- What is the contingent workforce and where did it begin?
- Contingent Workforce Today
- Organisational Challenges
- Contingent Workforce Successes
- Value of a Contingent Workforce
- Considering, Leading, Managing and Evaluating a Contingent Workforce
Organisations of all sizes are turning to a contingent workforce to meet the challenges of global talent management. Today, large organisations are faced with the retirement of Baby Boomers, the mindset of Millennials, and economic pressures to reduce costs, while maintaining viable and thriving operations. Organisations create strategic policies and procedures, which drive talent management agility through a contingent workforce model. As the work relationship, has changed, so too must our ability to engage and manage talent.
What is the contingent workforce and where did it begin?
The definition of a contingent workforce varies within a specific organisation or industry. It can include independent contractors, part-time employees, temporary employees, seasonal employees, leased workers or a phased retirement option. Depending on the industry or organisation, any of these contingent strategies have proven to be successful. Organisations are utilizing a contingent workforce more frequently to maximize flexibility during peak seasons, while ensuring there is agile talent available to meets the needs of the organisation. Evolution of the contingent workforce began in the 1960s with the emergence of the two-income households. This presented a growing need to transition away from the traditional 9-5 workplace that allowed employees to address both their home and professional needs. This created a growing need for a work-life balance within the household, while ensuring both parents could work and maintain the responsibilities of overseeing a busy household. Woman entered the workforce at an increased rate in the 1970’s, creating an opportunity for organisations to develop contingent worker opportunities.
Since 1975 to present, the labor force participation of U.S. women with children under 18 years of age has increased from 47% to 78%. Nearly 40% of all professionals and managers who work at major U.S. companies are now women, many who simultaneously juggle caregiving. The U.S. Census Bureau reports that 83% of U.S. families are dual earners or single parents with children under 18 years at home. A third of all workers (equally men and women) provide elder care. Fifty percent of all children will live in a single parent family before reaching 18 years. Fathers play a greater role in caregiving and value flexibility more than those of previous generations.1
Contingent Workforce Today
A survey conducted by the Bartech Group in 2013, showed the increased use of contingent workers in larger organisations. From 2009-2013, there was a 6% rise in the use of contingent workers in large corporates. An SIA 2016 CW Buyers Survey showed the use of a contingent workforce had increased to 22%. Regardless of the data presented in the survey, the use of a contingent workforce has risen significantly and will continue to increase in the new gig economy.
A 2015 study by Ardent Partners Ltd, provides data on reasons that organisations are utilizing a contingent workforce.
3 Reasons to hire a contingent workforce, Dwyer, Christopher. “The State of Contingent Workforce.” Resources Field Glass., 2015.
Contingent workers are equipped with the skills, knowledge and ability to efficiently and accurately complete projects and assignments, with less oversight. Summarising the data above into two words: efficiency and cost-savings. Organisations can select the most qualified individual for the project/assignment; knowing this individual can make decisions and deliver a quality product in a reduced amount of time. Saving the organisation time and money, as it requires specific skills and maximum efficiency. The contingent worker is hired for an assignment, the terms are agreed upon, the assignment is completed, the worker is paid and the worker moves on to the next assignment. This reduces the costs of recruiting and training, while eliminating the overhead of a full-time employee (perks and benefits). Perks and benefits make up on average almost 33% of total employee compensation for entities throughout the world. A December 2016 table shown below, provides employer costs related to employee compensation:
The current skill shortage in several industries has provided new options for contingent workers, creating new challenges in managing agile talent. An article published by Snelling, “Rise of the Contingent Workforce”, cites multiple industries having a current skill shortage, “namely, healthcare, education, business & finance, IT, architecture and engineering and skilled trades.” The lack of skill or expertise in the workforce will provide more opportunities for talent, creating a challenge for organisations that reluctant to embrace a contingent workforce strategy. As employee and business demands continue to evolve, so too will the need to implement and sustain policies for a contingent workforce. The Bureau of Labor Statistics (“BLS”) forecasts that in the next ten years the ratio of traditional workers to contingent workers will shift from the 90-10 ratio of the 1990s and move towards a 60-40 ratio.
