Article

You may not be a disrupter, but you might find opportunities in the gig economy

July 24, 2017
| United States

By Ravin Jesuthasan, CFA

Freelance, outsourcing and now…

In pre-disrupter days, we tended to call work that didn’t involve full-time workers and full-time salaries freelance. When an entire process was involved, we tended to call it outsourcing. The advantages were clear: flexibility and cost savings. The advantages, of course, did not come without risks, which included lack of commitment, loyalty and familiarity with the company, its products and its culture.

Today, whether we call it freelance, outsourcing, contingent, independent work or the gig economy, we can add to the advantages: access to a different type of work force; to talent segments who see career, career path and work differently; and access to skills we may not otherwise be able to attract if we don’t think beyond employment. We can add to the risks the potential for increased enforcement activity by governmental bodies, including the Department of Labor (DOL) under the Federal Labor Standards Act (FLSA). Another heightened risk is getting lost in the maze of choices and options in a more complex, politically charged talent marketplace.

Deconstructing work

But in that complexity may lie the greatest opportunity. Companies enjoying the best results often start with a process we call deconstructing work — looking at job roles, workloads and processes with the goal of pulling apart the jobs and revealing what and how work is done so that new choices and solutions might be applied. Jobs typically grow more complicated over time, evolving to include many different tasks and responsibilities. Applying different resources to those tasks and responsibilities can have a direct impact on the bottom line. One of the reasons it works well is that a fresh look at work sets the stage for a fresh look at an evolving labor market.

Several factors are driving these changes.

  • Scarcity of skills: Much of the work needed in the second decade of the 21st century is digital, and employers are increasingly facing a scarcity of resources.
  • Commoditization of skills: As artificial intelligence (AI) accelerates automation, work continues to be changed by the forces that have changed our world since the first industrial revolution. Instead of hiring people to get things done, employers can buy machines, or in our case, software that subsumes our work. But remember, we are not necessarily talking about entire jobs. In many cases we are talking about parts of jobs. In the legal and accounting spheres, for example machines can increasingly handle routine, analytical aspects of the work, leaving lawyers and accountants to do the advisory and consulting work that still needs human empathy and intellect.
  • Changing attitudes toward work: Our surveys of millennials tell us that the workers entering the workforce in greatest number today tend to have different ideas from their predecessors about career and employment. They tend to have different views of the role that employers play in society (think corporate social responsibility (CSR)). What this means is that in many talent marketplaces today, the workers are choosing you rather than you choosing them.

Studies bear out the value of deconstructing work. When companies outsource work in the traditional sense of taking existing jobs and moving them to a lower cost location, those efforts usually save 25-30% in costs. When companies deconstruct work and find the most appropriate resource for the tasks they need done rather than the pre-existing job descriptions, they achieve savings of between 60-80%, depending on the type of work.

The basic mode of employment that became standard in the 19th century — where work equated to discreet jobs and people were hired to do those jobs — is being challenged. The demand for labor is changing and so is the supply. The talent marketplace that is emerging will offer the efficiencies that marketplaces tend to offer and cast a bright and unflattering light on professions where there is a surplus versus a shortage. But companies must be ready to understand and navigate that marketplace.

Strategies for a new world of work

What can companies do to enjoy the advantages and avoid the risks?

  • Consider deconstructing work in your organizations. Pulling apart the jobs you are struggling to fill or the ones where the costs exceed the value will open the door to other resources: AI, talent platforms, alliance partners, contingent workers, etc. In many companies, an approach beyond traditional employment may only apply to 15-30% of the work. But the benefits, from cost savings, improved speed to capability and reduced risks, will reward the effort of deconstructing work with disproportionate value.
  • Know the laws, and be sure your gig economy roles will follow those laws. Labor regulations vary greatly state by state. Federal DOL laws apply to all. Be ready to work with professional advisors if necessary but start by using common sense. If you treat employees as full-time workers in all ways but official status, you might well raise eyebrows. If you offer pension and health care benefits to freelancers — again, you run the risk that a government eye might see a full-time person in a traditional job, subject to relevant legislation. Talent platforms like Upwork will help you navigate these issues while ensuring your access to the talent you need.
  • Accept the challenge of engagement. This is one of the great contradictions of the gig economy. Studies show that engaged workers perform better by several measures — including unlikely areas, such as the reduced propensity for clicking on ill-advised links and allowing cyber intrusions. So engagement matters, even as the model of life-long employment and deep company loyalty seems to be a thing of the past. Realize that your contingent talent is choosing you every day, so…
  • Consider benefit options for your non-full-time people:
    • Voluntary benefits: These are often very popular among full-timers who will enroll in various voluntary programs at the time of their annual health plan enrollment. Companies can generally offer these to contingent employees without repercussions.
    • Connecting to health benefits: Employers are partnering with companies that help contingent workers use exchanges to find appropriate health care coverage.
    • Communal workplace spaces: Opening up the office gym and cafeteria to contingent and part-time workers is an easy way to give a worker a sense of belonging and is the kind of perk that engenders loyalty.
    • Company events: Some cynics will be glad to skip the company picnic and spare themselves a workplace obligation. A year later, if they’ve been returning to the same worksite for various projects, some of these workers might find themselves eager to lend their skills to the softball team that now includes some of their friends. Engagement is the goal on whatever level it works.
  • Think beyond the binary: A crucial message here is for employers to avoid binary thinking when it comes to work. It’s no longer a question of long-term or short-term employment, full-time employees on the inside and others on the outside. Your employee value proposition — an articulated statement about why people would want to work for you — can and increasingly must appeal to the Uber generation and evolve to being a work value proposition that appeals to the full spectrum of work relationships, beyond just employees. It’s increasingly about choice — a key factor in the millennial work era — and a recognition of the changing nature of the workforce and of work itself.

Ravin was recently quoted in a National Public Radio story on the role of benefits for independent workers.