How The Gig Economy is Reshaping Talent Management in Financial Services

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 Table of Contents

1. Financial Services Today
2. References
3. What Does This Mean for Key Decision Makers?
4. Traditional Employment Redefined
5. Talent Management & Availability
6. Increasing Demand for Rapid Execution
7. Global Trends in the Gig Economy
8. The Move Towards Flexible Workplace Design

Financial Services Today

The financial services industry has seen significant technology-driven change over recent years. Many organisations have invested heavily in digitalisation and innovative financial products. The sector is facing increased pressure to improve customer centricity as market expectations create a demand for more personalised and relevant services. New entrants including innovative FinTech start-ups and blockchain disruptors are challenging the long-established players.  The key to success in this climate is agility and flexibility. To keep pace with this unprecedented disruption, the traditional work environment is changing and increasingly, businesses are looking to augment their teams with external consulting talent to keep ahead of the pack. This both impacts, and presents the opportunity for disruption in modern talent management in financial services, in 2018 and beyond.

The Move Towards Flexible Workplace Design

Historically, banks and insurance companies were hierarchical personnel-heavy organisations. Recently there has been a shift towards streamlined processes, automation and more flexible team-based and remote working structures. The popularity of agile project teams and the increased use of contract resources has resulted from the huge investments in technology and process improvements. Most of these project workers have been full-time employees reassigned from other areas, or long-term contractors provided by a few well-established recruitment firms.  The most recent workforce trends started with an increase in flexible work conditions for employees supported by collaborative online tools and digital technologies. This has resulted in a new model of talent management, with a rise in the numbers of contingent workers employed in more responsive and on-demand operating models. Talent marketplaces have emerged and financial services firms have followed the lead of other corporations to take advantage of a new pool of available resources that can be managed on the marketplace platform itself. Freelance specialist talent is now being employed across a range of specialist skill areas for both ad-hoc and long-term programs of work across all areas and roles within the financial services industry.  

Figure 1. From legacy models to a corporate marketplace

Source: Technology Vision for Insurance 2017, Accenture, 2017

Global Trends in the Gig Economy

Contingent workers are on the increase globally across all sectors of the economy. These workers include freelancers, temporary, contract and casual workers across various task and role types. The rapid emergence of digital talent platforms has resulted in a growing number of workers who prefer to work independently for one or more employer at a time.  Globally, demand for contingent workers is booming. Accenture presented their technology visions for the insurance and banking sectors and found 30% of insurers are already using talent marketplaces on a broad scale and 48% in some business areas. 62% of Insurance executives surveyed planned to increase their contingent workforce over the next year. In banking, it was an even greater volume with findings that 16% of the workforce is already independent freelancers and 29% of bankers expecting freelance contractors to increase more than 51% over the next year.

• 20.2% = contingent job share of the financial services sector in Australia talent management financial services
• 9M is the number of Independent professionals iPros in Europe, financial services talent management financial services
•  15% of independent workers earned income through a digital platform,talent management financial services        

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In Australia, the momentum is also starting to pick up. In their most recent Contingent Job index report, Kinetic Super found employers in Australia’s financial and insurance services market are the fastest growing users of the contingent workforce with an increase of 47.8% over the past 12 months. The Contingent Job Share of the financial services sector makes up 20.2% of the overall gig economy in Australia. There has been a particular increase in white collar contingent workers. In Europe research by the European Forum of Independent Professionals showed the numbers of freelance workers in Europe increased by 45% to nearly 9 million freelancers from 2004 to 2013. The report also found that in the financial services sector full-time employment fell by 0.4%, but the number of independent professionals engaged by financial services organisations increased by 12%.   The way financial services firms connect with on-demand talent is perhaps critical to its rapid growth. Traditionally large financial services firms engaged with specialised recruitment firms and professional consultancy or contracting organisations.  The surge in the availability of on-demand labour platforms has allowed finance companies to connect directly with freelancers to quickly supplement internal capabilities as required.  

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However, as seen in Figure 2, the implementation of a robust workforce management framework is proving a challenge to some organisations as executives build capabilities to take advantage of changing workforce opportunities.  

Figure 2. Respondent ratings of sub-capabilities related to the augmented workforce

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Source: 2017 Deloitte Global Human Capital Trends

Increasing Demand For Rapid Execution

The financial services sector now has an unprecedented focus on change, agility and adaptation to new innovations. The contingent workforce allows organisations to greatly increase the flexibility and responsiveness of their workforce. For increasingly digital organisations, the importance of speed in execution is paramount. The Open Talent Economy allows firms the flexibility to scale up and down their workforce to meet demand and to deliver innovative projects without tying up internal resources.

A recent Bain Brief predicts that:

• By 2027 most activity will be automated or outsourced with only “mission critical” roles remaining in house.
• Agile Projects are likely to blend an increasing number of contingent workers with internal teams to take advantage of the global talent marketplace on an as required basis.
• 42% of executives expect to increase or significantly increase use of contingent workers in the next three to five years.

