Season 3, Episode 17: Changing Dynamics of the Contingent Labor Market
Organizations have been increasing their use of contingent workers over the decades, but the pace of that change is accelerating. In the new normal of talent shortages, changing business models, and increased economic volatility, 73% of organizations expect to increase their use of contingent workers in the next 12-18 months. At the same time, only 23% have a plan for leveraging a contingent workforce strategy in place.
Join Lori Chowanec, Managing Director of Client Engagement at Talent Solutions TAPFIN, to learn what companies should be thinking about to build a strong contingent workforce strategy. Lori leads us through the contingent labor market dynamics, changing perceptions of contingent workers, and the opportunities that organizations can leverage due to the rise of flexible work among Gen Z workers.
Host: Dominika Gałusa
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Intro (00:01): The future of work and the future for workers is changing from new technologies and talent strategies to the management of tomorrow's workforce. Tap in to ManpowerGroup Talent Solutions’ 60 years of expertise and join us for the Transform Talent Podcast, your guide to talent market trends, new technologies, and winning talent solutions.
Dominika Galusa (00:31): Hello, and welcome to the 17th episode of the Transform Talent Podcast. I'm Dominika Galusa, and I will be hosting you today. And I'm particularly excited about today's episode because at the end of it, I will introduce you to your new co-host. So please tune in and let's get started.
Today we are going to focus on how the contingent labor market is changing and learn what companies should be thinking about to create a strong contingent strategy. We want to discuss how hiring more Gen Z workers through flexible work arrangements can help organizations improve diversity while helping them gain the valuable experience and skills they are looking for. And to discuss this, I have invited Lori Chowanec who is our Managing Director of Client Engagement at Talent Solutions TAPFIN. Welcome, Lori!
Lori Chowanec (01:25): Thank you, Dominika. It's truly nice to be here.
Dominika Galusa (01:27): Well, it's a pleasure to have you here. So first of all, I would like to look at the contingent labor market. We've seen that organizations have been increasing the usage of contingent workers over the decades, but the pace of that change is accelerating. So can you please give us an overview on how the contingent labor market and perception of contingent workers have changed?
Lori Chowanec (01:52): Of course, I'm happy to. I think in the past many organizations viewed contingent workers as purely supplemental to their core employee base really rather than a critical necessary component of their total workforce. Historically cost advantage, flexibility were primary drivers for organizations to use these workers. I think this is evident when we start to look at the numbers. According to Ardent Partners, in 2010, 20% of an organization's labor was considered contract, contingent, or non-employee, sourced primarily via traditional staffing suppliers. In 2020, Ardent Partners found that percentage more than doubled to 43%. And that number continues to increase. It's really demonstrating that the contingent workforce is a foundational element in the way that we get work done today.
If you look at before 2020, changing workforce demographics, digitization, and evolving customer expectations were already driving the modern workplace. And as we've seen with the pandemic, things have shifted and accelerated dramatically. Benefits such as access to talent, speed of deployment, and business continuity have become more important factors. What's happened in the pandemic is businesses have developed stronger relationships with key workers in their talent pools that could be internal or external talent pools, including freelancers, contractors as a means of aligning short-term needs with the best aligned talent available. And these workers are simply pulled from the contingent workforce.
In the new normal of talent shortages, changing business models and increased economic volatility, 73% of organizations expect to increase the leverage of this contingent workforce in the next 12 to 18 months. So what we have here is really two changing dynamics at play. They may have significant impact on perceptions and usage of contingent workers, according to the Everest Group. The first is the need to quickly improve Diversity, Equity, and Inclusion in the workplace. The second, the need for more flexible and scalable talent models. So let's go back to the first. One of the major demographics to leave the workforce globally to the tune of 13 million, to be exact, are women who tend to shoulder a larger share of domestic work and childcare responsibilities.
In addition to women, ethnic minorities were severely affected by pandemic induced job losses. So as the economy continues to recover, it's really critical for organizations to attract, hire, and retain workers from diverse group. So now more than ever before, we are seeing employees and customers expecting organizations to be responsible members of a larger community. In research produced by Everest in 2021, they found that 92% of organizations believe that a diverse workforce is more beneficial while 95% want to improve their workforce diversity over the next 12 to 18 months. We've certainly seen this across our client base.
As we look about to the second dynamic, more flexible and scalable talent models, what happened during the pandemic is it's really altered many industries’ business models as we continue to shift from uncertainty driven by the pandemic to now economic recovery. When we see that, the traditional talent model limitations become more prominent and glaring. There exist a push toward a more agile culture and without scalable talent models, agility simply can't be met. So what we see here is really definitely a shift in thinking, utilizing talent models that select the best talent for each role, regardless of the worker category.