Comparing 2005 to 2015 in a Forbes Article:
40.4% of the U.S. global workforce is now made up of contingent workers—that is, people who don’t have what we traditionally consider secure jobs.
Pofedlt, Elaine. “Shocker: 40% of Workers Now Have ‘Contingent’ Jobs, Says U.S. Government.” Forbes (25 May 2015)
In contrast, in 2005, 30.6% of workers were contingent. The biggest growth has been among people with part-time jobs. They made up just 11.9% of the labor force in 2005. That means there was a 36% increase in just five years. Evidently, there is a growing popularity in using and employing contingent workers to align with the strategic mission of organisations, ensuring fiscal frugality, while having agile policies as needs of the organisation change.
Contingent Workforce Successes
The success of any contingent workforce model will vary based on the needs of the organisation, skills, knowledge and ability within the workforce. Hallmark Corporation employee’s 13,000 individuals worldwide and has used a very successful contingent workforce model since the 1970’s. “Individual departments and/or plants would keep in contact with workers from their units who chose to leave the labor force and when there was a need they would call on those individuals. In the 1990s, Hallmark overhauled their contingent labor program and centralized the operations within the Flexible Staffing Department. Professional, administrative, and other corporate positions are grouped into one flexible labor pool that can be dispersed to any Hallmark location. Currently there are approximately eighty active contingent workers serving the corporate/administrative needs. Plants within Hallmark still maintain their own pools for manufacturing positions as these require a higher level of familiarity and a specialized skill set. Approximately 200 contingent workers are under the individual plants’ staffing pools. Out of the approximate 300 total employees, 200 are retirees and the rest of the pool consists mainly of parents who desire the flexible schedules and the ability to stay in the workforce while raising their families. As Hallmark demonstrates, companies—along with employees—value the benefits of contingent workforce labor.
The primary benefit to both parties is that with the creation of workforce pools, employees can stay with their current employer through transitional periods in their lives. Employees benefit from this relationship by being able to stay abreast to changes in their field, develop workforce skills, and maintain current business relationships while bringing in a supplemental income. Employers benefit by being able to reduce labor costs until the employees are needed for a specific project, retain top talent (both in terms of knowledge and leadership skills), and address changing business needs while not increasing permanent headcount.
During my career, I have worked in organisations that utilize a contingent workforce model during peak seasonal times and when additional support is needed. During the Christmas shopping season, retail and manufacturing organisations will utilize contingent workers, based on the needs of the business. As a Human Resources Manager at a paper mill, we used contingent workers during machine and boiler outages. We hired additional employees to perform maintenance work as equipment shutdowns occurred. Outages occurred once per quarter, this eliminated the overhead cost of employing hundreds of additional people throughout the year. The talent management agility of using a contingent workforce provides organisations with increased flexibility, cost savings, timeliness, specialization and decreased recruiting time. Contingent programs vary based on the organisation. However, the agility of incorporating the contingent programs has proven to be a competitive advantage for Hallmark and other large organisations.
Value of a Contingent Workforce
With economic uncertainty and increasing operational costs, a contingent workforce could be the solution to sustain a competitive advantage and cut organisational costs, adding value to the operation and value to the contingent population. Approximately 60% of all costs incurred by a company are tied to human capital. If we can cut those costs by utilizing contingent and flexible workers, why not do so?
