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Why Companies and Skilled Workers Are Turning to On-Demand Work?

by HBR IdeaCast

A conversation with HBS’s Joseph Fuller and BCG’s Allison Bailey on leveraging digital talent platforms.

CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Curt Nickisch.

When you hear the words, on demand workforce, or gig economy, the first thing that probably comes to mind is an Uber driver, or maybe somebody who drops off an ecommerce package to your home. Or maybe you think of a clerical temp worker or a freelance designer. The reality is, the market for on demand workers is much bigger than that. And in recent years, the demand for high skilled workers that can be hired for projects is booming. Dozens of companies with names like Toptal, Catalant, InnoCentive, Kaggle and Upwork – have created marketplaces for workers such as software coders, manufacturing engineers, digital marketing experts, and logistics specialists.

This has been fueled by a rapid automation, this has bene fueled by rapid automation and digital transformation at companies, many of whom are located outside of talent centers for these skills. But now there are also demographic changes pushing this trend. And the COVID-19 pandemic only seems to be speeding it up.

But it’s still early days. Most companies that hire just in time workers are doing it on an ad hoc basis. They’re just beginning to grapple with what it means to be a company that works this way.

Here to talk through the trend and to give advice for companies and managers who want to be strategic about this is Joseph Fuller. He’s a professor of management at Harvard Business School. And Allison Bailey is a managing director and senior partner at Boston Consulting Group. They’re coauthors of the HBR article, “Rethinking the On Demand Workforce. Joe and Allison, thanks to both of you for being here.

JOSEPH FULLER: Thanks for having us, Curt.

ALLISON BAILEY: Thanks for having us.

CURT NICKISCH: So some listeners may have heard that intro and thought, well, there have always been doctors who fly around and fill in for other doctors. There has always been skilled people in highly technical positions who have chosen that lifestyle of long term gig economy type worker, before the term, gig economy, was even around. So what’s different now? Like, what exactly are we talking about?

JOSEPH FULLER: Well, I think, Curt, the first difference is that those were very specific types of jobs with, of a limited number, and they were not broadly distributed across the economy. Today, with the advent of gig platforms that appeal to all different types of skill sets, you have a much more fluid market for this type of service. And you have, since you’ve got that supply of talent out there, more and more companies have started to employ it, and as they employ it, they begin to see it as a valuable resource and broaden their use of the model.

ALLISON BAILEY: And companies themselves, given the increased automation that’s occurring, the focus on a need for digital skills, are really struggling to actually match their workforce capabilities with their strategic needs, and finding themselves coming up short. If you sort of combine that with the fact that the half-life of those skills in a digital economy are shortening, you see that there’s a real need that broader talent platforms and the on demand workforce can potentially fulfill.

At the same time as Joe mentioned, we’re seeing an explosion on the supply side of these talent models and talent platforms. And matter of fact, there were something like 80 of these talent platforms back in 2009, and in 2019, we now have over 330 of them. And combined with these sort of increased demand factors, we also see on the supply side that workers, many of them really, really like the opportunity that gig worker, on demand work offers them.

CURT NICKISCH: It’s interesting to understand why companies are doing this, because there’s always been this concept of buy versus build – do you want to build this capability in house? Or do you want to buy it from outside? How might this differ if you’re a company in St. Louis, versus a company in San Francisco?

JOSEPH FULLER: Well, Curt, I think that’s one of the questions at the heart of this acceleration of growth in these talent platforms. There’s a question about now merely, do you want to have the talent inside the four ways of your enterprise? But can you get it?

And we have a couple of things that are at work here that are really making it challenging for companies with different characteristics to get world class talent to come and be a full time employee. You touched on geography. So we’re all familiar to the research of people like my colleague at Harvard, Ed Glaeser, that cities and specific cities are outsized winners in terms of attracting younger talent and all of these skills we’ve talked about tend to skew to younger workers.

The second thing is, as the world becomes more and more digital, you have this interesting phenomenon where everybody wants the same type of talent. It doesn’t matter if you make ball bearings in Cleveland, you’re Emerson Electric, a great company headquartered in St. Louis, or you’re Apple or Google or any other one of the FANGs.