Dominika Galusa (05:26): Lori, the paper you mentioned also highlighted that despite the growing intention to use contingent labor, only 23% of organizations have a contingent workforce strategy in place. What do you see as the biggest barriers to creating those strategies?
Lori Chowanec (05:43): Great question. So what I'm seeing that is very evident in organizations are silos between HR and procurement, which really leads to a void in the development of the strategy, let alone program ownership. So in the past, the contingent workforce program was typically housed within the procurement function. You know, it's really seen, was seen as a cost savings grab. This has changed dramatically over the last 10 years as contingent workers have become an integral part of the firm's overall talent strategy. As such, we've seen an increase in cross-functional ownership between the two disciplines.
In fact, when surveyed by Everest Group, 73% of HR leaders expect an increase in their contingent workforce management responsibilities in the next 12 to 18 months. That's a very glaring barrier that we see in terms of trying to push toward creating a workforce strategy. I think other barriers I've seen is really a lack of contingent labor expertise in house. So without contingent labor industry knowledge firms are left asking like, ‘where do we begin’? I think another would be simply a lack of understanding of the work and skills needed to be done now and in the future. And this will continue to happen without the focus of HR and business leaders understanding where they're more moving. And at the pace that they're moving, this will continue to take place.
Dominika Galusa (07:02): So having in mind to those barriers and the fact that only a few organizations have a contingent workforce of strategy in place, but also the growing intention to use contingent labor in the nearest future, could you please share how organizations might action the planning and creation of a strong contingent strategy?
Lori Chowanec (07:23): So a robust contingent workforce strategy first and foremost should identify the program's cross-functional ownership or sponsorship, really sets the program up for success with the right champions and speaks to one of the major barriers I've seen. In addition, the strategy needs to outline the objective to the program such as the roles and responsibilities, a governance model, risks, performance metrics. And as well, all need to be aligned with the organization's workforce and business strategy. They're really all critical components. In a survey conducted in 2021 by the Everest Group, 33% of respondents indicated that they were planning to formulate a strategy in the next 6 to 12 months. That really was step one in a four step playbook designed by a ManpowerGroup in collaboration with Everest Group to optimize the use of contingent workers.
Now the next step involves identifying roles suitable for contingent workers. Hiring managers and HR leaders can determine optimal roles using two simple criteria. One, think about the work item expect of frequency. And two, what is the role of strategic importance in the organization? So research has indicated that contingent workers are best suited for roles that have less frequent point in time tasks and low strategic importance. So examples might include project-based work, technical expertise, other highly specialized skills needed for short-term gain, gaps in skill sets within organizations that don't have the luxury of time to reskill their workforce.
Let's look at step three. It involves understanding the challenges and leveraging a contingent workforce for your organization. Having visibility to challenges allows leaders to establish mitigation strategies to address upfront. I've already spoken about the barrier or the challenge of not having appropriate ownership or expertise to manage the contingent workforce. And two other critical categories are challenges related to contingent talent acquisition and overall employee engagement and organizational culture. The last step of this four step approach centers around support structures needed for successful execution of your contingent workforce strategy. Changes to internal policies and organizational cultures and gathering external help or expertise.
Organizations should really focus on tools and technologies used to attract, engage, and hire permanent talent and leverage those to enable the firm to communicate a strong value prop to contingent talent as well. Leverage your brand. Increasing competition for top contingent talent is intensifying and your employer brand could give your firm the edge. Another area to look at is the use of alternative sourcing channels such as freelancers on marketplaces, independent contractors, statement of work professionals in order to optimize talent acquisition. Another means to tap into is market data and the vast digital technology ecosystem. Finally, I would say engage external experts to help you navigate and ensure success. Find providers with global market presence, access to talent data, the latest innovative of technology and solutions to help leverage the power of your contingent workforce.
Dominika Galusa (10:43): Lori, I would like to focus now on Gen Z. Among Gen Z, we see the rise of flexible work arrangements. Gen Z will represent a major force in business and attracting their talent is both a priority and a challenge. So we see that Gen Z is using contingent work as a way to grow skillsets and is choosing this type of work arrangements to gain experiences and exposure to organizations. So how remote work is becoming an enabler for contingent work and how it's making it more attractive to younger workers?
Lori Chowanec (11:17): So Dominika, I wanna start off by a stat that I recently found. A survey by FlexJobs, that was released last September, found 44% of employees know at least one person who has quit or is planning to quit because their employers are requiring them to return to the office. So one might ask, ‘how can we capitalize on another business's attrition challenges?’ And this really is, goes right in line with some of the younger workforce, that of Gen Z. So remote work has given workers the flexibility to continue to provide value to their employers while allowing them to care for their families. We are all well aware when the pandemic hit, we were living, working, schooling under one roof.