The value creation of a contingent workforce
1. Agility A contingent workforce can provide your organisation the agility to streamline decision making and utilize talent when needed to complete projects and assignments, with less overhead 2. Flexibility The flexibility created when using a contingent workforce benefits both the organisation and contingent employee. Talent is interested in flexibility in work arrangements. Developing these flexible work arrangements provides any organisation a means to an end, utilizing workers when needed. 3. Talent Management Agility Organisations can recruit and retain contingent workers through programs and offer flexibility in a work relationship. These programs can promote an agile and streamlined talent pool, while supporting the goals and objectives of the organisation. 4. Reduced Costs The cost savings will be determined by the contingent relationship. Employers can eliminate on average 33% of the overhead associated with employing a full-time individual, by utilizing contingent workers. Cost savings can also be associated with reduced recruiting costs, talent management, employee engagement, employee relations, flexibility, innovation, less office space, reduced organisational expenses and retention. Equally, hiring contingent workers allows businesses to scale rapidly, reducing the heavy human cost of organisation restructuring. The reduction in costs is important to any organisation, but it should not be the only reason to a contingent workforce. Developing metrics on cost savings will provide the data and information necessary when deciding on a contingent work relationships. 5. Knowledge, Skills and Abilities Contingent workers are hired to fulfill a specific need through their specialised knowledge, skills and abilities. Contingent workers have the tools necessary to successfully complete a project efficiently. A survey conducted by Major Players, a United Kingdom recruiting firm, data based on more than 1,000 responses by creative, design and marketing freelance professionals, found “40 percent of freelances said that the freedom of choice in their work topped the list as the most appealing feature of freelancing, next to having a choice in their work, freelances chose the creative experience and opportunity as the second…just 19 percent of respondents listed the financial reward of freelancing as its most appealing feature.” The chart below provides a visual account of the data. Showing, more than twice as many contingent workers prefer freedom of choice over financial reward.
As a consultant, I agree with the statistics and prefer a contingent work arrangement, it provides me the agility to work with multiple organisations on many projects. I can bring my experience and recommendations (added value) from multiple industries to ensure strategic, sound and proactive recommendations are made for each of the organisations I support. There is tremendous upside to utilizing contingent workers and the value of these programs have proven successful.
Considering, Leading, Managing and Evaluating a Contingent Workforce
Our job as organisational leaders is to create an environment both near and far that employees can both embrace and feel they are part of the team. The first step in aligning contingent workers with the needs of any organisation is to think through the following and how it will impact your organisation:
1. The organisations strategic goals and the use of a contingent workforce. The mission, vision and values of the organisation. Will contingent workers support the goals and mission of the organisation?
2. The knowledge, skills and abilities necessary to advance the organisations strategic goals. The specific core competencies a contingent workforce should provide to the organisation.
3. The internal interest of any employees in becoming a contingent worker. The talent flexibility within the organisation. Retirees or employees transitioning out of the organisation that could be utilised in a contingent capacity. The relationship between these alternatives and the goals and objectives of the organisation.
4. The current needs analysis within the organisation. The skills, knowledge and abilities of your workforce. The external labor market and talent outside of your organisation. The competition’s talent and their utilisation of a contingent workforce.
5. The opportunity to borrow workers from other organisations. Do seasonal peaks vary in organisations?
6. The reporting structure when using a contingent workforce. The current policies and procedures designed for contingent workers. Conflict resolution and conflict management procedures for contingent workers.
7. Engaging trust throughout the organisation. Ensuring there is no fear of job elimination from your full-time employees when using a contingent workforce.
8. Finally, any laws and regulations that impact the use of a contingent workforce. Review all regulations prior to implementing contingent policies and procedures. Labor and employment laws can vary by area, ensure your organisation is abiding by these laws. Seek guidance if you have questions.
Leading and Managing
Leading and managing a contingent workforce can be a challenge. However, when you have successfully found the right company to partner with, the opportunity to drive strategic innovation is limitless. Below are steps organisational leaders should consider when leading and managing a contingent workforce:
1. Engaging both full-time and contingent workers in the corporate culture.
2. The contingent workforce onboarding, training and development processes. Designing a program that ensures timely and accurate information is delivered to the contingent workforce.
3. Career growth opportunities. Developing opportunities of transitioning from a contingent worker to a full-time employee or full-time to contingent status.
4. The organisations current communication strategy and potential communication process for contingent workers. Communication is necessary for the success of any employee, design a communication process that encompasses contingent workers. Ask the workforce which communication tools they prefer. Do not fear technology!
5. Scheduling of work and hours of work. Develop a schedule that works for the organisation and the contingent workforce. Remember all labor and employment laws.
6. The impact to the current budget. Any constraints related to the current budget and how this is addressed. Is there opportunity to develop a business case for implementing a contingent workforce. This is your opportunity to develop metrics and key performance indicators to ensure there is value in utilizing a contingent workforce.
