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Managing the Contingent Workforce: From Temps to Free Agents By David Creelman who can be contacted at creelmanresearch@canada.com ---------------------------------------------------------------------- 1. Introduction Americans has long used the term "temps" to refer to workers who, unlike "permanent employees", were only working at a firm temporarily-such as clerical workers hired for a few weeks to handle a seasonal rush. Now HR talks about "the contingent workforce". "Contingent" is just a fancy word for "temp", but the change in terminology reflects something serious, temps didn't matter too much, the contingent workforce does. In Canada, two of the pioneers of the temp industry were Bill Pollock and Jim Shore, founders of Drake International. In 1949 they were in the business equipment business and noticed that firms were staffed to meet peaks in demand. This seemed wasteful. They saw the opportunity to provide temp workers so that firms could adjust the workforce to meet changing production needs. It was a compelling argument and demand for temporary workers grew quickly. Demand was readily filled with a supply of women eager to enter the workforce. Temps became a useful, but not particularly important, part of most organizations. Things changed in America in the 1980s when downsizing increased the demand for temps. In many cases managers faced restrictions on headcounts of permanent staff and hiring temps was the only way to get the work done. Importantly it was not just low-level jobs being filled by temp workers but contract programmers, bookkeepers, project managers and other important jobs. The widespread use of contractors in important jobs, especially IT, led HR to start using the term "contingent workforce." This was all part to the broad change of employment relations described in Dr. Peter Cappelli's excellent The New Deal at Work. Companies no longer had loyalty to their employees and so the scope for using temps increased. The mood of the new era was captured in Dan Pink's Free Agent Nation. Pink claimed roughly one-third of the workforce were "free agents" (his word for "temps" and "contractors") and that they liked it that way. While Pink's estimates are probably on the high side the fact that Pink's book was a bestseller shows he had captured the zeitgeist. 2. Managing the Contingent Workforce The contingent workforce captured the attention of corporate America when firms noticed just how much they were spending on that category. Elaine Taylor of iLogos Research estimates that Fortune 500 companies spend hundreds of millions on the contingent workforce. And while firms knew they were spending a lot they didn't know how much or what for. The contingent workforce was the largest area of what procurement managers (i.e. purchasing managers) call an "uncontrolled spend". Temps were-and still are-hired by individual managers and paid out of that manager's budget. No one knew what the firm was spending in total, whether they were getting good value for the money, how many contingent workers were on staff, or what they were doing. This led to many concerns. The two biggest concerns were, firstly that the firm was probably wasting a lot of money, and secondly that the firm might be unintentionally violating US legislation. US labour legislation requires that temp workers be treated differently from permanent workers-if they are not then the temps can sue for additional benefits. There have been a number of costly law suits in this area and Ms. Taylor believes that many more are to come. More visionary HR leaders were also concerned with a broader notion they called "Total Workforce Management." These HR leaders see their workforce as comprised of permanent employees, part-timers, contract workers, and temporaries. All of these categories are important and care needs to be paid to selection, compensation, motivation, development, and knowledge transfer of the total workforce, not just permanent employees. 3. Methods for Managing the Contingent Workforce The big push for solutions is coming from firms offering what are called Vendor Management Systems (VMS) and Contingent Workforce Management Systems. These firms promise software and services that will provide centralized control of the contingent workforce. If hiring is done centrally and tracked by the software then management will be in a position to better control the process. The big benefit initially is that they can negotiate better deals with temp agencies, but the longer view is that once the process is centrally controlled they can do everything (compensation, on-boarding and all the other HR processes) the right way. Initially VMS's have struggled because managers hire temps when they have an urgent need to accomplish a business result and don't appreciate having procurement or HR stand in their way. Nevertheless, technology and central control are clearly coming in America. It will just be a matter of time before firms learn how to do this effectively. The broader HR question of how you do "Total Workforce Management" (or even the question of what exactly we mean by that term) remains less clear. American firms are constrained by laws that are both vague and restrictive, for example if you invite contingent workers to a Christmas party then that could imply they are actually permanent workers and hence are entitled to the benefits of a permanent employee. Legal difficulties aside, firms have a real challenge in dealing with the fact that instead of having one predominant type of relationship with the worker (a permanent relationship) they have many different types of relations. This creates complications and room for conflict. The complications make general solutions unlikely. Every firm has a unique culture and a unique way of using contingent workers and it is likely that in the near term each firm will have to find a unique solution to total workforce management. 4. What HR Must Do In any firm that has a significant number of contingent workers HR must do two things. One is to use technology to manage the hiring of these workers so that the firm is in a position to control costs, improve the quality of processes and reduce legal risks. Secondly, they must take adopt the concept of total workforce management and take the issues around the contingent workforce seriously. This means assigning staff or launching projects that ensure that good HR practices are being applied to all workers, not just permanent workers. Of course, this requires figuring out what "good HR practices" means for all the different types of workers. In America, no employee is really "permanent" any more. Striving to understand the HR practices that work for free agents will likely lead to better practices for all workers-including outsourced workers, but that's a very big topic which we'll leave for another time. |
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