And I think the uncertainties of the pandemic and the various COVID-19 surges have perpetuated this need for flexibility. Workers really are less apt to go back into office buildings for not only health reasons, but many would say that a loss of flexibility is a main detractor. So industries that are requiring onsite work have lost talent. Many of those individuals are now choosing contingent work in different industries which offer flexibility of remote work as the standard. So if we think about a talent acquisition strategy without geographic constraints, it becomes extremely attractive to not only the organization but really aligns with the desires of candidates today, especially Gen Z.
What we've found is the desire of candidates has changed over the last decade. This is especially true of the younger worker, Gen Z. One of the top three desires of Gen Z workers according to Gallup is that employers care about their wellbeing. Besides flexibility and remote work, which has provides them with greater work balance, Gen Z has been attracted to contingent work to upskill, to your point Dominika, and really getting exposure to other organizations. They've used the last 20 months of the pandemic to acquire new skills and change career paths often as good workers. They desire flexibility, shorter term gigs or projects, and remote opportunities.
Dominika Galusa (13:15): And I think it would be interesting to talk about those opportunities you mentioned. That organizations, especially those in developed economies who have an aging population, can leverage by hiring more Gen Z workers for flexible work arrangements. And what comes to mind is workforce diversity. So could you please explain how hiring Gen Z workers can help organizations improve diversity?
Lori Chowanec (13:41): We all know that the Baby Boomers one is certainly retired. The Baby Boomers two will be retiring very, very soon, and Gen X is following them. We really need to think about additional desires that the Gen Z worker has and how we can bring them into an aging population and bring more diversity into our organization. So we talked about the first desire of Gen Z workers that they want to work for organizations that care about their wellbeing. Another desire that's in their top three is they're attracted to organizations that are diverse and inclusive of all people. So if you think about it, it's really a win-win for both parties. Bringing in younger workers from across the globe to organizations that share a similar value in diversity, equity, inclusion is a win for the candidate contingent worker as well as the organization.
Workplace Diversity, Equity, and Inclusion is a true differentiator in the worker value prop. So attracting a younger, more diverse group of workers will improve workforce diversity for businesses that are currently comprised of the aging workforce, as I mentioned, Boomers and Gen X. If you're hiring Gen Z workers from diverse markets across the globe for remote contingent roles, that positively impacts Diversity, Equity, and Inclusion initiatives. Again, it is a win-win.
Dominika Galusa (14:57): Last question to you, Lori, and one of my favorites on this podcast. We always like to ask our guests about the future. Fast forward to 2052, what do you think contingent workforce management is going to be about?
Lori Chowanec (15:13): Dominika, that is just so scary. I mean, 30 years from now in 2052, it's hard to believe. I think, you know what? Contingent workers as we know them today, probably won't exist. Contingent workforce management is really a solution to address present challenges. So I think before you tackle the question of what it will look like in 30 years, you have to pause and think about how the world will change. And I don't think neither you nor I have a crystal ball. But if we could put them into sort of buckets as to what's happened over the last 20 years or so, we know that the challenges have been changing workforces, right? Millennials in 2052 will be retiring. So no longer will we be talking about Boomers or Generation X. It's actually millennials who will be retiring, Gen Z will make up most of the workforce, and then we'll have our further generations follow.
I think we also have to look at the impact of digitization and automation. Skill sets will change, you know, as remote work and automation accelerates. And we have certainly seen the rapid rate of change over the last five years. Dominika, as I think about this, you know, I've been in the industry for over 20 years and all I can say is my excitement remains for what's to come. So Dominika, I'd like to leave with one last note and I encourage organizations and our listeners to develop a contingent workforce strategy, engage experts to guide you, and be open to the world of contingent workers.
Dominika Galusa (16:38): Thank you so much for joining us today on our 17th episode of the Transform Talent Podcast. I hope that you enjoyed this episode as much as we did and that it'll help you think about contingent workforce in a new way. And before I let you go, as I promised, I would like to introduce you to your new co-host, April Clark, who will be joining us on this fantastic journey. Welcome, April!
April Clark (17:04): Hello, and thanks for that warm welcome Dominika. You know, I'm really excited to join the team and I look forward to bringing more of these great conversations to our listeners.
Dominika Galusa (17:13): I'm excited too! And to all our listeners, don't forget to subscribe and leave us a review in your favorite podcast listening up. See you at the next episode. Bye-bye!
Outro (17:27): The Transform Talent Podcast, because we know the right talent transforms organization and helps your business flourish. Talent solutions, business and talent aligned.