There’s a shift happening in the workplace. Recent reports from Staffing Industry Analysts (SIA) and MBA Partners predict that 50% of the Fortune 500 workforce will be contingent by 2020. SIA further reports that today 30% of the Fortune 100, and 18% of the total workforce, is already contingent.
We’re used to seasonal labor, shop floor labor, administrative support, and IT staff coming in for short time-frames or on a project basis, but this shift isn’t limited there. It’s top to bottom and across the Enterprise. Even Executive ranks have already seen their share of contingent staff. It’s no longer unusual to hear about an Interim CXO or VP brought in on contract to put a department, or company, back on track.
A Free Agent Nation Emerges
In the 90s we saw contract labor and staffing go through a boom as we geared up for the Y2K challenge. Corporations managed project deployment more efficiently and they deferred risk and costs by not being the employer of record with this rapidly expanding workforce and model. Tech workers found themselves commanding more pay than in traditional salaried roles, getting access to varied environments (tech and business) in a more rapid time-frame, and having more control over their careers. The path to a “free agent nation”, as Daniel Pink penned it in the storied 1997 Fast Company article, was becoming more clear.
Follow The Money
After the turn of the century, companies, having deferred risk, avoided the cost of benefits, and managed projects well saw a new challenge with this emerging contract workforce. The spend. Contract labor was normally employed by a staffing agency, who then “billed them out” to a client. For some tech skills that were high in demand at that time it wasn’t unusual for staffing agencies to see hourly margins of 50% or even much more ( e.g. client pays $100 per hour for labor, contractor gets $50, agency gets $50). Corporations put pressure on staffing agencies to provide more visibility on bill rates and started being less reactive to contract talent being available. Competition became fierce between contract tech staffing firms, while bill rates and margins started to lower. Tech responded with solutions like IQ-Navigator, B-Line, and Chimes – on-line market places that drove competition between the agencies, and gave the companies more control of the bill-rates and contractor pay-rates.
With all of the constraining of cost in the contract labor market, and all of the new technologies and emerging hiring models in the full-time-employment workforce (Job Boards, ATSes, Social Media), you would think the staffing market would be flat or shrinking. Think again. It has grown to an enormous $416 Billion globally ($124B in US) and projected to double to more than $800 Billion globally ($245B in US) by 2020.
We’ve Been Solving In Silos
Based on the way the contingent workforce has emerged to date, we have addressed the challenge in silos. IT contract labor spend in the Fortune 1000 is primarily driven and managed by the Purchasing Department. Seasonal Labor in many businesses, take retail for example, is a showroom floor hiring decision. Administrative staff is split between Ops/Admin and Finance. As the shift has occurred over the last few decades, we’ve built a silo for each, some with it’s own dedicated technology.
This works for the Fortune 1000 when the spend is primarily in one area, but what about when the workforce in Finance, Marketing, Sales, Manufacturing, IT, Exec Ranks, and everything else is reflecting the trend? What about the Small to Medium Sized Businesses (SMB) where 98% of employment occurs in the US?
Tech and Demographic Trends Also Seem To Support A More Contingent and Mobile Workforce
We’ve seen the impact that tech trends, like Consumerization, Mobile, and Bring Your Own Device(BYOD), have had on the Enterprise. Current HR Technology innovation is following suit.
Demographic trends in the workforce, as the Baby Boomers slowly exit, Gen X moves more firmly into leadership ranks, and the Millenials continue to enter, also seem to grease the skids for a more contingent workforce. The workforce is becoming more flexible, more focused on personal fulfillment, more tech savvy, and more mobile.
Silos Probably Won’t Work Well When 50% of the Workforce is Contingent
Thinking of the HR Technology landscape currently in the market, this trend has the possibility of shaking things up a great deal. Possibly the only HR Tech segment truly prepared for handling the shift is Payroll.
Today, do you manage your contract staff that is critical to business performance in the same HR Systems you are managing your FTEs when it comes to Talent Management? I don’t think so. Think about the current lightning rod of “employee engagement”. How do you measure engagement of a project team, or division, that is 50% contingent throughout the staff and management ranks? How do you address an engagement problem with a 50% outsourced workforce? What about performance management, or rewards/incentives? How do you reward performance based on department goals, or incentivize your team to deliver results when 50% of that team isn’t actually your employee to begin with? And benefits. How do you feel about your FTEs not having as good a benefits package as the other 50% of your team that receives their benefits via the buying power of a large global staffing firm? What about Recruiting? Are you looking at both contingent staff and FTE hires in the same view today? What about your hiring process? Are you prepared as the market shifts? I could go on.
Let me be clear. I’m not saying that by 2020 all of the existing tech systems and processes managed by them will need to be thrown out with the bath water. I AM SAYING, that the HR Technology vendors that start to address this issue will begin to usher Employers into the next age of the workforce in ways no one is delivering today, except for the staffing firms and they’re rapidly on their way to an $800 Billion market.