The needs of your organisation will vary, based on the skills and abilities required by the contingent workforce. All options should be reviewed prior to implementing or designing a contingent workforce strategy. Do not be afraid to embrace technology and always benchmark. Do not fear change! Change is necessary for organisations and individuals to thrive and grow.
Performance reviews and assessments are crucial for all our employees. We cannot forget to evaluate and assess the contingent workforce as it relates to job performance and strategically aligned goals of the organisation. Below are a few considerations when developing a performance review process for the contingent workforce:
1. The contingent job descriptions and core competencies. Ensure the job description and competencies are up-to-date and align with the knowledge, skills and abilities necessary to perform the essential functions of the project or assignment.
2. Benchmark best practices. Review current evaluation processes in other organisations that currently use a contingent workforce. Research additional options globally.
3. Develop a performance plan together, that will include goals and objectives. Ask the contingent workers which goals and objectives are important for their career growth (aligned with the organisations goals and objectives), for the completion of the current project or assignment.
4. Accuracy and consistency. This recommendation should be embraced throughout the organisation, regardless of full-time or contingent. The performance review and evaluation process should be aligned with the goals and objectives of the organisation and managed consistently for all employees, at every level.
5. Developing a performance review process or checklist, to ensure all employees are consistently and accurately evaluated. The process should be tailored to the contingent workforce. High performing workers desire feedback for continued career growth and the completion of successful assignments.
6. Over communicate goals and objectives. Do not communicate once per year during the evaluation period or at the beginning/end of the project or assignment. The communication process should be discussed and agreed upon by the organisation and contingent worker.
7. Performance should be reviewed by the manager and worker. Feedback can come from multiple sources to ensure a fair and effective performance review process. Feedback should be consistent and fair.
8. Upon agreeing on the performance review process and implementing, evaluate the process after utilization. Seek feedback on the current process and make changes as needed. The performance review process should be ever-evolving as needs of the organisation and contingent workforce continue to change. Very few projects or assignments will be identical, why should the performance review process follow an old or outdated model?
9. If you have made your hire through an online marketplace, ensure that you leave accurate feedback for the worker based on these performance reviews. This feedback is a critical aspect of a contemporary independent contractor’s resume.
7 Tips to Improve Your Contingent Workforce Programs Using Analytics
As leaders, we need to proactively plan for the challenges associated with overseeing a contingent workforce. Can we plan for everything? No chance. However, through detailed research and proactive preparation, we will be on a strategic path of success when implementing, leading and evaluating a contingent workforce.
The International Labour Organisation breaks down the global labor market into eight clusters, as show in the chart below:
As Baby-Boomers continue to leave the workforce and Millennials are developing new skills, there will be a growing talent gap. The importance of a contingent workforce will continue to provide a strategic advantage through this global transformation, as talent exits the workforce and new leaders are developing the skills necessary to lead in a complex global economy. Organisations continue to evolve and find competitive advantages in talent management agility through the utilization of a contingent workforce. Organisations that have not considered a contingent workforce will eventually be at a competitive disadvantage. As leaders, we need to recognize this opportunity and develop programs to capture the innovation and strategic talent that a contingent workforce can bring to our organisations. Talent management agility will continue to grow in importance, as the war for talent heats up in the new gig economy and needs of organisation continue to change.
Matthew Burr, HR Consultant http://burrconsultingllc.com/whats-new-in-the-hr-field/ http://burrconsultingblog.wordpress.com/ http://www.facebook.com/burrconsultingllc http://www.linkedin.com/in/matthewwburr/ Twitter: @Burrconsulting For additional reading about changing demands in the workforce
“Changing Demands: The Workforce of Yesterday, Today and Tomorrow”
“Building Trust Between Your Employees and Freelancers”
- Kossek, E. & Michel, J. In press. Flexible Work Schedules. In S. Zedeck (Ed.), APA Handbook of industrial and organisational psychology. Vol. 1, Washington, DC: American Psychological Association. Page 6. https://www.noexperiencenecessarybook.com/aEj0y/flexible-work-schedules-chapter-14-ellen-kossek.html