CURT NICKISCH: Every business has become a digital business in that sense.

JOSEPH FULLER: Absolutely. It’s almost a universal language. And that means suddenly, a company headquartered in St. Louis is particularly with, for remote, with the advent of remote work, is not just competing with other companies in St. Louis for talent, they’re competing with JP Morgan Chase. They’re competing with Capital One. They’re competing with Facebook. And that makes it hard if you’re a midsize company, maybe not in the most intriguing industry, maybe not with a, working for a company or running a company that has a big brand reputation, which will really impress your friends you work there. To get the talent they need. And historically, companies have hired the best person that applied. But what if the best person who applies for your job doesn’t have the skills you need? You’ve got to turn to an alternative.

CURT NICKISCH: Let’s talk about the supply side now, because at the same time, I think the half-life for workers who want to go work for a company and stay there for a long time has gotten shorter, too. Right? What market forces are becoming apparent on the supply side of these workers, the context for companies that are trying to hire them?

JOSEPH FULLER: There are several, Curt. One is that a lot of the skills we’re talking about are associated with having an advanced degree, certainly a college degree, if not something above that. More than half of college graduates are women. One of the things that’s fueling the growth of these platforms is that women, for lifestyle reasons, family formation, caregiving obligations, are just not able, often, to accommodate the parameters of employment as we think of them historically, the nine to five job, the business travel, etc.

A second is that young people are much more comfortable using these types of platforms. And many of them are motivated in choosing the work by the intrinsic interest of the work, what we would sometimes describe as the moral purpose of the work. They don’t want to just work on the most important project that their supervisor has. They want to work on something that really engages their skills, that calls out the best, and it causes them to learn new things.

Now, obviously there are some real impediments to this. Gig platforms don’t have the type of benefits packages that most people expect. And so whether or not this will extend into people’s lives as they get into their later 20s, 30s, they start forming families, is open to question. There’s one other population I just want to throw out there. The benefits from that, which is retirees. We’ve got a graying workforce. In a lot of industries, the workforce in management skews quite old. For example, a specific example, we have program managers for defense and aerospace companies. They have really hard to replace expertise. They get offered a retirement package, or they take a retirement package. Now they can stay active, and obviously some people had big dents put in their retirement savings in 2008/2009. Others are now maybe experiencing business closure, if they have opened a small business after they left the formal workforce. So this is an outlet for that demographic as well to stay engaged, and be accessible to companies that need their skills and expertise.

ALLISON BAILEY: Just building on some of Joe’s points, if we think about digital skills and digital experiences, what we find is, say, among software engineers, that there’s a real desire to keep their experience base fresh and leading edge. And so when we survey them about, are you interested in, for the employ value proposition, in more money, career progression up the managerial ladder, or other things, what you routinely hear back is, the most important thing to me is actually more varied, more leading edge experiences, because that’s what keeps me marketable, and that’s going to, what is going to make me attractive for my next job.

The other thing that I would say is, with crowdsourcing platforms, where people are able to contribute to really large, hairy, difficult problems in the world, many people like to dedicate part of their time to being a participant and solving some of those really, really difficult problems, whether it’s in genetics or aerospace or what not. And so companies are realizing the power of this, and individuals are seeing this as a way to put their unique skills and capabilities to use on things which are much bigger than they are, and which they might otherwise not get access to.

CURT NICKISCH: Yeah, what I find interesting is your research showed that the number of freelancers who say they consider gig work to be a long term career choice is the same as the number of who consider it a temporary way to make money. So that’s pretty stark. How is the pandemic factoring into this trend?

JOSEPH FULLER: Well, one thing it’s done, Curt, that we’re all witnessing, it’s obliged organizations of all sizes to adopt distance work and put in the technical infrastructure to support that. So it’s like fast forward has been hit on the capacity of companies not merely to rely on remote workers to do work, but also to accommodate the working groups outside the office. And we’re all familiar with phrases like, acronyms like MBWA, managing by wandering around, and everyone piling into a conference room for eight hours to figure out what’s going on.

