By 2020, the number of self-employed workers in the United States -- whether called the contingent, alternative, or remote workforce, the gig economy, freelancing, contract work, or a plethora of other terms -- will rise to 42 million people, according to a recent Deloitte study.
Although all companies have access to this workforce, not all organizations fully capitalize on the availability and expertise of this talent. Instead of creating a strategic plan that incorporates external workers into a company’s values, vision, and goals, most companies simply hire for a specific transaction. In fact, Deloitte found that 54% of companies have inconsistent or no policies for managing the full range of contingent workers.
Even among the 8% that do have specific management processes in place, having an organization-wide strategic plan for optimizing the contingent workforce is atypical. This is true even though having such a plan helps a company maximize the benefits of the new talent economy in tough labor markets, poor economies, and fluctuating opportunities.
As organizations embrace “the future of work,” how can they capitalize on this shift in talent in a strategic way? What should they do to prime themselves for a flexible, contingent workforce?
Today’s Contingent Workforce
In order to effectively leverage the contingent workforce, an organization needs to create processes and policies that allow them to match talent with needs. Without such a plan, getting the right talent where and when it is needed will be haphazard, leading to poor outcomes.
Before creating a strategic plan, however, an organization must understand the following about today’s contingent workforce:
I. “Contingent” Is an Umbrella Term
Contingent workforce is an umbrella term for a variety of workforce solutions. The three main modern contingent workforce solutions include the following:
- Staff augmentation. Staff augmentation means supplementing an in-house team with qualified workers on a short-term basis to meet specific business objectives. In most cases, workers hired in this manner are paid an hourly wage until the project is completed. Staff augmentation is typically sourced through a staffing agency that finds, vets, hires, and pays the worker.
- A statement-of-work (SOW) contractor. A SOW contractor is a type of contingent workforce present at companies. The organization outsources a body of work to another company which is typically paid on a deliverable or milestone basis. The outsourcing company typically manages the day-to-day activity of the workers. SOW contractors are not typically sourced through staffing agencies; they are typically sourced through niche firms that specialize in specific functions.
- A freelancer. A freelancer is a self-employed individual who may work by the hour or by the project. Rather than sourcing through a staffing agency, organizations find freelancers through direct digital sourcing platforms, LinkedIn and other social media, referrals, and even within their own internal employee roster. In this case, the organization employs the freelancer directly and is in charge of finding, vetting, hiring, and paying.
II. The Breadth of Talent Is Substantial
Contingent labor is a broad term encompassing a variety of skill sets, including administrative and clerical, light industrial, finance and accounting, information technology, creative, marketing, translation, branding, engineering, analyzing data, tax preparation, content creation, recruiting, consulting, and more -- all of which benefit departments throughout an organization.
This means that to get the most from a contingent workforce strategic plan, the processes need to be flexible enough to account for the various workforce solutions, talent sources, and departmental needs.
III. A Contingent Workforce Is No Longer an Alternative
Regardless of what one calls the alternative workforce, choosing to embrace these new forms of talent is no longer an alternative. The only way enterprises can remain competitive against other large companies and new, high-growth entrepreneurial ventures is to strategically implement this workforce to create new products, markets, and avenues of growth.
Those who learn to leverage the contingent workforce have the potential to reap impressive rewards, such as:
- Access to global talent. An increase in employees reaching retirement and the desire of the younger generation to have more flexibility and work/life balance often makes finding local, qualified candidates difficult for nearly half of employers across the globe. Since technology makes proximity to the main office less necessary, access to a global talent pool allows organizations to cast a wider net to discover candidates with the perfect set of skills.
- Solving critical problems. Organizations experiencing a critical business problem often do not have internal access to someone with the talent or skills necessary to resolve the issue.
- Flexibility and innovation. Flexibility and innovation are needed for all organizations but are especially important for those that are just forming, entering a new market, or seasonal/cyclical. When creating teams, organizations can combine internal employees possessing company knowledge and experience with contingent workers who have specific expertise to find and create new products, determine new marketing angles, and capitalize on growth opportunities.
- Cost savings. The cost of hiring a full-time employee includes wages, benefits, and payroll taxes, as well as hiring, training, and administrative tasks. The average cost of employee turnover equals six to nine months of that employee’s salary, and hiring a new employee averages $4,425 and 42 days. Current hiring practices also create skills gaps and create less efficiency.
Guiding the Strategic Conversation
As organizations move toward making use of the contingent workforce, it’s important to recognize the complexity of managing those who are not full-time employees. In order to optimize your organization’s use of these workers, you will need to reprogram your organization’s approach to hiring.
Here are four things to keep in mind:
- Focus on the broad view. Before creating a strategic plan, look at the goals, values, and culture of your organization and how these relate to hiring a contingent workforce. Then, you need to consider how you will disseminate this information to them. Ask questions such as:
- What is it like working in our organization?
- Are there any changes we need to make to allow contingent workers to fit into our organization more easily
- Do we need to provide skills training to managers and/or the internal workforce to provide better integration of contingent workers?
- Do we need specific tools to allow for a more seamless integration?
- Clear guidelines. Once you understand why you need contingent workers and how they will fit into your organization, you must create clear and centralized processes for doing so. If departments do not follow the same processes and management techniques, the administration of this workforce will be dysfunctional, time-consuming, and costly. Processes to consider include:
- Procurement: Create a glossary of terms; determine the type of workers needed; how to track and pay workers; compensation; benefits, if given; sources to find talent; continuous review of talent source performance; security role definitions; legal compliance and worker classification; statutory and internal reporting; service level agreements between departments; international hiring norms. Additionally, procurement is responsible for establishing the supply chain strategy, identifying quality suppliers, measuring and monitoring performance, and negotiating contracts.
- Hiring: Post openings; complete job description; accurately convey company culture; contract creation; set objectives and goals; obtain personal information for legal and to create worker profiles; worker profile management.
- Onboarding: Explanation of the company’s internal processes, culture, and rules; introduction to team members; offer company swag.
- Statement of work: Planned deliverables and workflow; provide needed information and tools; tracking hours; ending work assignments.
- Management: Workforce engagement; communication; work-style needs; recognition of employees.
- Training: Performance reviews; training programs; succession planning.The best way to create these guidelines is to involve HR, legal, procurement, and company department heads. In this way, you can avoid legal issues, determine standard HR procedures, and understand the needs of those seeking contingent workers.
- Talent sources. With the ever-increasing number of people joining the alternative workforce, there has also been a rise in the number of talent solution platforms and managed service providers (MSP) offering anything from someone to perform simple, personal tasks to elite industry experts needed for a specialized project. Which talent source you choose will determine your outcomes because, as with internal employees, not all contingent talent is created equal. The best talent sources are those that have a rigorous screening process and limit the talent in the pool to the very best in their field. A best practice is to always use a talent source that matches the nature of your work and provides needed additional services often performed by the HR department.
- Compliance. To avoid legal issues, regularly audit your organization’s compliance with the created guidelines.
With a strong strategic plan, an organization can realize the many benefits of harnessing the power of a contingent workforce.
As the workforce continues to become more flexible, organizations need to learn how to find, hire, and manage contingent talent. In this way, they can be agile, relevant, and stay apace with digital transformation. However, the only way to reap all the benefits of a contingent workforce is to create a strategic plan that provides the needed guidelines, processes, management, tools, and technology.