The alternative labor market — which includes freelance and contractual gigs — continues to heat up. About one-third of today’s workforce is hired in an on-demand capacity, and by 2020, that number is expected to grow closer to 50 percent.
With technology making it easier than ever for employees to work just about anywhere, market expectations for flexible positions have skyrocketed. In fact, 41 percent of employees say they will only work for a company that offers agile options. Today’s reality: workers want to work where and when it works for them. And they see job-hopping as a resume builder — a way to shop their skills around to the highest bidder and gain more experience quickly.
This work culture shift is significant. Short-term gigs are becoming mainstream, and procurement functions need to understand how the new workforce composition affects their organizations and how they can take advantage to make certain they are the ones who win the talent to grow.
Opening the Talent Pool
The immediate business benefits of an alternative or contingent workforce lie in the recruiting process. By considering short-term or remote workers in addition to full-time employees, companies are no longer bound by geography or other physical barriers. Access to a larger talent pool gives them a better shot at securing the specific skill sets for which they are looking, and may help cut costs.
The other major benefit: it’s faster and easier to hire for alternative positions. This is especially true when outsourcing the process — when another firm handles the hiring, it also owns the complications that come with benefits, taxes, H.R. issues, and more — making it less expensive and risky to hire because the responsibility and cost is elsewhere. With this weight on someone else’s shoulders, internal teams can focus on the strategic work that matters to them. For procurement teams focused on maintaining control, compliance and operational efficiency — which is the case for just about every company today — outsourcing makes business sense.
While the talent acquisition opportunity of the alternative workforce market is huge, there lies a problem: today, only 16 percent of employees say their companies have well-defined strategies for managing contractors, freelancers and gig workers. Sourcing the best candidates, and the right mix of talent and cost, is critical, and as expectations for contingent and alternative work options evolve, companies need to adapt and transform the way they manage their total workforces.
A Two-Pronged Approach
A mismanaged workforce opens the organization up to risk and costs. And with the complexities that come with managing alternative labor, including tax implications, classification errors, benefits, and compliance issues, the lack of a solid strategy multiplies these concerns.
Procurement’s job is to acquire assets at reasonable costs while reducing risk, and talent is one of the biggest assets for an organization. That’s why it has historically been the leading force in contingent labor hiring.
But hiring can be a cost center when done incorrectly, and it exposes the organization to risk. Naturally, failures raise key questions: could we have found a similar candidate at a lower cost? We thought we had the right candidate, but it didn’t work out — what is the cost of this bad hire? Or, we sourced a major project through one vendor because H.R. said it was our only choice, and then they went under. Where was the due diligence?
These concerns can be mitigated by taking a more strategic, collaborative approach to hiring.
The takeaway: procurement, which wears a financial hat, and H.R., the function responsible for managing talent, need to work together on contingent talent acquisition.
The alternative workforce might seem like an extension of full-time talent, but this subset of the workforce is just as important and ingrained in the organization as full-time employees. When tapped correctly, the contingent workforce can be a value driver, and even a competitive advantage, for organizations. This means companies can’t manage these workers on financials alone, and need to prioritize employee engagement and retention, with the same level of attention as is given to full-time staff.
Both H.R. and procurement bring unique perspectives and priorities that, when leveraged together, create a platform for smarter, more intelligent hiring.
This is especially true for supply-chain talent. The supply-chain field is facing a significant perception problem. Millennials and Gen Z, who grew up with flexibility and don’t want to be stuck behind a desk all day, view the industry as an antiquated, back-office function instead of the innovative and strategic sector it is today. The industry needs to flip this perception on its head, and meet incoming workers where they are. The starting place is integrating more contingent and alternative positions into the overall talent management strategy, and tapping H.R. for help with connecting more effectively with today’s workforce.
Contingent positions are no doubt rising in popularity, and as organizations struggle with talent supply and labor costs, this workforce can help them quickly adapt to changing market conditions and fill in skills gaps faster.
We don’t have a choice in the future: the market percentage of contingent labor will continue to climb, and organizations need to take advantage by putting a greater emphasis on finding the right skills and engaged talent for the workforce of both today and tomorrow.
Fatime Doczi is chief human resource officer at ZeroChaos, a provider of software and services for workforce management.