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Leading in the Gig Economy: Engaging or Ignoring Our Contingent Workers.

Stanford business professor Jeff Pfeffer once asked the CEO of a large company if he really needed employees anymore. He tells the story as follows:

"When I first met Andrew Berlin at a Stanford executive program in the early 1990s, Berlin Packaging was a small enterprise doing maybe $40 million in sales in what was then, and still is, a very tough, almost commodity-like industry. Today, the packaging company brings in close to $1 billion in annual revenues.... Andrew Berlin has made a fortune by building a competitive advantage through his company's culture and his people. Having recently joined Berlin's board, I could anticipate Andrew's answer to my question, 'why have employees?' First of all, he said with a chuckle, 'I like my employees.' More fundamentally, Berlin said that his company is special because he has employees who are interested in both beating the competition and delighting others. 'Contractors would not have the same level of commitment,' Berlin added. If organizational culture is a key to competitive success, you can't just turn that over to someone else." (1)

But Pfeffer also stated that "Such perspectives are exceedingly rare as the U.S. and other countries confront what has been called the 'gig economy' and as notions of what it means to have a job change in profound ways. Nothing about the new employment arrangements lacks controversy, including how significant such contingent work is." (1)

While it is almost laughable to ask CEOs if they really need their employees, we are seeing a trend toward companies relying on more contingent workers. While the story above is about Berlin Packaging, it is also a story that relates to many companies throughout the world that are grappling with how to lead in an era where increasing numbers of non-traditional workers are critical in providing services and helping get work done. The statement that "contractors would not have the same level of commitment" begs the question: To what extent should leaders engage or ignore the growing numbers of contingent workers in the new gig economy?

In this Linking Theory + Practice article, we focus on leading and leadership in the gig economy. We gratefully acknowledge the contributing ideas offered during a recent interview with distinguished professor Stephen Barley (University of California). (2) We also draw from "The Changing Nature of Work: Careers, Identities and Work Lives in the 21st Century," which was published in the Academy of Management Discoveries by Stephen Barley and co-editors Beth Bechky and Frances Milliken. (3)

New Work Relationships

The gig economy is made up of contingent workers who are often looking to pick up their next gig or temporary work contract. The fundamental nature of work and work relationships is changing and becoming far more complex as more people are working independently. This new economy includes a dizzying array of different work relationships including freelancing, shared jobs, consulting, remote work, teleworking, temps, on-call workers, online workers, independent contractors, advisors, self-employed workers, seasonal workers, virtual teams, integrated global staffing, agency workers, employees of vendors, interns, digitally enabled workforce, part-time workers, off-shoring, outsourcing, leased employees, and crowd workers.

People who work in the gig economy are sometimes referred to as "giggers." Interestingly, while some job contracts are short-term others land contingent jobs that are longer-term or continue indefinitely. Amidst the complexity of these new work arrangements, giggers are making a difference in companies even though they are not traditional employees. "This issue begins by recognizing the people who make things happen for an organization may not work in a traditional employer-employee relationship." (4)

From the agrarian and industrial ages to the information age, leaders have continually adapted to new working relationships and new workplace changes. However, the rapid rise of the gig economy in recent years has caught many organizational leaders by surprise. There are over 57 million freelancers in the United States." (5) Fueled by creative business models and an ability to connect through innovative online platforms, the gig economy has grown at unprecedented speed. "The number of self-employed individuals (many of whom are independent workers in the gig economy) soared by over 19 percent from 2005 to 2015." (6) Research on the size of the gig economy shows that it accounts for about 16 percent of the labor market and, over the decade, grew by a staggering 56 percent. (3)

To complicate things, workers are increasingly engaged in both traditional jobs and in the gig economy. "Making a decent living is no longer limited to the 9 to 5 life--it often includes a serious side hustle. Perhaps that's why more and more people are getting in on the gig economy. According to Finder.com, about 1 in 4 Americans holds a side gig, aka an extra way to make a buck aside from their main source of income." (7) And to recognize another complexity, consider the joint venture between the human workforce and the digital workforce. We know that people will always be a part of the future workforce but we also know that future workers will likely be coordinating more often with learning machines, artificial intelligence, and other digital assistants to get work done.

