The relationship between an enterprise and its workforce used to be pretty simple. An enterprise hired an employee and paid him or her a salary or hourly wage, provided benefits, including for retirement, and the employee stayed on until they were eligible to retire.
I started working when I was 16 years old as a part-time employee and continued to work for three other employers before graduating from University when I was 22. Since graduation, I have worked as a full-time employee for six employers (over 32 years). I am not unusual. A Bureau of Labor Statistics study of people born between 1957-1964 showed that they held 12.3 jobs between 18-52 years old (though half of those jobs were held between 18-24).
Today, this rarely happens. Fewer and fewer employers have pension plans, and the onus is on the worker to save for retirement. With the ease of available “side hustle” jobs (think Uber and Lyft), it’s not uncommon for people to become part of the extended workforce, either working as freelancers or taking project-based contract engagements. The entire nature of the relationship between employer and worker has changed.
Yet many things we take for granted about our experience at work have not changed. For example, we still have the notion of a 5-day, 40-hour work week that we use as a baseline for full-time employment and a marker for when overtime starts. Sixty-five years old is still retirement age, even as our life expectancy has increased from age 55 (at the time the Social Security Act was passed) to almost 80 today in the U.S.
As the nature of the employer-worker relationship continues to evolve, we need to think differently about all components of worker experience:
- How employers find and engage with workers
- How employers onboard, manage, and develop workers
- How employers compensate and reward workers
- How workers take time off from work with employers
- How employers offboard and then re-engage with workers
As the relationship between the employer and worker changes over time, we need to reimagine these components of work experience and truly broaden the talent lifecycle beyond direct, full-time employees to a growing segment of extended workforce.
Finding and Engaging with Workers
Today, managers have many ways to find and engage with workers to meet their talent needs. They can:
- Find an existing employee and move them to a new job
- Recruit a new employee and hire them for an open job
- Leverage employee referrals of people in their networks
- Leverage professional networks of their own or of peers
- Use a staffing firm to provide a contingent worker to fill a job temporarily
- Find a freelancer or gig worker in a marketplace to do various activities related to a job or project
As we discussed in Part One of this series, sourcing talent is a disjointed experience for managers. On the flip side, though, all these different types of relationships with an organization provide a worker with choices for how they want to manage their employment lifecycle in a way that supports their lifestyle. In a SHRM study, nearly 1 in 5 external workers prefer flexible working arrangements over full-time employment, and about one-third reported earning more money as an external worker. When asked what persuaded them to become an external worker, respondents cited three top reasons:
Source: SHRM and SAP SuccessFactors April 2019 n=1,178
If that is the case, why is the traditional employee relationship still the primary focus of most HR strategies, programs, and systems? Yes, there remain many workers who value being a full-time employee eligible for a company-provided benefit plan and regular salary. However, in the next decade, the world of work will continue to evolve. People entering the workforce will have different opportunities and think differently about their careers. Our talent strategies, programs, and systems need to evolve to keep up.
Onboarding the Workforce
Today, onboarding is predominantly focused on employees. Employers want to ensure employees have, at a minimum, filled out the proper forms and been provided what they need to be productive on Day 1. But most employers do a poor job overall onboarding employees. A recent Gallup study indicates only 12% of employees strongly agree their organization does a great job of onboarding new hires. This is why we see so many clients interested in reimagining employee processes like onboarding.
If it wasn’t bleak enough for new hires to our internal workforce, consider the fate of external workers. An acquaintance who sells HCM software recently shared a story, a conversation he overheard while working at a table in the corner of his local restaurant. Two business owners were eating and visiting nearby. One: "I'm all for hiring a bunch of contractors who can work 12 hours a day and fill in the gaps globally. I don't need to worry about their happiness like a regular employee."
As we have noted, our workforce is more than just our traditional employees, and that will only increase as businesses recognize and value the flexibility and availability of contractors and gig workers in an increasingly tight labor market. But as the contingent workforce becomes an increasingly dominant workforce, should we not think about how we onboard non-employee workers and the type of experience we create for them? Isn’t time to productivity and overall experience important for all new workers? An independent contractor or contingent worker may work for an employer temporarily by definition.
Still, they have the same needs in terms of provisioning, security access, orientation to the company and job, and, in some cases, even training that a full-time employee might have. And don’t forget: for some employers, temp-to-hire employees are a vital source of future full-time employees.
