The Contingent Workforce


May 23, 2007

by Marshall Goldsmith

Doug Berg has a fascinating job. The work he’s doing couldn’t have even been imagined when I was looking for my first position. As the CEO and co-founder of HotGigs, Doug is a work-force expert and technology entrepreneur providing solutions for the recruiting and staffing industry.
The Staffing Exchange, one of the company’s offerings, is a marketplace portal for consultants, staffing firms, and the organizations that hire consultants. It provides an online resource that helps contingent workers – those who are hired on a temporary or contract basis, as employers need them – find employers – and employers find contingent workers. We recently spoke about the changing workforce and how both worker and companies can adapt. Edited excerpts of our chat follow:
What’s driving the rise in contract-based workers that we’re seeing? 
We’re mid-course in a major shift in the employment picture in the U.S., particularly in the technology-rich professional areas. Due to compressed market cycles, the old way of doing business just won’t work too much longer. This specifically applies to the area of work-force planning and recruiting.
To succeed in the future, those working in corporations and staffing firms, as well as the workers themselves, have to understand the forces at play: cost and on-demand access to short-term labor, preferences among laborers, and technology innovation.
How fast is this contingent-staffing industry growing? 
Fast! The growth of the staffing industry is also something that’s very indicative of shifts in the labor supply. Data show that the staffing industry has doubled in just the last five years, from about a $60 billion a year industry to an over $120 billion a year industry, and analysts project it will become a $200 billion industry by 2010.
What is driving this growth? 
Most of the growth is going to come from two areas: the use of standard temp workers and the use of highly skilled professionals on a contractual basis.What type of workers are seeing the biggest demand as contractors? 
Everywhere, work-force segments have been growing. Professional, nonclerical workers are obviously one of the biggest areas. And creative, design, and engineering consultants have always been in big demand for contract and consulting resources.
Two surprising areas that are heating up are health care and legal. A lot of companies are actually trying to use contract and consulting legal resources instead of large legal firms because they’re off-the-charts expensive. Instead of going the traditional route of hiring a legal firm, many companies are trying to just beef up some of their own internal legal resources through the use of contractors. This has been in the area of growth, along with accounting and finance, as hiring full-time professionals has become more expensive because of things like Sarbanes-Oxley and other accounting and reporting regulations.
Why are companies turning more attention to contingent staffing strategies? 
They’re finding the use of contractors makes it easier to rapidly expand when business is growing, and to shift resources as the business changes.
What are your predictions for the future? 
In the next 10 years, we’re going to see even more use of the contingent workforce. This shift has already begun in IT-heavy organizations. We have specific examples of companies that predominantly were only at a 90-10 mix (meaning 90% full-time employees, 10% contract), moving to more like a 60-40 mix – 60% being full-time employees, 40% being contract consultants and offshoring. That’s a dramatic shift, and these are national, 10,000-plus employee organizations across the U.S. Contingent workforces just give them much more flexibility.
Is the American worker to some extent fueling this change? 
Yes, you’re correct. The constant theme with most people who work for companies as full-time regular employees is, “I don’t get recognition, I don’t feel like I’m being acknowledged, I don’t get access to projects, and I don’t have someone connecting the dots between the job I’m doing and the difference it’s making in the world or in our company.”
These sentiments drive a lot of workers to look to themselves to try to begin creating self-recognition through self-employment. As a contractor, you can determine what projects you work on, how you cultivate your skills, and how you choose what people you work with and the projects you work on. Five or 10 years ago, jumping around from job to job completely ruined your resume. But now I think it has just become much more acceptable.
The shift to a contingent workforce isn’t going to happen overnight. And for your readers who are considering shifting to consulting, they can start to plan and market themselves now – before they’re forced to make the change by suffering a layoff.
This sounds fairly positive, but what are the obstacles facing consultants? 
The risks are high for people who aren’t wise to the dynamics of the changing workplace. Going from a situation where companies provide you everything – health and liability insurance, retirement planning, sick days, and educational reimbursement – to consulting, where you have to provide for yourself, is a big paradigm shift.
Some major health providers and insurance companies have started to create competitive long-term health benefits packages for individuals, where in the past these were only available to corporations through group health programs.
How is the Web helping companies streamline their staffing? 
Companies can now very quickly communicate job or contract requirements to a large and broad marketplace of people and attract the best candidates at the best rate. The Web as a staffing supply chain is really helping to normalize pricing and streamline the sourcing of contract workers, so that just-in-time workers can be assigned to projects and so forth.
This is causing staffing suppliers to become much more efficient in terms of the tools they have used to recruit source and manage their workers, but it’s also driving a pricing-normalization strategy, which will really help to normalize the pricing structure for contract labor.
Thanks for your thoughts. As companies become more focused on contingent employees, individuals are going to have to take more responsibility for their own careers. While one could argue whether this change is positive for the larger society, it’s happening anyway, and workers at all levels – including professionals – need to consider the ramifications.