HR experts have a new term for the employment model that organizations are shifting towards – the open talent economy. While the classical employment model relied on HR departments hiring full-time employees who work eight-hour shifts on location, the new open talent economy model is a collaborative, technology-enabled, fast-paced way of sourcing workers through networks and communities.
“There’s a very high demand and low supply of the talent that’s required within the workforce. They’ve been forced to look at other ways to meet that supply.” ~Andrew Liakopoulos, Human Capital Principal at Deloitte.
Deloitte coined this term to refer to the currently evolving workforce, which is a “mixture of full-time employees, contractors and freelancers”. A new generation of workers has a different focus from generations before them who sought job security and benefits. The worker of today is looking for freedom, with the ability to shift from role to role and organization to organization without any geographical boundaries. And global markets and products align to the desires of workers with a need for talent models that are agile, scalable and fast. Employers are looking for the right skills to be available to them as and when they need them.
In this article, we explore some of the market trends and factors contributing to the rise of the open-talent economy.
The Increase of Freelancers
According to MBO Partners, the number of freelance workers (both independent contractors and agency contractors) in the United States is continuing to increase. In 2012, there were 16.9 independent workers in the country, which MBO forecasts rising to 23 million in 2017 and reaching 65 to 70 million (approximately half of the U.S. workforce) by 2020.
The growth of online marketplaces that provide services to connect freelancers with employers also supports this trend. A report from the freelance-staffing platform Lance showed that businesses spent 335 percent more on network and security jobs through their services this year than one year ago.
According to a recent survey, 35 percent of freelancers chose to remain independent, as they believe they will obtain more work taking this route. And 25 percent are attracted to the potential for higher pay.
The growing ability to digitize many different types of work opens up the opportunity to source skilled workers from anywhere in the word.
“What this is going to start causing is a lot of virtual work. If you hire freelance talent [they] can go through an entire project without being in the same room together. Creating this collaboration will be a challenge.” ~Andrew Liakopoulos, Human Capital Principal at Deloitte.
Crowdsourcing is springing up as an alternative channel to source talent. Employers are increasingly engaging in open-source projects where workers contribute different skills, information, and insights to solving a wide-range of business problems. Mechanical Turk, a crowdsourcing internet marketplace by Amazon, is leading the way for a business model where projects are divided into small components, and the work is executed remotely on a piece, project, or hourly basis.
Surge in Temp Employment
According to the Labor Department, a record number of 2.7 million workers held temp positions in July, up from 2.5 million last year. Recent data shows that almost 12% of all employed people in the United States hold temporary or contractual positions. Experts say that economic uncertainty and a shortage of consumer demand are just some of the reasons why employers are reluctant to hire full-time employees. The upcoming health care reform mandates along with the changing talent motivations are causing more companies to turn to temp workers to fill their talent pools.
“Employers are even more reluctant than usual to commit to full-time employees. They like the flexibility.” ~Harry Holzer, Professor of Public Policy at Georgetown University
Professional and Business Services
Temporary help services sector is growing at a faster pace than any other under professional and business services. Recruitment agencies remain a popular job source destination for temporary workers. Temp agencies have become some of the largest employers in the country; Kelly Services is second in size to Walmart.
Certain geographical regions in the United States have seen tremendous growth in the number of temporary workers. Georgia, for example, has seen a 40 percent increase in temp jobs over the past four years, particularly in information technology positions and office and clerical help. In New Jersey, where there state’s gross domestic product (GDP) has grown slowly at 1.3 percent compared to the national average of 2.5 percent, employment in the temporary job market accounted for 15 to 22 percent of gains in the private sector. And according to the U.S. Bureau of Labor Statistics, Ohio has seen an increase of 43% in temporary staffing employment.
More Part-Time Workers
Out of the 162,000 jobs added to the economy in July, 65 percent were part-time positions. According to some analysts, part-time work has made up approximately 70 percent of job growth so far in 2013. The Bureau of Labor Statistics defines part-time work as being less than 35 hours per week.
New Jobs in 2013: Full-Time vs. Part-Time
Source: Mercatus Center at George Mason University
A recent survey by Gallup indicated that 1 out of 5 workers is part-time, and the percentage is ever increasing. A study by the American Enterprise Institute finds that in the first half of 2013, 4.3 part-time jobs were created for every one full-time job. The study also shows a 2.7 percent increase in the number of people working 25 to 29 hours per week.
Experts believe that employers are offering more part-time positions to avoid being hit by the new health care law that will require them to provide medical coverage for full-time permanent workers. HR analysts argue that companies are simply getting smarter on evaluating their hiring needs and becoming more flexible with the composition of their workforces – many companies have come to realize that the traditional Monday to Friday, 9 am to 5 pm worker model does not fulfill their business needs. Employers are becoming more sophisticated and savvy about using analytics to forecast their hourly staffing needs, and are scheduling workers accordingly.
Looking closely at the 195,000 jobs added in June, a total of 75,000 were in the leisure and hospitality sector. Workers in this sector average about 26.1 hours per week.
A Greater Demand for Workplace Flexibility
With top-level talent increasingly demanding more work-life balance, companies are starting to realize that workplace flexibility is a solution to meet needs on both sides. HR executives have known for a long time that the best way to drive productivity is to have happy and engaged workers. Gallup’s 2013 State of the American Workplace Report showed that only 30 percent of employees are engaged and inspired at work, and 18% are actively disengaged. These disengaged employees cost the United States up to $550 billion in lost economic productivity annually.
It has been proved that flexible work options reduce worker absence and turnover. The Bureau of National Affairs estimates that over $11 billion is lost annually due to turnover.
The Bottom-Line Impact of Employing Remote Workers
A 2011 paper by the Global Workplace Analytics and Telework Research Network shows that almost 80 percent of U.S. workers want to work off-site at least part-time and 64 million employees hold a job that can easily be configured to telework, at least part-time.
From 2005 to 2011, telecommuting grew by 73%, with a 424% growth for federal workers. Based on these trends, telecommuters are forecasted to total 4.9 million by 2016, a 69% increase from 2011.
According to the study, transforming compatible jobs to telework positions could lead to a national savings of over $700 billion per year, where a typical business would save $11,000 per person per year. Remote workers themselves would save between $2,000 to $7,000 per year in transportation and work-related costs, not including cuts in after-school care and eldercare costs.
“With recruiting costs running approximately 1.5 times annual salary, the ability to engage and retain valuable employees has a significant impact on an organization’s bottom line.” ~Bureau of National Affairs.