Although many freelancers sacrifice income for flexibility, there is definitely a growing high-end sector of independent workers. The gig economy is becoming more attractive to those who are tech-sawy or have other professional skills. It appears to be a lifestyle choice that prioritizes autonomy. Some of the more lucrative gigs include those in the high-tech and professional services sectors such as "deep learning" jobs. "With the rise of AI, it's no surprise that deep learning jobs take first place for the highest-paying gig economy jobs. Deep learning is a category of machine learning that entails the development of neural networks that are inspired by and similar to those of the human brain, without needing labeled or structured data to function. Freelancers in this area have job titles like data scientist, software engineer, and machine learning engineer.... These professionals have skills in algorithms and programming languages such as Tensorflow, Python, R, Java, Matlab, Perl and C++." (5) Other high-end tech-savvy gigs include block-chain architecture, robotics, ethical hacking, cryptocurrency, lambda coding, virtual reality, and visual communication editing. (8)

According to Deloitte Insights "(Companies) expect to dramatically increase their dependence on contract, freelance, and gig workers over the next few years. As alternative work arrangements become more common in the broader economy, HR and business leaders are rapidly trying to plan and optimize their own workforce ecosystems, pressured by the need to improve service, move faster, and find new skills. The composition of the workforce is changing dramatically. Globally, there are approximately 77 million formally identified freelancers in Europe, India, and the United States. In the United States, more than 40 percent of workers are now employed in 'alternative work arrangements,' such as contingent, part-time, or gig work. This percentage is steadily rising--increasing by 36 percent in just the past five years--and now includes workers of all ages and skill levels." (9) Based on their research, Deloitte shows the changing nature of the contingent workforce in Figure 1.

As we consider the future of work and strategic workforce planning, it's important to note there are three main players who have enabled the rise of the gig economy: the gig workers themselves, the hiring entities (companies and consumers), and the technology platform companies who enable creative and simple connectiveness in ways that were never possible before. "The gig economy is not new--people have always worked gigs ... but today when most people refer to the 'gig economy,' they're specifically talking about new technology-enabled kinds of work.... App-based technology platforms are replacing people as middlemen to connect consumers and producers quickly and easily, allowing individuals to perform a variety of tasks for complete strangers based on real-time demand.... The growth of the gig economy represents a shift in the way Americans view work. Instead of a more traditional system where a worker works full-time for only one employer, some workers choose to enter the gig economy for the flexibility, freedom and personal fulfillment that it provides them." (6)

Three Core Shifts in the Nature of Work

For organizational leaders these new work relationships will require new strategies as we adapt to the changing nature of work. For instance, consider the gig economy's effect on workforce issues such as strategic workforce planning. "Strategic workforce planning is a mindset focused on ensuring an organization has the resources needed to achieve its mission, (but in the gig economy) how do we ensure people capabilities are available as needed using a staggering array of potential work relationships?" (4) The answer resides partly in a foundational understanding of the changing nature of work and work relationships both now and in the future.

What are the ways in which the nature of work is changing? "First and foremost, has been the demise of manufacturing and other relatively well-paying, middle-class jobs associated with the bureaucratic employment contract in which employees exchanged labor and loyalty for security. Many of these jobs have been offshored to countries where labor is cheaper. The outsourcing and offshoring of manufacturing has [impacted] industrial and employment relations over the last two decades [and] the issue certainly figured prominently in the recent election of Donald Trump to the Presidency. What is rarely discussed is that work being offshored is no longer simply blue-collar work. Firms have begun to offshore professional and technical jobs as well...." (3)

Second, the rise of contingent work based on discreet projects has led leaders to rethink the way they should organize work and engage with their workers. "Given the expansion of contingent work, it is not surprising that project-based forms of organizing are spreading across employing organizations. Although once largely confined to the construction, consulting, aerospace, and defense industries, project work is now becoming a predominant form of organizing in high-tech industries and it is spreading into banking, retail, and other sectors of the economy." (3)

Finally, the impact of artificial intelligence and machine learning on the nature of work is now undeniable. "Although these technologies are still in their infancy, their development portends potentially radical changes in the status quo. To take just one example, if self-driving trucks were to become common, they would significantly threaten the employment of men in the United States. Few people recognize that truck driving is the most common occupation among men in the United States." (3) As intelligent machines and robots continue to replace humans, the landscape of currently available employment opportunities could be dramatically altered.

Ten Reasons to Engage in the Gig Economy

Historically, contingent workers were used mostly in jobs that were peripheral to a company's core activities. This is changing. W hile gig workers are still doing peripheral work, they are also increasingly doing core work in critical and specialized areas for organizations.