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The cost structure is an obvious advantage and the gig economy is moving to a model of “purchase orders instead of salaries9." The globalisation of freelance talent means organisations can hire professional talented freelancers from around the world at competitive rates. Some financial services firms favour task bidding platforms for certain projects to further drive down the cost of outsourced work. The era of stable and rigid organisations is over and workforce models based on long-term planning are not the nimble realities of current project-driven innovations. Paying for talent on an as-required basis creates significant savings against managing a traditional employment model with fluctuating periods of demand. Contingent workers may be engaged on a part-time, full-time or ad hoc basis to meet the business need. For example, in insurance, contingent resources can be rapidly engaged in times of a natural disaster, or an investment bank may ramp up analysts ahead of an acquisition.  Online talent marketplaces also serve to connect organisations with a pool of talent outside of the financial services industry. A future trend identified by PwC is that “expert talent is being recruited from other technology organisations and think-tanks rather than staying focused on recruiting from within the financial services industry.” Particularly in financial services, workers may be required on a 24/7 basis and the flexibility of remote contingent workers in different time zones can be a benefit.

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The speed of hire is also a critical factor with an average of 2.7 days to hire a freelance worker rather than 34 days for traditional recruitment methods. Savings are also seen through an increase in the employment of fully remote workers (both internal and contingent) as financial firms continue to invest in flexible working alternatives and away from traditional high-cost CBD locations. Additional overhead savings for contingent workers include employee-related costs including insurance, leave and superannuation.

"In 30 years time, as technology moves forward even further, people are going to look back and wonder why offices ever existed." -  Richard Branson

Talent Management & Availability

Challenges in the employment landscape include the impact of an ageing population which has seen numbers of retirees outstripping employees in the middle of their careers. This, compounded with the shortages of key skills in the finance sector, has further driven the demand for sourcing expert talent from the global contingent workforce. The required skills within the industry have shifted and online talent marketplaces are particularly strong in areas such as technology implementation, business innovation and improvement professionals, investment researchers and highly experienced data analysts. Call centre roles, sales, marketing and administrative roles can largely be undertaken by a network of individuals working remotely from around the globe. The contingent workforce has become a much more cost-effective and agile alternative to traditional outsourcing models.

"What started as outsourcing and off-shoring has now morphed into a new supply chain for employees"

The financial services sector has seen a significant change in the talent mix required to be successful. Organisations have become leaner, low skilled roles have become automated and the skills required have shifted from traditional finance skills to a focus on innovation, technology and big data research and analytics roles. Skill gaps have become apparent within the industry and employers have started to look outside of their traditional recruitment options to find the next generation of digital talent.

Traditional Employment Redefined

A growing preference among workers for flexibility and autonomy has seen a rapid increase in people abandoning traditional employment in favour of freelance work. The motivators are varied and individual:

• The diversity of work available
• Improved skills utilisation
• Entrepreneurship
• Work available outside of the geographical area
• Choosing from a variety of contracts work types, employers and industries
• Greater flexibility in schedules - control over when, where and how to work.

Contractors, independent professionals (iPros), giggers, freelancers, temps, consultants, contingent workers, external talent - call them what you will – these workers come from a myriad of backgrounds and are working in an equally varied way across the financial services sector. Some are working on-premises, fully remotely, in the growing number of co-working spaces worldwide or a mixture of on and off-site. Some are engaged directly by financial institutions, through labour-hire firms, consultancy firms and in growing numbers through talent matching platforms. There is hardly a role untouched in financial services with freelancers working in roles across the spectrum - from ICT specialists, investment analysts, customer service agents, marketing, business executives, risk and legal experts, actuarial, project workers, assessors, underwriters and many more. In Europe, the number of freelancers as a percentage of the sector employed reached a record high of 6%.

Figure 3. Contingent Talent is Redefining Employment Trends

Much of the gig economy literature focuses on Millenniums – a Bain report has found that Generation Y employees are “increasingly sceptical about corporate career paths” and are looking more and more to online marketplaces to find work. In reality, independent work is not dominated by millennials who represent less than one-quarter of independent workers.  A McKinsey Global Institute survey from 2016 reveals that the independent workforce is very varied in age, income levels, educational attainment, and gender. It is clear that the growing freelance marketplace is attracting workers from very diverse demographics. In fact, across the USA and EU27, nearly two-thirds of iPros are aged between 25 and 49, with most of the remainder aged over 505 and a growing trend to bring back retired workers for part-time or as needed pieces of high-end work. In financial services, in particular, demand for contingent workers with high levels of education and experience is in high demand.  Becoming a freelancer is an option likely to be most open to those with established skills, networks and reputation, favouring those with professional experience. Skill gaps within financial services organisations are driving demand for key competencies in analytics, customer experience, AI, data science and digital. This has also been assisted by the increase in top-level talent marketplaces seeking to assist highly experienced independent professionals with high-value executive freelance opportunities.  

