Contingent Workers: Why Companies Must Make Them Feel Valued
Why giving free agents an 'arms-length embrace' is the way forward.
Sharron Wood felt left out.
A freelance writer and editor based in San Francisco, Wood had worked hard for roughly two months for a client on a book. But she didn't get invited to a launch party for the book last September—she only learned about the bash by reading a blog post about the event. The exclusion stung both personally and professionally.
"I wrote a quarter of it," she recalls. "It just makes you feel like they don't value your contributions."
In years past, companies might have shrugged off this sort of complaint from a contractor as a minor matter or annoying whining. These days, they would do so at their peril.
Organizations face a growing need to engage workers such as Wood just as they do their full-time employees to attract the best of contingents, get the best out of them, and preserve a long-term relationship with them. Why? A confluence of reasons. Companies rely more and more on contract and outsourced workers to deliver both their customer experience and strategic initiatives. Increasing amounts of work are going to higher-skilled contingent workers—to professionals such as engineers, graphic artists and nurses—whose talents can be pivotal for organizations. And many of today's temps and contractors are millennials, an age cohort famous for needing more attention than older generations.
For the past few decades, the corporate agenda regarding temporary workers, contractors and independent consultants has been largely about cost-cutting and legal compliance. But amid greater interest in labor flexibility and a tight market for specialized skills, companies are starting to see contingent quality as key. This concern surfaced in a recent Workforce Management survey of almost 1,200 readers. Asked for their biggest concerns about using contingents, nearly 43 percent of respondents cited "quality of work"—making it the top response.
If companies are going to connect with the best of today's contingents and elicit their best efforts, a new deal or relationship is in order. That relationship might be called the "arm's-length embrace." In it, companies respect contingents' independence yet nonetheless show them more love—in the form of invitations to social gatherings, improved communication, greater recognition and the like. It also means a partnership approach to pay that includes a fair wage rate rather than a nickel-and-diming approach to free agents.
To be sure, there are categories of contractors and temps where a transactional, cost-conscious, impersonal exchange makes more sense. And attention to contingents cannot eclipse efforts to maximize the engagement and output of the regular workforce. But experts say the smartest companies are paying greater attention to contingent labor as they set overall workforce strategy, and that tighter ties with contingents are increasingly crucial.
So far, companies are giving scant attention to their bonds with contingents. The Workforce survey found that fewer than 30 percent of companies either have a plan to become a client of choice for contingents or are working on one. But wise firms will take relationships with contingent workers more seriously if they want to improve organizational agility, customer service and productivity, argues Brian Kropp, analyst with research firm the Corporate Executive Board.
"Organizations need to rethink their approach," he says. "If you treat them as 'hired help,' then they will behave as 'hired help.' "
Definitions of contingent work vary. But most observers agree the term at the very least encompasses temporary agency workers and independent contractors. The contingent workforce also can include individuals pitching themselves as business consultants. And some analysts argue companies should add in the employees of larger professional services firms who are engaged in project work.
About a decade ago, pundits including author Daniel Pink proclaimed the United States was morphing rapidly into a "free agent nation." The transformation has proven to be slower than expected. But today free agency and other forms of contingent work are coming to fruition in dramatic fashion. Research firm Aberdeen Group estimates that nearly 26 percent of the average organization's total workforce is contingent or contract-based. And the irregular workforce is growing quickly. Aberdeen says use of contingent labor has jumped over the past year alone by more than 12 percent.
Fueling the era of impermanent labor are factors including companies' desire for greater flexibility amid economic uncertainty, the need to access scarce skills and the fact that some high-end professionals are choosing to work independently. That last trend could intensify thanks to the recently upheld federal Patient Protection and Affordable Care Act, which aims to make it easier for individuals to get coverage on their own.
To the extent that they have focused on contingents, companies have concentrated largely on labor costs and legal compliance. Organizations are keen to avoid calling people "temporary workers" or "independent contractors" when they actually qualify as employees. Microsoft Corp.'s landmark $97 million settlement with its "permatemps" in 2000 put the "co-employment" issue on employers' agendas, and recently the Obama administration has made worker misclassification enforcement a priority.
Saving on labor costs has long been a rationale for using contingent workers, who typically don't get health or retirement benefits and allow firms to avoid paying employment taxes. Still, a concern for many organizations is that departments and managers hire temps on their own, avoiding oversight and missing opportunities to save money through preferred vendor arrangements.
In part to save costs, industrial-packaging-maker Greif is working to standardize its use of contingent workers. But higher quality also is on the radar screen for Greif, which is based in Delaware, Ohio, and employs some 16,000 people worldwide. Steve Youll, human resources strategic planning analyst for Greif, foresees a future when individuals and small bands of highly skilled people will engage with companies on projects in information technology and other areas. Attracting them, vetting the effectiveness of their work and wooing the good ones back time and again will be crucial, Youll says.
"The HR trend is to look at contingent workers in the same way you look at your regular employees," Youll says.
As it stands, though, companies tend to look at the two sets of workers quite differently. A key case in point is performance assessment. While most firms track their staffers' performance in a formal process, contingent quality control is much less consistent, according to the recent Workforce survey. Not surprisingly, the quality of contingents often isn't great, as indicated by the Workforce survey.
Mediocre or low quality poses a threat to organizations as they turn more and more work over to contingents. And much of that work touches customers directly or indirectly. The Workforce survey found that contingents affect customers' experience to a moderate or significant extent at 31 percent of organizations. Nonregular employees shaping customer service levels is a growing concern, says the Corporate Executive Board's Kropp. That is, companies increasingly are relying on their extended workforce to deliver a great experience—whether that's a security guard, a call center worker or a nurse. "From a customer's viewpoint, all these people are actually your people," Kropp says.
