(Part 2 of a 2-part series on Recalibrating Risk in the Age of the Independent Worker)
One third of the American workforce has declared its preference for independent work. In Part 1 of this 2-part series (which you can read here), we saw how this army of freelancers and small business consultants fills a critical gap in the talent supply chain. We also explored how companies should reconfigure the way they think about work, how it gets done and where to find the right people to do it. Although broader access to talent, a more variable cost structure and enhanced agility in highly competitive markets all offer upside potential for businesses looking to leverage the independent workforce, increased use is not without risk. How can businesses counter that risk to securely embrace flexible, independent talent?
The Downside of “Independence”
In many ways, the risks that accompany increased use of independent talent mirror the risks businesses faced in the past when engaging temporary workers: the more people involved, the more complex the process. Complexity promotes inconsistencies that translate into higher costs and higher risk to the enterprise from worker misclassification, recruiting brand reputation damage and business model integrity. To mitigate these risks, smart organizations engaged MSPs to build workforce management systems with detailed governance to protect the enterprise. These systems are a model of efficiency for engaging traditional temporary workers, but they fit neither the needs nor the unique configurations of the different types of independent workers that are today filling a key talent gap.
Enter the “Duct Tape Fix”
When things don’t quite fit, it’s time for the business equivalent of the “duct tape fix.” That’s when business managers get creative. They have important work that needs doing. They have deadlines to meet and priorities to execute, so they look for workarounds and shortcuts to bypass the established talent acquisition protocols and avoid the hassle of trying to squeeze their square pegs into the round holes of the official process. For one large company that had built an extremely comprehensive management system for using external talent, duct tape fixes to accommodate independent engagements included payment via P-cards and expense reports. These arrangements that bypassed official procurement channels represented massive amounts of leakage, to the tune of 50 percent of all external talent costs. That was a significant financial hit; it also represented substantial risk to the organization.
What’s the Right Solution?
Rather than trying to reengineer independent talent to fit the existing talent acquisition process, smart organizations are reengineering their processes to accommodate new sources of talent. In some cases, that means introducing new freelance management systems; in other cases, it means working with an existing MSP to recalibrate risk in a way that works for independent contractors and small businesses.
A multinational software company understood the need for a different way to engage with independent workers at a scale and level of rigor more appropriate to small entities. This required recalibrating risk to accommodate the size of the vendor and the nature of the engagement. It meant new requirements with regard to levels of insurance and workers’ comp, reference checking and background screening. Rather than handicapping managers, this organization enabled them to acquire independent talent in a safe way.
Recalibrating Risk to Reap the Rewards of the Independent Workforce
The most innovative companies know that if they don’t recalibrate risk to fit the needs and demands of the independent workforce, they will miss out on a huge talent source at a time when access to talent is a key competitive differentiator. Reengineering talent acquisition systems to offer a streamlined path to attract and engage independent talent at an appropriate level of risk allows an enterprise to engage the best talent resources—regardless of source or employment status—to gain customer insights, develop digital capabilities, implement business transformation and execute a host of other critical business initiatives.