The latest Deloitte Global Human Capital Trends Report has uncovered a new reality: the alternative workforce is no longer “alternative”.
Once viewed merely as a side-gig to supplement a full-time job, freelancing is now an increasingly common career choice. Organizations are already tapping into this important talent-pool but many still lack a strategic approach: one that optimizes this workforce by introducing a standardized process and creating new connections between HR, IT, procurement and other business functions.
This article is part of our guide on the future workforce.
What is the “alternative workforce”?
The alternative workforce is a broad concept encompassing traditional contractors, entirely outsourced teams, freelancers who charge for their time, gig workers paid by the task and even crowdsourcing where workers compete to participate in a project and are often only paid if they are among the top.
Growth in this segment is a global phenomenon
Official figures confirm the rise of the alternative workforce across the world:
- The number of self-employed workers in the United States is projected to triple to 42 million people by 2020.
- Freelancers are the fastest-growing labor group in the European Union, with their number doubling between 2000 and 2014.
- Deloitte’s latest millennial study found that 64% of full-time workers want to make extra money through part-time alternative work.
Full-time employees are a shrinking talent pool
45% employers surveyed by Deloitte admitted to having trouble filling open positions — the largest percentage in the last decade.
Demographic factors have contributed to a shrinking full-time labor pool, such as the decline in birth rates in many countries. Modern lifestyle trends are also pushing more people out of full-time employment and into the alternative workforce: retirees returning to work, people caring for children or elderly parents, and professionals going back to school.
The alternative workforce fulfills a wide range of needs
In the latest Global Human Capital Trends study, 33% of respondents reported extensively using alternative arrangements for IT, 25% for operations, 15% for marketing, and 15% for R&D. Other areas where outsourcing is a common practice are product design, development and support.
As to where to source these workers, the vast majority are still found through staffing firms but online marketplaces such as Upwork, Fiverr, TopTal, and Freelancer.com are growing suppliers of on-demand workers. Specialized platforms are also cropping in all sorts of niches, like Kaggle, which focuses on data science professionals and was recently acquired by Google. These talent networks now generate upwards of US$2 billion in outsourced activity and employ hundreds of millions of workers worldwide.
Organizations aren’t leveraging the alternative workforce to its full potential
Deloitte’s report suggests that most companies have embraced the alternative workforce but merely in a transactional way. While 41% consider it an important issue, only 28% believe they are ready to address it. Worse yet, only 8% said they had proper processes in place to manage and develop alternative work.
To leverage its full potential to enhance company performance (figure 3), companies need to switch from a tactical approach of filling slots to the strategic engagement of alternative work as a long-term solution.
The study cites German company Robert Bosch GmbH as a case study where an entire subsidiary was created to manage an on-demand workforce of hundreds of its former and retired employees. These “senior experts” are brought in to consult and work on projects at Bosch on an as-needed basis, in different functions, resulting in a 92% customer satisfaction rate.
A strategic approach to the alternative workforce
It’s a complex process. Even some of the companies with proper policies in place, there’s a lack of an organization-wide approach.
Companies need an approach that allows it to connect the right role with the right talent, regardless of how it’s sourced. And this can not be achieved without connecting the various business functions which are often involved in this process in a fragmented way, including procurement, IT, and HR.
Many HR leaders have already set the wheels in motion: more than 50% mentioned their organization had plans to address recruitment strategies for alternative workforce talent. Almost a third now have learning and development plans, while more than 20% have incentive pay for alternative workers.
Often, with new process implementations comes the need for new tools, and some organizations are already taking advantage of a growing offer of alternative workforce management tools, with some key acquisitions happening in the market. These tools are developed to connect all key stakeholders involved in managing several workforce segments and types.
Integrating alternative workforce with internal teams
Integrating alternative and traditional workers within the same project brings its own set of challenges, as their backgrounds and motivations may differ. Managers need to be prepared to lead a team with a diverse mix of people with respect to culture, inclusion and work assignments, making sure both sides are happy with the arrangements.
Companies that take these challenges seriously and adopt an on-demand talent platform have a better chance to access and effectively employ talented workers from all segments of the labor pool, promoting diversity of the workforce, accelerating time to market and boosting business growth.