Likewise, consultants may only be engaged in specific projects. Even then, they need support from corporate facilities (security badges) and IT (system access), and they benefit equally from an understanding of the company’s history, mission and vision, core values, and direction – many things that would be covered in employee orientation for direct hires. Without it, how can you ensure consulting partners perform work that is reflective of what you are trying to achieve as an organization? This is a real challenge for clients with whom I have worked as a consultant, and I can personally attest it has impacted my own productivity working in that organization.
Instead of thinking of onboarding as a singular and linear process focused on employees, during the next decade, there will be onboarding for all workers, tailored to the needs of how that worker is engaged, and for the type of work that they will be performing.
Managing, Developing, Compensating & Rewarding Workers
In the traditional employer-worker relationship, training and development have always been a tradeoff between ensuring that employees had the skills and competencies for their current job (and maybe future roles) and the cost to provide. Training and development was considered an investment, one that needed to show a defined return: how prepared is the workforce and how well is it performing? Performance management, compensation management, and learning management solutions evolved to do that. We could assess skills and competencies, review and rate performance, identify additional training and development needed, and compensate the employee appropriately.
All of that has started to change.
- Performance ratings have started to give way to anytime feedback and coaching
- Formal, rigid competency models are moving toward more flexible skills tagging
- Training has moved away from formal curricula for specific career ladders to more self-directed models based on interests and recommendations
- Compensation is based less on performance ratings and more on contribution and potential
These are all welcome changes from an employee and manager perspective. These changes also provide an opportunity to think differently about the rest of the workforce. Why can you not provide feedback and coaching to freelancers? Why should you not keep track of the skills of consultants who have worked for you in case you want to re-engage them in future projects? Why shouldn’t contractors have an opportunity to learn new things from their clients to improve their performance on the job they have been hired to do?
Unfortunately, even organizations that provide some training to contingent workers do not do it well. 24% of employers say training for contingent workers is ineffective, according to new research from City & Guilds Group. Besides, why shouldn’t a manager be able to offer a bonus or a non-monetary reward (something that is becoming increasingly common) to a freelancer, consultant, or contractor for a job well done? Some may say the challenges of co-employment present a good reason why not.
Challenges and Opportunities of Co-Employment
In the U.S., we call it co-employment. Co-employment is defined as “a relationship between two or more employers in which each has actual or potential legal rights and duties concerning the same employee.” In a single employer-employee relationship, the employer bears certain responsibilities to employees, including paying wages, overtime pay, and taxes; providing worker’s compensation, benefits, and pension plans; and ensuring civil rights compliance, appropriate labor/management relations, and a safe work site. In a co-employment situation, these responsibilities may be shared.
Co-employment issues arise when the client company extends its control beyond the staffing firm/client division of tasks and takes on the role of the primary employer.
What I described above in terms of performance, learning, and compensation could contribute to a staffing or consulting firm client - or a firm who employs independent contractors - being at risk for becoming the primary employer in the co-employment relationship. This co-employment risk has always been viewed as a bad thing.
If a contractor is re-classified as an employee, they become eligible for the same compensation (overtime, stock options, bonuses, etc.) and benefits. This obviously increases the costs associated with using contractors, especially since it is applied retroactively, not just as a going-forward cost.
Some companies have responded to co-employment fears in overly conservative ways that won’t actually reduce their risk. These include different color badges, keeping contingent workers away from team celebrations, and siloing each process under different rules and teams. Using the Darden test can help teams understand real limitations and how to best operationalize experience for maximum productivity and everyone’s overall experience.
Some risks may resolve themselves. If universal health care is adopted in the U.S., will the cost of benefits present the same issue? Maybe employers will be able to better plan for reclassifications; if you know the 20 factors designating the tax status of employee versus independent contractor, could you not proactively track these factors for your own worker population and take appropriate actions? Many companies already track length of contract and hours worked in a 52 week period; why not other factors?
Employment laws are sure to change; they’ll need to as a reflection and response to a workforce with more options than full-time employment. For the employer, costs and risks of co-employment will always have to be weighed against the benefits of improving the performance and engagement of the full workforce. One thing is certain: we should not take for granted that the way it has always been is the way it will always be.
Taking Time Off
Choosing to take time off whenever works best and not being limited to a set number of days or weeks is one of the primary benefits of working independently for an employer. As long as it does not interfere with your contractual obligations to your clients, you can choose when you work and when you take time off.
We saw some employers move to unlimited PTO as a way to provide employees that same kind of flexibility and personal choice. The results have been mixed. Some employees found this greater sense of freedom and flexibility, as long as it came with the full support of their managers and supervisors, made an enormous difference in feeling a sense of work-life balance. Others found when managers and supervisors do not fully support the change, it becomes an illusory benefit.
