February 12, 2020

The Case for an External Workforce Strategy

The mix of external vs. full-time talent will soon rise to nearly 50 percent globally. The external workforce isn’t just about “bandwidth.” It’s a source of deep expertise. Hidden in this workforce are brand ambassadors with crucial tribal knowledge. Yet the way external talent operations is managed continue to be tactical, reactive, and short sighted.

Last November, I resigned after working for my employer for 15 beautiful years. It had been a fabulous ride across continents, roles, industries, and memories to last me a lifetime. My relationship with my employer was my identity and my support system. I left because I’d reached the young adulthood of my career and wanted to leave home to explore what’s out there. I didn’t have another job. I was really, truly just going to explore. 

I explored, but in a few months I realized it might be a while before I found the perfect next thing. So I returned to my previous employer, this time as a contractor.

It was a very interesting role, helping implement a compelling new business strategy across a global audience. I was bringing so many facets of my resume to the table each day but more importantly tribal knowledge that one develops only by being part of the tribe that long. I was super grateful that I was re-included, had income, and now even interesting work. 

Just one thing secretly pinched me a tiny bit. My title went from Managing Director to Regular Contractor. I did a little research into what a Regular Contractor — RC — was, and what I found made me recalibrate everything I had ever thought about contract work:

  • RCs were a key part of the workforce, engaged thoughtfully for a finite amount of time to support a specific but important business need.
  • They were seasoned, deep experts in their field, precious assets to a services business … definitely not extra bandwidth to support a business spike.
  • Like me, they had been friends of the firm: alumni, clients, partners, past applicants, interns, referrals, silver medalists and returnships. The firm had managed this external talent network elegantly. I just hadn’t realized it.
  • Many of them chose to be RCs. Unlike my accidental journey, most of these professionals chose contract work. They thrive on contributing to multiple businesses, learning from diverse experiences, and owning their own schedules.

It was suddenly cool to be an RC, and part of the “external” workforce.  That workforce included deep expertise, hopes of flexibility, struggles with complex regulations, and the dream of leaving a legacy at more businesses than my generation could ever imagine.

Regular Contractors at Work

The External Workforce Is Getting Larger, by Choice

Eightfold is building a version of our product to help businesses attract and manage their external workforces. I’ve been speaking with every type of stakeholder there is in this ecosystem — workers, talent supply agencies, managed service providers (MSPs), vendor management systems (VMSs), payroll providers, contingent industry analysts, employment attorneys, and of-course enterprises that engage an external workforce. Below are my reflections from this discovery process:

In 2018 the external workforce was a little over 35 percent of the global workforce. Depending on which data source you embrace, this number will be 50 percent anytime between 2021–2023. The more interesting aspect is this growth is not driven by the economy. This wave is driven by personal choice. An increasing number of workers are choosing alternative work arrangements to learn from diverse experiences and own their flexibility needs. The growth is also not isolated to industrial workers or ride-share drivers. It is just as steep among highly skilled knowledge workers who are exercising the right to choose the projects they want to work on. 

That disrupts the myth that most people who work as contractors do so because they can’t find a full-time job. Perhaps that was true a decade back when the composition of this workforce was different, but not any more. 

Our lens towards the external workforce has a lot of catching up to do.

A Collection of Things, Carelessly Lumped Together

The external workforce has numerous names: contingent, contractor, gig worker, consultant, crowd, temp, flex, external, extended, supplemental, and more The list is long and the confusion is real. While the classification is quite clear in the minds of employment lawyers, the lines are blurred when it comes to hiring and managing this workforce. Traditionally, organizations have used an overly simplistic classification of 1) full-time employees and 2) all others, regardless of role or skill complexity. The all-others bucket is far from being homogenous. It ranges from skilled experts like data scientists or researchers to simpler-skilled workers like retail store employees or hospital support staff, all engaged and managed by very marginally differentiated processes, technology, policies, and regulation. 

The easiest analogy that comes to mind is a toolbox that includes everything from an industrial chain saw to a travel sewing kit. You need them all but they’re so different that perhaps they’re best in different toolboxes.

