We are in the midst of one of the biggest workforce transformations since the industrial revolution: the rise of the independent contractor. Freelance work is by no means a new thing, but the landscape has grown beyond photographers and writers to include marketing executives and strategy consultants.
There are three numbers that encapsulate this upward trend:
- 94: percentage of new jobs that are now in “alternative work categories” rather than traditional employment since the recession.
- 50: percentage of people projected to be working independently by 2020. Today this number is at about 33%.
- 64: percentage of growth in the number of people earning over $100,000 per year while working independently since 2011. This is not your neighborhood Uber driver or task rabbit worker.
It’s clear from these numbers that the freelance market is growing at a high rate, and that this growth is largely focused on high-end independent contractors—the executives, experts, and consultants that big companies rely on every day.
Welcome to the new org chart
Companies are increasingly experiencing critical talent gaps. There is projected to be a large shortfall of skilled workers (between 35 to 40 million globally) by 2020, and by then the demand for talent to deliver on new capabilities will significantly outstrip supply by a factor of four. With business working at a faster pace than ever before, companies can’t wait for months to fill permanent positions and need to be more agile in bringing in new skills as needed.
Traditional employment is not going away any time soon, but it is critical for organizations to evolve and harness the power of independent contractors. New infrastructure that provides easier access to independent contractors—technologies like freelance management systems and companies like UpWork and Business Talent Group—has formed. Organizations need to start understanding the resources that are available to them and taking advantage of projectized work. The new organization will look far more like a puzzle than a pyramid, and its challenge will increasingly be to find the missing pieces from the outside and figuring out how they fit together rather than presiding over a traditional set org chart.
Publishing is a leader in this terrain; many of its workers have either worked with or worked as freelancers, even at an executive level.
Now, other industries are following suit and strategically integrating freelance talent into their operations. Life science companies have become particularly reliant on independent contractors, since each product, each drug, is like a project that needs to be developed, marketed, priced, manufactured—and that requires discreet skills that will have uneven utilization.
Rethinking the Corporation
One F500 CPG company that Business Talent Group works with is taking a more enterprise-wide approach by creating a branded on-demand talent mall that they have staffed with internal managers who act as concierges to connect executives to the right independent talent provider. BTG is an early tenant in this mall. The company has stated that through the use of such platforms, work has been delivered both faster and at a lower cost than conventional methods 60% of the time.
As companies start to truly integrate talent options, we will see other innovative models emerge. UpWork itself has 300 traditional employees and uses 700 freelancers. We may even eventually see corporations that consist only of a CEO and a CTO, as John Chambers predicted in Fortune a few years ago.
There are real benefits for organizations that embrace this change, namely a more flexible, agile workforce with faster access to skills and a more variable cost structure. They can access thousands of former consultants from top consulting firms, and even pair them with industry veterans and subject matter experts, at a fraction of the cost.
There are also various challenges, but with awareness and preparation, corporations will be able to face these head on.
- Organization: Management awareness of, comfort with, and skill in projectizing work is still underway. In addition, the legal, HR and procurement infrastructure is not yet in place, and this can often be a big obstacle to fully leveraging independent contractors. Executives can help with this transition.
- Public policy: US labor, tax, and benefits laws are largely outdated, and are no longer suited for the modern workforce. Until very recently, New York State refused to even acknowledge there is a legitimate 1099 classification for independent work. This is still a very frustrating landscape, and the legal infrastructure needs to catch up to working trends in order to see meaningful change.
- Talent: Platforms like Upwork and BTG need to mature as well in order to be able to supply reliable project flow, so that independent contractors have the opportunity do better in this new landscape than in traditional work models. Though easier than before, it can still be difficult for such talent to navigate projects. This is no longer challenging for freelance workers in certain industries, like Hollywood and baseball—when they focused on improving talent service and moved to a free agent model, top talent thrived.
The liquid workforce
Accenture’s recent Technology Vision Report lists the Workforce Marketplace as the third tech trend in 2017, and envisions a world with what they call a “liquid” workforce: 85% of executives surveyed indicate they plan to increase their organization’s use of independent contractors over next year.
The report predicts:
- Corporations that still carry a burden of legacy bureaucratic models will experience rapid deterioration of market power.
- Traditional corporate and management models will be replaced by digitally connected marketplaces by 2022.
- On-demand labor platforms will emerge as the primary driver of economic growth in developed and emerging economies worldwide within the next five years.
The economic headwinds and technology changes that drove the publishing industry to be creative and innovative may turn out to be a very lucky turn of events, because companies who figure out early how to access and integrate new labor models will have huge advantages in the workforce.
Getting started with the future of work
Here are 3 things you can do to accelerate this agenda in your organization.
- Boost awareness: Task executive sponsors with knowing the best sources of independent contractors for your organization, and where they can be deployed.
- Fix the plumbing: Ensure procurement, legal, and HR are set up to work with the growing group of independent contractor solutions.
- Get started: Encourage rapid experimentation beyond what you are currently doing; the goal is to have a company-wide approach to tapping independent talent routinely.
No matter where you sit today, soon you will all be either regular users of independent contractors or independent contractors yourselves—and both will be just fine.
Tessa is an Associate on BTG’s Client Development team. She connects with clients to help them understand how they can best leverage the independent workforce.