Getting full value from external talent

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More and more leaders recognize the need to manage contingent workers, but their companies and cultures often undercut their efforts.

Many recent studies of talent include some version of the prescriptive advice in PwC’s Preparing for tomorrow’s workforce, today report: “Harness the potential of flexible talent and innovation.” The wellspring of flexible talent and innovation is the contingent or alternative workforce — these days, that includes the fast-growing ranks of freelancers, independent contractors, gig workers, and the crowds whose collective genius companies can tap to address a variety of challenges.

The problem, as the PwC study found, is that 92 percent of companies are not managing these contingent workers as effectively as they could. Even as companies rely on contingent workers in ever-greater numbers, they often make it difficult — if not impossible — for them to contribute in full measure. Leaders need to do better.

A PwC study revealed that 92 percent of companies are not managing contingent workers as effectively as they could.

This didn’t matter much 30-something years ago when I became a full-time freelancer. Most industries had little use for contingent workers then, and most workers wanted “real” jobs on the payroll. By 2017, however, 57 million American workers identified themselves as freelancers — that’s 36 percent of the workforce and nearly 50 percent of millennials. And contingent workers are in demand in a host of industries for a host of reasons. These include (but are not limited to): the record low unemployment rate, shortages of talent in emerging capabilities arenas (like AI and robotics), and the growing numbers of business models and workforce strategies that depend on contingent workers.

Yesteryear, managing contingent workers was something of a contradiction in terms. It seemed like a major reason to hire independent contractors was that you didn’t have to bother managing them. If there was a problem, the relationship could easily be terminated with a minimum of cost or conflict. And regardless of how well contingent workers performed, it was the rare manager who thought it might be worth cultivating an ongoing relationship. The operative managerial mind-set was “here today, gone tomorrow.”

That mind-set has been transformed over the last decade, as contingent workers have become more central to more companies’ operations. I didn’t have a clue what to say when managers in a few client companies first started asking me what I wanted to do. My stock answer was, “Whatever needs doing.” This wasn’t entirely glib — I often had no idea what kinds of opportunities were available within a given manager’s purview.

Eventually it dawned on me that these managers were onto something. When they took a modicum of interest in me, I tended to stick around and to favor them when time constraints forced me to choose between clients. Throw in a title (is there any cheaper perk?), provide a relatively steady flow of work, and invite me to a staff meeting or two to give me a clue about what you’re trying to achieve, and suddenly I find myself as emotionally invested in your company’s well-being as somebody on the payroll. So if you’re going to use independent contractors anyway, why not find ones whose work you like and try to create an ongoing relationship? The direct cost is the same, and the better the output, the lower the indirect costs and higher the return.

In my work, I find that more and more managers understand this and are acting on it, too. But if that’s so, how is it that more than 90 percent of companies are not managing contingent workers as well as they might? The short answer is that corporate policies and cultures often undercut the efforts of managers.

In recent years, for example, companies have been seeking to insulate themselves from the nebulous legal and regulatory requirements inherent to ongoing relationships with contingent workers. One of the ways they have sought to clarify the gray areas, such as whether the worker in question is an employee or a contractor, is to require contingent workers to sign on with third-party platforms and companies that handle billing and invoicing on behalf of the worker, in exchange for a not insubstantial fee.

From a legal and risk-management perspective, these arrangements make all the sense in the world for companies. But leaders should recognize that they also carry ramifications for operations and talent. They impose costs and burdens on the contingent workers, and effectively create a barrier between workers and their client companies. What’s more, if contingent workers find your corporate policy burdensome, they can work for some other company instead. The ability to easily switch between more or less appealing opportunities, after all, is one of the big draws of contingent work.

Balancing the dictates of corporate policy and the expectations of contingent workers can be a challenge. But I’ve seen leaders walk the line in ways that reinforce relationships versus erode them. Taking the time to explain the company’s position (as opposed to delivering an “our way or the highway” pronouncement) is a first step. A good-faith search for alternatives communicates that the relationship is valued. Picking up the cost of policies that protect the business but offer little or no benefit to contingent workers, and compensating workers for onboarding time that can’t be avoided, also help managers hang onto external talent.

It may be more challenging to address the cultural barriers that make it harder for contingent workers to integrate effectively with companies. By culture, I mean the tribal ties, mores, and language that people who work together develop with one another and their companies. For all the positive aspects of culture, there is often an exclusionary element to it. A tightly linked culture can reject outsiders, and contingent workers are often seen as outsiders. This negative energy can be compounded when employees see contingent workers as a threat to their jobs, and sometimes that fear is entirely justified.

Making contingent workers feel welcome is a particular challenge in environments where they are literally sitting in cubicles adjacent to full-time employees — yet wear badges that signify outsider status. “People look down on you, even though you’re doing the same work,” one former Google contractor told Bloomberg. Another said, “You’re there, but you’re not there.” If you felt that way, what are the chances you’d be performing at your best?

Sometimes the systems in a company reinforce those feelings of otherness and isolation. Contingent workers are not eligible for the same benefits that accrue to full-time employees. They are not usually invited to all-hands meetings or off-sites aimed at building camaraderie. And they may not be given access to the same communications and data tools — Slack, proprietary databases, content management systems — that employees use. I often work collaboratively with employee teams in client companies, but I’m locked out of the systems and platforms, like Google Docs, on which they work together.

 
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Asking contingent workers about the things that make them feel like outsiders is a first step in bridging the gap between internal and external talent. Inviting contingent workers to appropriate staff calls and meetings can help erase the boundaries; an annual or semiannual meeting of the entire team can do the same. (But please remember that contingent workers are not on the payroll and, like any other worker, we need to be paid for our time.) If possible, provide contingent workers with access to work systems and platforms. If not, assign an internal team member to keep them in the loop.

For some contingent workers, the various issues that arise around policy and culture can be a big deal; for others, they might not be. Just like payroll employees, we’re all different. But if your company is using contingent workers or thinking about making them a bigger part of its workforce strategy, you should consider the policy and cultural obstacles that can unintentionally sabotage managerial efforts to get full value from external talent.

Ted Kinni

Theodore Kinni is a contributing editor of strategy+business. He also blogs at Reading, Writing re: Management and is @TedKinni on Twitter.

 

 

 
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