The Shift From Role Titles to Skills

The idea of contract work originated with more tactical jobs. For decades, the key considerations for these roles have been availability and affordability. External workforce programs have traditionally rolled up to procurement organizations that nurtured an ecosystem of talent suppliers and focused primarily on reducing time to fill and optimizing hiring costs. 

This modus operandi works just fine so long as a role title is universally amenable to just one interpretation. For example, if I say “server” or “stock room stacker,” you know what I’m talking about with 80–90 percent accuracy. But the composition of the external workforce has changed dramatically to include niche experts in almost every discipline. So now if I say “customer success manager” or “digital marketer,” you probably have a thousand questions about the role, skills, success criteria, experience, industry acumen, and so on. 

Procurement functions are partnering with their MSPs today to address this added complexity. They are having hiring managers write up job descriptions and recruiters diligently screen resumes to find the chosen one. But this screening process isn’t always able to truly validate the required list of skills and expertise. No one owns quality of hiring. No one’s accountable to minimize rehiring due to poor quality. No one’s keeping an eye on the overall skill graph of the enterprise and how it needs to evolve — which skill families need to be developed internally and which ones should be incubated externally.

More CHROs are partnering with CPOs to plan and manage the external workforce, but nearly not as many as I would have hoped. This won’t be optional much longer.

Contractors Brainstorming Skills

Reset, Reboot, and Start From Scratch 

The current external workforce hiring process works much like an assembly line. Requisition created, job description developed, supply agencies notified, resumes submitted, screening done, and hiring complete. The same cycle is repeated. Individual workers are forgotten when the job is complete. Re-engagement is often not even a consideration given co-employment regulations and the simplistic business processes that govern the function today. 

Instead of investing in the relationship, organizations hit the reset button once a job is complete. They’re wiping out a key part of their talent networks. They’re forgetting about an expert, an employment-brand ambassador, and potentially the holder of tribal knowledge they will spend months building in the future. 

Organizations should nurture their external talent network just the way they think about their potential employee networks, especially if they belong to a skill family that’s crucial to the company’s future. In addition to preserving this expertise within the talent network, the business case that can be delivered by re-engaging contingent workers (within the guardrails of co-employment regulations) is huge. It could mean at least a 40–60 percent drop in both hiring costs and time to fill.

Until organizations make the transition toward taking a holistic view of their total talent network — internal and external, this reset button will keep being pressed.

Co-employment: a Protective Regulation or a Bad Excuse?

Through the weeks of roundtables and conversations I’ve had on the topic of co-employment, I have taken away just one thing: there are a lot of shades of gray in there. The regulations were designed to protect the rights of the worker, and they continue to evolve to manage the changing conditions of work and worker engagement (with AB-5 the most current example). 

There’s one consistent theme I see: Co-employment has inadvertently increased the distance between employers and workers. I understand why, and I know it is viewed as necessary to protect both sides, but it now comes at the expense of simple and direct communication with the worker. 

The analogy that comes to mind is the game of “telephone” (sometimes called “whispers”) we all played as kids. Vital information about requirements and qualifications are going from hiring manager to procurement to MSP to talent supply agency to recruiter to worker and back. Imagine the potential loss in translation. An employer or worker has a hard time establishing a relationship. 

Back to RCs, which I started with, I can imagine a not-so-distant future where RCs will proactively manage their engagements across the top few brands in their category. An average employee changes 11 jobs by the time they are 50 today. My hypothesis is that number will be much higher for the future workforce with a larger proportion of RCs, and the number of RC boomerangs through repeat contracts will be significantly higher than full-time employment. All this will happen within the guardrails of the regulations. 

I’m not a lawyer, but I know there are shades of gray in the co-employment landscape where employers and workers can and should stay connected as part of each other’s networks. The direct, well-intentioned engagement will generate more intelligent referrals, more diversity of thought, and faster re-engagement when required.

Perhaps I have rose-colored glasses on. But I’m wondering why so much hype and intelligence is being applied to full-time employment (which is super encouraging) and yet the other 50 percent of the workforce isn’t even viewed as an asset to establish and evolve over time. The tools and practices already exist. It’s just a matter of shifting mindsets. 

For CHROs reading this, I’d love to hear about your external workforce strategies. Here’s a link for contacting us at Eightfold.