CURT NICKISCH: And the business travel you mentioned before, too. Right?

JOSEPH FULLER: And business travel. If all those things are suspended, then the idea that we have to do our project planning, or do our project review, or do our analysis separately. That really accommodates gig workers in ways that the suspended model of doing work didn’t. On top of that, there are a number of kind of policies and procedures that various functions in big companies have enforced who have been reluctant to relax, like issues of cybersecurity for a chief information officer or chief technology that have had to be relaxed.

So some of the barriers have been reduced. But the biggest one probably is just the nature of work itself, the nature of supervising work. If I’m not going to be able to rely on the coffee klatch and the watercooler talk and stopping by somebody’s desk to manage a worker, I’m much more able to accommodate outside talent like gig workers who I’m going to deal with through Zoom calls or Microsoft Teams.

ALLISON BAILEY: And I think another accelerant coming out of COVID is the fact that there have been such significant shifts in the demand for skills. If you think about, for example, the rise of ecommerce or the importance of digital market, and so many organizations finding themselves flatfooted and without the necessary workforce to actually help them execute on those pivots, it makes them much more open to thinking about an on demand workforce to help them fill some of those gaps.

JOSEPH FULLER: Curt, I also think that companies are being a little bit more cautious about adding talent right now. They don’t really know what’s going to happen on the demand side. You know, as Allison was saying, some companies have had a big surge of projects they have to do as they shift, for example, to more online commerce. But this is a, gig platforms are a way to reduce your ongoing fixed expense of personnel and allow you maybe to staff a little bit more towards your more conservative forecast about a recovery in your marketplace than you might otherwise have been able to do if you were relying solely on full time employees.

CURT NICKISCH: Let’s talk now about the difficulties companies have putting some of this into place, because in the past, you know, you work at a company, and they bring in some temp workers to do some things, or you bring in consultants to work on a project, and they leave again. That’s different than when maybe you’re a data analyst at a company, and they say, well, we’re going to hire this outside team of people now, and perhaps on an ongoing basis in the future we’re going to keep reaching out to these folks to do the sort of work that you’re doing. That can feel threatening to employees. Do you see that as one of the stumbling blocks so far?

ALLISON BAILEY: Well, I think it’s definitely a barrier. But what I would also say is, it’s one that I believe organizations can actually actively work through. You know, it’s for sure a fact that employees in these kinds of situations can feel threatened, especially because it sort of challenges in many cases the notion of managers’ employees saying, you know, we have a problem, and we can’t really solve it, and now actually people are thinking that we need to go to the outside to get help.

But if we actually step back, and we saw this in the case of a large global energy company. They did a really nice job of educating their workforce on the potential benefits of this. Meaning that, yes, it was OK, actually, to say that there were problems that maybe internally couldn’t be solved, and that we needed to go to the outside world to access more expertise, more thoughtful minds, to actually help us.

It required actually being humbler, but actually also educating people about the benefits.

The other thing I would say is that employees themselves need to be thinking about this from the perspective of, what is it that these talent platforms can do for me, such that I actually get more leverage? Right? There are many activities that we all do that maybe we’d rather not do, and that aren’t super value added, but actually by leveraging people on a talent platform, they can free up their time for more value-added activities or more time to think strategically, or what not. So getting that message out there of the upside, both the collective upside to the organization of being able to solve really tough problems, or to the individual about what it might mean for their own personal productivity, I think is really critical to helping organizations get over that challenge of being threatened.

JOSEPH FULLER: Curt, I think there are two barriers that I’d like to just also mention. The first is that managers like to control things.

CURT NICKISCH: Oh, really?

JOSEPH FULLER: A nd they just, you know, they want to have as much control and influence on anything they’re paying for that they can, anything that’s in their budget, and that includes staff. So it’s asking managers to do something that is almost genetically adverse to them. How do they know this person will work hard? How do they, how can they make sure that they bring the right attitude and the right dedication to the project?

