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Since December 2007, more than six million jobs have been cut in the U.S.1 When the recession hit hard in October 2008, many feared the impact could be far reaching and long lasting. While there is still a high degree of uncertainty in the markets, we are fortunate to already see the signs of recovery. But how could we move beyond an economic crisis of global proportions, recovering more quickly today compared to past recessions? In many respects, the economy’s overall shift to a more flexible workforce has allowed companies to efficiently scale back their operations, recuperate and position themselves for a rebound.
While the continued uncertainty about the future plays a role in how companies utilize contingent labor today, the reliance on a flexible workforce through contingent labor is likely not a flash in the pan. Over the last 20 years, U.S. companies have migrated away from a rigid labor model as temporary and contract staffing employment grew more than 200 percent between 1987 and 2007.1
All signs suggest this trend will continue. Even when economic indicators turn positive and demand picks up, many companies will opt to utilize temporary workers as they question whether they can or should increase full-time employee counts in advance of recovering profits. IT employment will increase 22 percent from 2010-2020. All other occupations are expected to grow 14.3 percent.1
The reliance on a flexible workforce through contingent labor is likely not a flash in the pan.
Clearly, companies realize that a contingent workforce offers opportunities for competitive advantage. Those businesses that take a strategic approach and proactively develop total talent management plans can enhance profitability, operating efficiency and flexibility without sacrificing quality.
Compared with permanent staff, contract labor offers businesses some explicit advantages:
So, what’s the catch?
Historically, talent managers have avoided utilizing contingent labor for fear that contractors are lower quality employees who cannot get a full-time job. These contractors could, thereby, produce lower quality output and potentially erode an employer’s brand.
While managers are right to be cautious (especially when considering contingent labor for highly visible, large-dollar initiatives like the development of a core IT application or the enterprise-wide implementation of a new system) several industry trends are leading the recent paradigm shift in favor of contingent labor.
Businesses that take a strategic approach and proactively develop total talent management plans can enhance profitability, operating efficiency and flexibility without sacrificing quality.
Above money or a sense of identity and belonging, Generation Y values personal freedom and a strong work/life balance. They are attracted to the “free agent” opportunities a contingent position provides. As a result, the modern contingent labor pool does not only consist of workers who have no other choice than to contract. Rather, it is increasingly comprised of highly educated and skilled, independent-minded individuals who contract by choice.
Generation Y’s Top Three Priorities2:
As an employer of Gen-Y, if you hope to develop and retain the top talent, consider their priorities. Realize that work won’t be at the top of the list. They value a true work-life balance. And they want an opportunity to give back to the community through your company.
It is still possible to open a staffing operation with just a phone and a phone book. However, a new entrant with this business model would certainly have a tough time competing, as the staffing landscape has greatly matured over the last two decades. Today, there are staffing companies, and there are staffing companies worth working with. The difference between good and great often depends on a firm’s candidate network and systematic process to ensure customers receive the absolute best match of talent relative to their needs.
Businesses should look for several success factors to differentiate between good and great staffing companies:
Employers realize that quality outcomes are actually at risk when full-time employees are overworked to the point of burnout. While it is possible to require “more with less” and get results in times of crises or necessity, productivity increases under these terms can only last so long. Contingent labor allows employers to uphold quality standards, along with the productivity and morale of their full-time staff.
Quite simply, employers are getting smarter about how they manage their talent. The belief that happy, high-performance employees help to achieve satisfied, loyal customers and greater revenues is not new. But how to identify, attract, manage, develop and retain happy employees is a topic that has gained momentum in recent years. Employers have started to think beyond traditional models to truly optimize their employee population. The use of contingent labor as a part of a larger talent management philosophy has proven itself profitable. For example, Nandu Nayar of Lehigh University and G. Lee Willinger of the University of Oklahoma demonstrated a strong link between improved financial performance and a contingent workforce. In a survey of staffing buyers by Staffing Industry Analysts, buyers reported that the median savings realized by using contingent labor was 13 percent3.
The difference between good and great often depends on a firm’s candidate network and systematic process to ensure customers receive the absolute best match of talent relative to their needs.
Identify Employment Models by Job Function
Forward-looking companies do not let a strategy happen to them. Rather, they set goals and proactively plan how to “operationalize” their strategy. Talent management is no different. To be most effective, organizations should develop a total talent management plan by inspecting each job function and determining what type of employment – full-time, part-time, contingent or outsourced – makes the most sense relative to strategic priorities.
Involve All Impacted Stakeholders
An organization’s talent management plan impacts multiple stakeholders. Hence, Human Resources (HR), Procurement, Vendor Management and hiring managers should work together to develop and establish a comprehensive view of success, representing their respective business objectives. Ultimately, plans that centralize performance visibility but are executed locally do a better job at encouraging true partnerships between talent suppliers and hiring managers relying on talent to accomplish strategic objectives.
Upon identifying how to resource each job role and function, organizations should also consider how to optimize their vendor population. It takes time, resources and money to engage a large supplier list. Consequently, organizations can realize economies of scale in terms of cost, accountability and institutional knowledge if they utilize a consolidated list of suppliers able to provide the most value.
Uncertain times require flexibility. Organizations should think creatively about how work gets done. Companies that proactively assemble and institutionalize total talent management plans, inclusive of contingent workers, can help position their businesses for continued success.