnerstephan.pieronczyk@mercer.comLauren LyonsPrincipallauren.lyons@oliverwyman.comBenjamin BajmelPrincipalbenjamin.bajmel@mercer.com © Oliver Wyman & MercerRAPID, UNEXPECTED CHANGE HAS BEEN THE OVERARCHINGTHEME OF THIS DECADE SO FARThe 2020s kicked off with a pandemic that altered our approach to, and outlook on, work inwhat behavioral scientists and organizational psychologists have described as irreversibleways. This was followed by companies changing their operating models to support productionneeds, artificial intelligence permanently altering how we view knowledge acquisition,significant disruption in worker’s skills, and major changes in the labor market such as techlayoffs affecting more than 224,000 employees to dateglobally.In this economic landscape, organizations are under pressure to become more efficient andmore agile. For some organizations, those long-term goals are overshadowed by solutionsfor immediate challenges, such as reduction in force (RIFs) and organizational restructuring.However, achieving long-term return via investment in talent requires a strategic view towardholistic workforce management.People are often the largest single source of cost for an organization — and this has beenexacerbated in recent years with the ‘war for talent’ — but it’s an organization’s people whoultimately deliver its products and services, and as such drive performance, which explainsthe use of labor-to-revenue ratios as a measure of efficiency. Yet many organizations donot have a clear view on their implicit and explicit labor costs, or on the current or futurerelationship between role structures andefficiency.Additionally, despite the changes that have demanded rapid organizational turnaround in thepast few years, businesses continue to struggle in determining how their workforce can bestbe organized around current strategic priorities to maximize performance and how roles andskills need to evolve in the future. For example, while 93% of companies say their top strategicpriority is to grow their workforce in the next three years, only 27% place talent acquisitionprominently on their transformation agenda.Under current cost pressure, organizations deploy RIFs, setting reduction targets from thetop and using levers such as spans and layers, location strategy, and seniority mix to reduceworkforce size. Often, though, these have significantlimitations:•Often shortsighted and have little consideration of strategic priorities and how theworkforce lines up against the priorities•Not focused on creating future workforce cost synergies enabled by automation inthe long-term, leading to multiple cost-out programs•Usually disruptive, with negative implications on organizational culture•Often not joined up with resource requirements within different parts of theorganization Organizations requirea structured approachthat maximizes efficiencyand invests in people©Oliver W y man & M ercer © Oliver Wyman & MercerTHE WORK ARCHITECTURE PROVIDES A FOUNDATION TOMA