Workforce strategies in the era of the gig economy

Organizations should prepare for economic, hiring, and cultural adjustments to develop an effective, future-proof workforce.

And it is far from alone. Upwork, CrowdANALYTIX, Kaggle, and Freelancer are among the dozens of exchanges that match people with job opportunities, usually on a project basis.

Temporary and “gig” workers will be an increasingly important part of the workforce, which presents both opportunities and challenges for organizations. The growing popularity of gig labor reflects businesses’ reluctance to hire full-time employees in an uncertain economy and as well as the increased willingness of young people, in particular, to sell their services to the highest bidder. In this free-market economy, individuals may work for multiple employers at the same time. Employers are just fine with that, as the arrangement gives them the flexibility to staff and up-down to meet fluctuations in demand.

The growth of the gig market

Organizations that need quick access to skills to complete a project often find it easier to hire them on a short-term basis rather than spend months scouring résumés, conducting interviews, and onboarding new hires. Bringing in temporary workers is not only faster but is also a good way to vet people on the job for possible later employment.

The gig market is on fire, fueled by COVID-19-related layoffs, and the sudden willingness of many large organizations to engage with remote workers. Gig work will generate $455 billion in 2023, up 53% from 2020, according to a January 2021 Statista Research Department report. Gallup reported in 2018 that about 36% of US workers were involved in the gig economy, a figure that has doubtless grown since then, and a daVinci Payments survey found that the gig economy grew 33% during the pandemic in 2020 as jobs were lost or scaled back and people sought to supplement their income.

The most stunning statistic is that the gig workforce is on track to surpass the full-time workforce in size by 2027, according to a survey commissioned by Upwork and the Freelancers Union and published in Forbes. The phenomenon is prompting changes in business strategies. Successful companies today no longer concentrate on hiring the smartest people but rather on having access to the smartest people, but the shift also raises new questions about how organizations can foster the loyalty and codependency that has traditionally characterized the workplace.

A convergence of labor forces

The growth of gig and part-time positions has been driven by several factors:

• Technology is making it possible for many knowledge tasks to be performed remotely.
• Project time frames are getting shorter as more companies adopt “fail fast” innovation techniques. These require teams of people with specialized skills to be assembled quickly.
• The need to make capacity more flexible is prompting organizations to invest less in full-time employment.

Businesses have a lot of incentives to embrace this trend. Chief among them is flexibility; gig workers can be furloughed temporarily to reduce salary expenses and brought back on a project basis or even hired full time. Companies are finding that many roles that were long assumed to require salaried workers can be permanently redefined or broken up to accommodate contractors. Gig workers can also supplement full-time staff for short-term assignments requiring specialized expertise or seasonal changes inactivity.

A new breed of the agency is emerging that makes the employer’s job even easier. These service firms hire workers on a full-time basis and assign them to companies that want a reliable workforce without the overhead costs. That’s less expensive for employers, and temporary workers enjoy greater income predictability and benefits.

Time for a change in workforce thinking

Companies that want to take advantage of the short-term workforce need to develop new management tools and tactics to optimize the recruitment and onboarding of temporary labor. Although certain vetting processes used in hiring full-time employees can be circumvented, there is still a need to make sure part-time employees can do the job. Onboarding procedures should be streamlined and customized to the needs of occasional workers, for whom time is money.

Managers and HR organizations will need to reorient their thinking to being about skills rather than jobs. This can be challenging in large organizations, where the size of a manager’s staff may be a status symbol. Reward mechanisms should be adjusted to recognize excellence in managing costs.

Also, few organizations will want to go to the well every time they need short-term help. A better model is like the one people use with babysitters and landscapers: When they need help, there is a service or known entity they can call.

Projects should be broken down by skills requirements and tasks assigned accordingly. This more granular definition can be challenging for managers who are accustomed to assigning “bodies” to tasks.

Finally, information technology organizations need governance practices that accommodate the ebb and flow of a constantly changing workforce to avoid increased security risks.

Organizational and cultural issues

Organizations will want to cultivate long-term relationships with their best gig workers. They should regard those people as valuable extensions of the company. The office culture should also welcome temporary workers and integrate them into group activities whenever possible.

Successful companies will make themselves a place where short-term and temporary workers want to work. They will need processes for evaluating performance and determining compensation and retention strategies on an individual level. Workplace designs should become more flexible to accommodate a constantly changing population.

Employers will also need to address the criticality of a social safety net for this workforce. Although that may not take the form of full medical benefits and retirement savings plans, minimum-hour guarantees and retainer arrangements can remove some of the uncertainty these workers face. Businesses should also keep a close eye on tax legislation, as gig workers have been somewhat of a political football.

There’s no question, though, that flexible labor will become a more entrenched part of the workforce. This will require organizations to think more strategically about how work is done. Delivering a good experience to temporary workers increases their loyalty to the company, helps ensure that they will be available when needed, and reduces onboarding times.

Organizations that crack the code will be able to tap into these growing ecosystems faster and more effectively than their competitors.

Authors:

• Steve Hatfield, Global Future of Work Leader
• Melanie Lougee, Head of Employee Workflow Strategy at ServiceNow