What Does This Mean for Key Decision Makers?

To be successful, leaders need to embrace technological change and transformational strategies. The disruption of a changing marketplace for employees means organisations are starting to plan for their changing capability requirements and are rethinking talent management & operating models to identify and recruit the best talent from multiple sources. Transformational strategies are required to ensure organisational design reflects the required objectives.  

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Changing market expectations and demand for innovative products and technologies means organisations are becoming more agile and innovative to execute quickly on new opportunities. Strategic leadership and innovation in response to new demands and disruption has led to some interesting developments in operational models and workplace designs.

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Procurement and human resource models are developing beyond traditional hiring methods and focusing more on agile talent requirements. Vendor sourcing and selection are expanding beyond traditional avenues to include talent exchanges and direct freelance hires. Models are including accountability, pricing, and supplier evaluation components to minimise organisational risk. Strategic leaders are focusing on new innovative opportunities so they can act rapidly to pull together the best blend of talent to execute quickly and stay ahead of the competition.  Workforce management is beginning to account for the value of distributed teams, remote workers and balancing a workforce portfolio of permanent and contingent workers. There are challenges in embracing the opportunities presented by the gig economy. To assist with this, performance management and training can be expanded to include partnering firms as well as individual contingent workers. Challenges remain and financial firms are developing strategies put in place to ensure compliance using new online platforms to manage confidentiality, PR, intellectual property and regulatory and legal risks or uncertainty in new and creative ways.  A blended workforce of internal and external resources is becoming the new organisational norm. This requires a focus on a shift in talent management; how to leverage complementary talent as well as best-practice collaboration, skill transfer and shared learning to maintain core capabilities in-house. Balancing the right ratios of internal and contingent workers is critical, as well as ensuring organisational models promote a shared organisational culture which spreads beyond the internal workforce.

References

1. The open talent economy - People and work in a borderless workplace, Deloitte Development LLC, 2013 Retrieved from https://www2.deloitte.com/content/dam/Deloitte/global/Documents/HumanCapital/dttl-hc-english-opentalenteconomy.pdf
2. Technology Vision for Insurance 2017, Accenture, 2017 Retrieved from:https://www.accenture.com/us-en/insight-insurance-technology-vision-2017
3. Banking Technology Vision 2017, Accenture, 2017 Retrieved from:https://www.accenture.com/us-en/insight-banking-technology-vision-2017
4. December 2017 Contingent Job Index, Kinetic Superannuation, 2017 Retrieved from:https://www.kineticsuper.com.au/employers/forms-and-resources/contingent-job-index
5. Leighton, Patricia. Future Working: The Rise of Europe’s Independent Professionals (iPros), European Forum of Independent Professional, 2013 Retrieved from:http://www.efip.org/future-working-the-rise-of-europeans-independent-professionals
6. Independent Work: Choice, Necessity and the Gig Economy, McKinsey, 2016 Retrieved from:https://www.mckinsey.com/global-themes/employment-and-growth/independent-work-choice-necessity-and-the-gig-economy
7. Global Human Capital Trends 2017 - Rewriting the rules for the digital age, Deloitte Development LLC, 2017 Retrieved from:https://www2.deloitte.com/content/dam/Deloitte/us/Documents/human-capital/hc-2017-global-human-capital-trends-us.pdf
8. The Firm of the Future, Bain Brief, 2017 Retrieved from:http://www.bain.com/publications/articles/firm-of-the-future.aspx
9. Global Human Capital Trends 2016 - The new organization: Different by design, Deloitte University Press, 2016 Retrieved from:https://www2.deloitte.com/global/en/misc/search.html#qr=Global%20Human%20Capital%20Trends%202016
10. The Emergence of the Gig Economy, AIGroup, 2016 Retrieved from:http://cdn.aigroup.com.au/Reports/2016/Gig_Economy_August_2016.pdf
11. Financial Services Technology 2020 and Beyond: Embracing disruption, PwC, 2016 Retrieved from:https://www.pwc.com/gx/en/financial-services/assets/pdf/technology2020-and-beyond.pdf
12. White Naomi. Tomorrow’s insurance workforce: The future trends impacting the insurance industry, Suncorp, 2014 Retrieved from http://www.vero.com.au/vero/sites/default/files/Tomorrow%E2%80%99s%20insurance%20workforce%20-%20The%20future%20trends%20impacting%20the%20insurance%20industry_0.pdf
13. HR Functional Perspectives. Global Business Driven HR Transformation - The Journey Continues, Chapter 18 Contingent Workforce, Deloitte Development LLC, 2011 Retrieved from https://www2.deloitte.com/content/dam/Deloitte/global/Documents/HumanCapital/dttl-hc-chapter18-8092013.pdf