The second thing is that making gig workers in projects that are complex, that really require the types of skills that we’re talking about here, it requires a fair amount of work to structure the project so those workers can be really productive. They don’t have institutional knowledge. They don’t know the informal way to get some piece of data. They don’t know what happened in the project two years ago. So a supervisor can’t turn to one of them and say, well, remember that thing we did last summer? Just do that again.

And so, it requires the work be designed around defined tasks, chunks if you will, and assigned to people in a way that they can do them correctly. So it requires a more kind of formal process and a little bit, frankly, a little bit more work up front to be able to make these people productive. And I’m not saying that managers are lazy and don’t want to do that work, but it’s a different type of task, and it’s not familiar, and it’s easy to find reasons that this is just not as comfortable for managers as the way they’re used to doing things. And that, you have to overcome that if you’re going to make maximum use of this resource.

CURT NICKISCH: Conversely that probably means that there are opportunities if you work at one of those companies that is trying this out, and you take it on, and you show success using this model, and figure it out, you can also advance.

CURT NICKISCH: Absolutely. So Allison, what else do companies need to think through before they, you know, really put both feet into this new experiment?

ALLISON BAILEY: So I think companies really need to have a good understanding and inventory of the capabilities that actually reside within their organizations and their workforce today.

I do think that to manage across all of these different models and mechanisms for accessing and managing talent, that it does actually take a higher skill level amongst the managerial force to be effective. And we should be looking to help educate and train managers to effectively manage in this kind of environment, and that it won’t be easy. But with support, with the right kinds of organizational processes, scaffolding and so forth, that they should be able to do it successfully.

CURT NICKISCH: Joe, five years from now, this doesn’t sound like it’s a fad. It sounds like just the new reality that is going to be here to stay, and that managers need to learn to contend with. Is that fair?

JOSEPH FULLER: I think it is, Curt. COVID has really put the spurs to this phenomena, because not only have companies learned how to integrate teams and projects across time zones, across geographies, but also it’s really caused a rapid acceleration in companies’ investment in digitalization. 85% of our respondents said that they had significantly increased their investment in digital technologies and digital platforms. And the senior managers in these companies were pretty much universally, 85-90% saying that this was going to be an important source of talent in their future.

And one thing we do know about supply and demand, while the supply of talent in these marketplaces is growing quite rapidly for a long time, the supply of people with digital native skills, sophisticated digital skills, is not growing fast enough. And that’s true across the developed world. It’s not just a U.S. phenomenon. And it’s not just an issue of immigration, although that exacerbates the problem. So you put that together. The stars in alignment for this to become much more integral to companies of all different sizes and shapes workforce management. And as we all know, once demand starts growing for something, you start getting more scale economies. You start legitimizing the business model. More people are trained in how to use it. And other adjacent innovations will happen. For example, if you suddenly have a large number of fairly affluent gig workers, you’re going to have innovations in things like how they go about sourcing health insurance. And then you can get a virtuous cycle going to really let this market become a permanent feature of the landscape.

ALLISON BAILEY: You know, many business leaders see talent platforms as a primary solve for their talent gaps, as opposed to a strategic lever to transform their business models. So when companies are no longer limited to the talent that they have on staff and are able to kind of dynamically hire, utilize, and flex their workforces in response to changing needs, what you see is that a whole bunch of new avenues open up. A whole bunch of new opportunities for business model innovation. And it used to be we talked about business like Uber and Airbnb becoming sort of asset light. The question I would have is, why not now for organizations to became talent light? Right? Really innovating their business models to take advantage of what these kinds of platforms can offer.

CURT NICKISCH: Joe and Allison, thanks so much for coming on the show to talk about your research.

JOSEPH FULLER: Curt, it was a pleasure.

ALLISON BAILEY: Thank you, Curt.

CURT NICKISCH: That’s Joseph Fuller. He’s a professor of management at Harvard Business School. And Allison Bailey is a managing director and senior partner at Boston Consulting Group. They are coauthors of the HBR article, “Rethinking the On-Demand Workforce.”

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