The top 10 potential benefits of engaging with contingent workers include:

1. Access to specialized skilled workers.

2. Flexibility in adjusting staffing levels and shifting headcounts as markets fluctuate.

3. Faster hiring and less red tape, including ability to start new projects quickly.

4. Reduced labor costs including retirement, health benefits, vacation time, sick leave, etc.

5. Administrative savings in reduced hiring and dismissal processing and documentation.

6. Increased job security for fulltime employees as gig workers provide buffers during layoffs.

7. Savings on capital, infrastructure, and technology expenses.

8. Access to fresh ideas and outside perspectives.

9. Time-zone advantages for global or 24-7 operations.

10. Provides a trial period to determine fit for new positions and possible full-time employment.

Yet the risks may outweigh the benefits. As shown in the list above, there are many potential benefits to relying upon contingent workers in this new era of a growing gig economy. But there are several key downsides and they mostly revolve around the important response made by the CEO of Berlin Packaging at the beginning of this article: '"Contractors would not have the same level of commitment." One of the most problematic concerns leaders face in the gig economy is the recognition that contingent workers may not have the necessary level of dedication, loyalty, integration, knowledge, and commitment to the vision, mission, and culture of the organization.

Engaging or Ignoring Gig Workers

The research shows that gig workers may not identify with the company nor its customers. This is not an insignificant concern because if workers (traditional of contingent) do not identify nor feel connected with a certain company, their performance and morale is negatively affected. Students of organizations have long assumed that our identities are tied to the organizations for which we work. But, suppose people increasingly no longer work in organizations that offer stable jobs. How will people answer the questions: "Who am I?" and "How is what I am doing meaningful?" If companies are going to engage in the new gig economy, leaders will need to grapple with the important underlying issue of worker commitment, which is inextricably tied to worker identity.

But to what extent does it make sense to engage or ignore our contingent workers? The following real-life case study sheds some light on the answer to this question.

Johanna earned a graduate degree later in life while at the same time taking care of her home and young children. With her new credential in hand, she was fortunate to land two part-time teaching positions at two different universities. University A sent her the teaching schedule and a text book and wished her good luck. University B paid Johanna to attend a virtual two-week training workshop where she was enculturated into the mission, vision, learning models, student customer expectations, and standards for good practice. University B also told Johanna that she would have a professional mentor and would attend monthly video-conference development meetings with a group of other part-time teachers. In addition, University B paid to have Johanna attend an annual three-day conference for all part-time teachers. At this conference the university president would express appreciation to these contingent workers and offer opportunities for professional development. Further, Johanna received regular feedback from this university on how she was doing and how she could improve.

Five years later Johanna has become a proficient university instructor who receives rave reviews from her students, peer mentors, and group teaching leaders. Importantly, over the years Johanna has made a commitment to University B and feels a connection and identity with this university and its mission. She has long since quit teaching for University A, which assumedly is continuing to hire less experienced part-time teachers that may not understand the mission, may not have the best teaching abilities, and may not be heavily invested in student success.

University B obviously invested a great deal of time, organization, and funding into its contingent workforce. But most importantly, there was an investment from the leadership of the organization which made the decision to engage with its gig workers. The strategic leadership decision was a conscious effort to heavily invest in and reach out to its contingent workforce. This university now has thousands of part-time instructors who are fairly stable in requesting new gigs each semester and who have developed a meaningful identity with and commitment to the organization. While the investment of engaging with its contingent workers is significant, the labor cost savings are enormous. Within the higher education industry, this disruption is a unique workforce model that has received attention nationally. (10)

Implications for Leaders

The vast majority of companies are not only utilizing contingent workers but are also seeing a rise in their numbers of contingent workers. Company leaders are recognizing that their actual workforce may be larger than their observed workforce.

Leaders are also seeing the value that gig workers provide as they holistically scan their full workforce ecosystem. They are adopting a new way of planning for the future that consciously recognizes the growth of the gig economy, including the benefits and challenges of engaging with their contingent workers.

Here are six core ideas for leaders to consider as they engage in strategic workforce planning for their traditional and contingent worker ecosystem:

1. Anticipate a possible future with dramatic growth in the gig economy.

"The growth of the gig economy is a global trend and this trend does not show signs of slowing. [Workers] are increasingly making a living through several sources and using their skills with different employers. Intuit and Emergent Research predicted that the number of people working on-demand [gig] jobs will grow from 3.9 million Americans in 2016 to 9.2 million by 2021. [The trend] is already happening and be prepared to adapt [because] gig work is 'real work.'" (6)

2. Consider the underlying psychological needs of gig workers to "identify" with a company or group.

Identity or identification is the extent to which a group membership is self-defining. In the new era of the gig economy, workers are going to be increasingly looking for ways to answer the questions, "Who am I?" "Where do I find belonging?" and "Where do I make a meaningful contribution?" The messages that come from senior leaders regarding how they feel about contingent workers will make a difference. The extent to which leaders build a sense of inclusion and investment for those in the gig economy will significantly and positively affect loyalty, commitment, and performance.