Organizations ought to make contingent labor more central to their strategic workforce planning, says Barry Asin, president of Staffing Industry Analysts, a sister organization to Workforce Management. As Asin sees it, firms should "stop setting the contingent part of their workforce to the side."
To help get their contingent houses in order, companies have purchased software tools called vendor management systems—though these have tended to focus on efficient use of temporary workers rather than quality (see "Tech Talk" below). Organizations also have turned to third-party managed-service providers, or MSPs, which promise to oversee contingent labor operations.
Among such MSP vendors is Kelly Services Inc. John Healy, vice president and talent-supply-chain strategist at Kelly, says MSPs have a responsibility to help clients figure out when to focus on efficiency with contingents and when to be more flexible for the sake of better talent. For example, he says, it may make sense to treat contingent assembly-line workers in a transactional way, because supply of this labor may exceed demand. But workers in more creative or critical roles may require a responsive, high-touch relationship, Healy says. "You have different models," he adds.
The high-touch model may be especially effective with the legions of young people now in the workforce. Millennials—the roughly 80 million people born from the early 1980s to 2000—tend to want a great deal of guidance on the job. Call it the product of coddling parents or a healthy desire for self-improvement, this hunger for feedback makes it all the more vital for companies to connect with their contingents.
Mary Ann Davids has seen the payoff of a little TLC to young temps. Davids is a performance support specialist at a call center run by a large insurance company. A 16-year veteran at the company with a background in training, Davids took her current job about two years ago when the firm saw quality and attrition problems with its stable of temporary workers—who help handle calls and serve as a pool of candidates for permanent positions.
Before Davids came into the picture, temp-population attrition at the center was running about 95 percent annually. And the service quality of calls handled by temp workers was judged by officials to fall short of the company's standard. The temps, from a major national staffing firm, have an on-site manager from the agency. But the insurance company put in Davids to beef up the coaching given to the temps. This comes in the form of weekly evaluations and live monitoring of calls.
So far the extra strokes to the youthful temps are paying off. Davids says temp call-service quality now exceeds the company standard, and attrition has plunged to about 25 percent. Davids says her young charges can't get enough of her comments. "They're so used to getting some sort of acknowledgement. They crave feedback," she says. "Some of them will ask me every day, 'How am I doing?' "
Another reason to reach out to temps and free agents is that many of them aren't there voluntarily. The ranks of contingent workers are made up in part by people who would prefer the steadier work of regular employment. As game as they may be to do a good job, these folks may suffer from an inherent engagement deficit. Offering feedback and appropriate kudos can help fire up their performance.
Even voluntary independents are thirsty for signs that clients recognize their worth and potential. Take Jan Grose. Since 1999, Grose has had a consulting business helping companies with organizational development and HR projects, and she prefers life as an independent contractor.
Still, Grose chafes at the way clients penny pinch rather than value the insight she can bring from many years of experience in the field. For example, she once persuaded a client to consolidate its payroll systems worldwide through regional providers. The suggestion was outside the scope of her work, but she estimates her advice easily saved the client the equivalent of her fee.
"Companies should not be focused on just the rate," Grose says. But "that's the first thing they think about."
Travis Coleman, a technology contractor based in the Seattle area, notes another problem that hurts both companies and contingents: a failure to give contract workers the "big picture" surrounding their assignments. When firms spell out a discrete set of tasks without a sense of the larger purposes of the work or the project's timeframe, it makes it more likely that contractors will do the bare minimum for the client, Coleman says.
Coleman, who has been working for about a decade as a contractor on computer-support projects for companies including Bank of America Corp., Brio Realty and Microsoft Corp., says he does his best to combat the image of the disengaged contractor by going above and beyond client expectations.
But even he finds it frustrating when organizations do not share information about how a project is proceeding. For example, Coleman hates when, at the end of a week he thought was going well, the client supervisor suddenly reports the project is way behind schedule.
"There's nothing worse," he says.
Besides passing key information to contractors, there's also gathering information from them. If companies want to optimize use of their contingents, they will want to learn about the skills, experience and passions of those impermanent workers. Organizations have begun to develop sophisticated databases about their in-house talent in order to best match assignments with employees. They aren't as far along with that sort of talent tracking with their armies of contingents.
Consider Wood, the freelance writer. She says her publishing house clients typically don't know her areas of expertise.
"They don't do a very good job of finding out what my particular strengths and interests are," Wood says. That disconnect not only has frustrated her over the years, but also, she believes, has kept clients from getting the most from her talents. Wood says she would never provide less-than-professional services. Still, projects on musicology and food in particular get her juices flowing, which leads to even better results. "I'm going to get much more excited about something that's up my alley," Wood says.
Overall, though, Wood says she has it good as a free agent. She treasures the flexibility, the lack of office politics and the diversity of assignments that come with working independently.
And sometimes clients do include her in fun, professionally helpful events. The same client that didn't invite her to the party last year made up for it more recently. The organization flew her and other freelancers to New York, put them up in a hotel, talked about future strategy and took them out to a fancy dinner. "This client generally does the right things," Wood says. The "right things" like involving key free agents in occasional strategy discussions and taking them out to dinner once in a while are likely to pay off for companies too—in the form of fresh ideas, increased loyalty and extra effort.
What Wood and many other contingent workers want is to remain independent yet grow closer to clients. To feel a sense of inclusion, even if at a distance. The arms-length embrace. It promises to warm the hearts of contingents and business executives alike.
Ed Frauenheim is Workforce Management's senior editor. Comment below or email email@example.com.
Workforce Management, August 2012, pgs. 34-39 -- Subscribe Now!