This is one of the main reasons some people will choose to leave full-time employment. They want to have more flexibility and control over their own time, and being an independent contractor, consultant, or freelance/gig worker provides that.
Offboarding and Continued Reengagement
When a traditional employee leaves an organization, several obligations need to happen. The employee needs to return company property, be offered COBRA (in the U.S.), and receive their final paycheck. Some organizations conduct exit interviews with people who leave voluntarily, and they may have alumni programs for continued engagement.
Most organizations, sadly, do not have a good strategy to continue to engage with former employees. According to a Workplace Trends study, 80 percent of employees say former employers do not have a strategy in place to encourage them to return, with 64 percent saying there appears to be no strategy for maintaining a relationship.
The situation is even more desolate for non-employees at the end of a contract. There is usually no equivalent of an exit interview or alumni program. Worse, there is no “institutional memory” of the performance or skills of non-employees, so it is difficult to re-engage with non-employees for future needs. This tribal knowledge of competencies and work performed sits in the heads of managers and supervisors or inside the staffing firm, if it exists at all.
If you are committed to getting the most out of your full workforce, consider tracking more data about every type of worker, understanding their experience working with your organization, and determining the best way to engage with them on an ongoing basis.
Disaggregating the Talent Lifecycle
We are well along in the future of work, with a better understanding of how the HR/people function needs to evolve to design more modern, consumer-like experiences for our people; to drive more meaningful engagement for talent who expects more; to connect and power a diverse and evolving workforce; and to harness change as a growth catalyst for businesses struggling to transform, compete and thrive in the new decade.
Economically and perhaps thanks in part to the myriad of work options available, the workforce appears to be at full employment. Companies will have a harder time recruiting than ever before, putting more strategic importance on internal mobility, skills inventory, and additional sources of available talent, like the extended workforce you already have working for you.
When it comes to the extended workforce, the opportunities are clear and compelling: we need to think about the full workforce in a new and different way, as a proprietary talent marketplace to which you have special access. Powering external workers in the same way we power internal workers can help bridge talent shortages and skills gaps, making businesses more agile and flexible.
This requires extending the same employee experiences intended to help people work more easily; driving the same engagement that produces better work; assessing, developing, and deploying every worker’s skills, not just internal employees; and facilitating access to teams and resources to make work more fluid.
It means looking beyond traditional employees and broadening the talent lifecycle to extend value to all talent, from onboarding to offboarding to re-engagement. When we design worker experience and consider the ways in which we organize teams, we need to build with a full lens. Nothing should be off the table when we consider all possible ways to get work done and to make the workforce more successful, and that includes your extended, external workforce.
There has never been a greater opportunity to creatively and intentionally harness all available pools of talent to meet the demands of a new decade. There is a massive competitive advantage in doing so. It just requires organizations to start to think about relationships with every worker throughout their work life, including what it means to onboard, manage, develop, compensate and reward, and offboard for all the different types of relationships that may exist over that work life.
About the Author
Jim Holincheck has more than 25 years of experience in the HCM technology industry and is the Vice President of Advisory Services at Leapgen. Before joining Leapgen, Jim gained experience as a vendor (Workday - Services Strategy and Product Management), an industry analyst (Gartner and Forrester/Giga), and a consultant (Accenture).
Jim has spent his entire career working with customers to strategize, select, implement, support, and optimize their usage of enterprise applications. Helping customers successfully get the most out of their enterprise software investments is something Jim is very passionate about. He launched his career in Chicago at Andersen Consulting (now Accenture) in its Software Intelligence group, where he worked on the full lifecycle of Financial and HCM application projects, including application strategy, requirements definition, software selection, implementation, and production support.
After ten years at Andersen Consulting, Jim moved to Giga Information Group (acquired by Forrester),where he was an industry analyst covering ERP applications. In 2000, he joined a startup, IQ4hire, to create a consulting marketplace around ERP and CRM applications. In 2002, Jim joined Gartner as an analyst covering the HCM market, where he also managed the research agenda for Financials, HCM, and Procurement applications. Jim graduated from Washington University with a BS in Electrical Engineering and an MBA in 1988.
Leapgen is a global digital transformation company shaping the future of work. Highly respected as a visionary partner to organizations looking to design and deliver a digital workforce experience that will produce valued outcomes to the business, Leapgen helps enterprise leaders rethink how to better design and deliver workforce services and architect HR technology solutions that meet the expectations of workers and the needs of the business.