3. Extend talent management ap proaches throughout your contingent ecosystem.

"What can organizations do to engage these increasingly important ecosystem workers, even as they turn away from the very idea of being 'employees'?.... HR teams should work with legal and IT to give gig and contract workers clear performance goals, secure communication systems, and the right amount of training and support to make them productive and aligned with the company's strategy. Cummins, for example, a global leader in power, energy systems, and engines, considers its contractors a part of the family, and tries to give them the same focus as full-time employees." (9)

4. Measure and record what's happening across the full spectrum of your contingent workforce.

Leaders should have a sound data-based understanding of how significant the impact of the gig economy is in their industries. "A large part of recognizing the gig economy and legitimatizing its work involves recording and measuring its extent and effects.... Collecting information on residents involved in the gig economy can also help [companies] develop better-targeted policies to serve specific constituencies." (6)

5. Create new leadership alliances with HR, business leaders, and procurement.

"The growth of new workforce models is redefining the employer-worker relationship, and many organizations have the opportunity to draw upon today's variegated labor market. HR and business leaders should proactively form new leadership alliances--especially between HR and procurement--to develop integrated workforce strategies and programs that can help an organization take advantage of the breadth of workforce options available today." (9)

6. Adapt as a leadership team and move forward.

As with any change, leaders must adapt and thrive or hold fast to the status quo and risk losing in the market. The gig economy will continue to bring new opportunities and complexities. Leadership teams will need to think outside the box as they develop new strategic workforce planning models and accommodate to new realities. Leaders who innovate with regard to the new mix of human capital options may discover profitable ways to engage with a diversity of contingent workers that will strengthen their overall workforce.

Leading in the gig economy is definitely more challenging as the types of company-worker relationships become more complex. However, it also provides leaders with an opportunity to rethink their strategic workforce planning models and the extent to which they engage in meaningful ways with both their traditional and contingent workers.

References

(1) https://fortune.eom/2015/07/30/free lance-vs-full-time-employees/

(2) Personal interview on August 1, 2019 with Dr. Stephen R. Barley, distinguished professor of technology management, UCSB.

(3) Barley, S., Bechky, B. & Frances, J. (2017). The Changing Nature of Work. Academy of Management Discoveries, 3 (2).

(4) Sokol, M. (2019) Call for Papers. People + Strategy Journal, 42(3).

(5) https://www.entrepreneur.com/slide show/309958

(6) https://www.naco.org/featured-resources/ future-work-rise-gig-economy

(7) https://www.monster.com/career-advice/article /high-paying-side-gig-companies-0717

(8) https://www.thebalancesmb.com/highest-paying-gig-economy-jobs-4163094

(9) Agarwal, D., Bersin, J., Lahiri, G., Schwartz, J. & Volini, E. (2018). "The workforce ecosystem: Managing beyond the enterprise." See deloitte.com/insights.

(10) Christensen, C. & Eyring, H (2011). The innovative university: Changing the DNA of higher education from the inside out. Jossey-Bass: San Francisco CA.

Brad Winn, Ph.D.. is a senior editor for the People + Strategy journal and a leadership professor at Utah State University. He is an award-winning instructor who presents regularly at national events. He can be reached at brad.winn@usu.edn or see www.huntsman.usu.edu/bradwinn.
FIGURE 1: ANTICIPATED USE OF EACH LABOR TYPE IN 2020
RELATIVE TO TODAY

                Increase   Stay the same   Decrease

Contractors        37%          46%           16%
Freelancers        33%          52%           15%
Gig workers        28%          56%           15%
Crowd workers      21%          62%           18%

n = 11,070

Source: Deloitte Global Human Capital Trends survey, 2018.

Note: Table made from bar graph.
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Title Annotation:Linking Theory + Practice
Author:Winn, Brad
Publication:People & Strategy
Date:Sep 22, 2019
Words:3511
Previous Article:Integrating People and Technology in Worktask Planning.
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