Contractors, Freelancers and Gig Workers: The Changing Face of the Modern Workforce
Three trends emerge identifying the powerful forces driving the changing face of the modern workforce:
Significant barriers to leveraging contractors exist in organizations
Demand among specific industries is increasing for project work and specialized skills
Organizations must rethink how they engage with and manage their on-demand workforce
Finding and Effectively Deploying a Liquid Workforce
Back in 2015, the title of a contributed article in TechCrunch boldly proclaimed that “In the Future, Employees Won’t Exist.”2 At the time, the liquid workforce was experiencing an upswing, with predictions from Intuit3 that by 2020, 40% of the U.S. workforce would be “contingent workers.”
Turns out, they were four percentage points shy of hitting that target: A report4 released earlier in 2021 showed that in 2020, contractors comprised 36% of the U.S. workforce, and it’s expected to grow from 59 million to 90.1 million in just seven more years. Our own research supports this projection: 52% of our respondents say they’re looking for contractors to fill gaps to meet business needs in their organizations, with 58% of those searching for talent monthly and 27% searching quarterly.
of 2020 U.S. workforce comprised of contractors
Increased use of contract workers since COVID-19
Expect use of contractors will increase
Of course, the pandemic has had some bearing on the demand surge for contractors. As COVID-19 continues to ravage the economy, many organizations have had to shed jobs, leaving gaps in their base of full-time employees. As a result, organizations are looking for greater flexibility in their hiring models, and a liquid workforce fits the bill. In fact, over one-half (57%) of respondents say that COVID- 19 has led to their increased use of contractors. Another 29% say their use of contractors will increase post-pandemic.
While the contractor pool is large and demand certainly exists, 31% of our respondents say finding good contractors is a challenge. Part of that may be attributed to a lack of internal processes and technology: Our research reveals that those surveyed see a need for their organizations to improve their processes for identifying (70%) and selecting (53%) skilled contractors. Once hired, additional challenges related to internal structure are laid bare. For example, how organizations onboard, collaborate with, and manage their contractors remain concerns among our respondents
Key areas businesses need better processes and technology to manage contractors:
|Staff and resource planning||48%|
|Collaborating with contractors||37%|
|Managing contractor work and performance||25%|
The primary drivers for use of on-demand resources:
|Ability to scale||52%|
|Create new business line||38%|
|Access to specialized skills||29%|
Questions to consider
Organizations Want Contractors with Specialized Skills but Vary in their Requirements for Experience
Traditionally, contract work has consisted of administrative or operational tasks, as opposed to more strategic work. However, our research found that to be changing as 92% of respondents say they’re very or extremely comfortable giving mission-critical work to contractors. Despite their comfort in assigning mission-critical work to their on-demand employees, 45% of our respondents indicate that a primary challenge for them is having confidence that contractors will actually deliver.
Contractors with specialized skillsets are in high demand among our respondents. A total of 29% say they’re looking to find contractors to fill gaps in specialized skillsets, and 91% of respondents say they anticipate specialized skills will be needed more often over the next 12 months. However, required levels of experience vary depending on industry. For example, our respondents in the accounting and financial services sectors are picky about how many years of experience their contractors have, with 44% looking for contractors with five or more years of experience.
Conversely, only 24% of respondents in the marketing/agencies sector look for contractors with more than five years of experience. This 20-percentage point difference may be attributed to differences in industry culture: the marketing/agencies sector is more creative and project-driven in nature, whereas accounting and financial services organizations have long been associated with more traditional and linear thinking.
To be fair, this sector is also bound by strict regulations and compliance mandates, so it makes sense that contractors with more experience are better suited to working in this sector.
are very or extremely comfortable giving mission-critical work to contractors
indicate that a primary challenge for them is having confidence that contractors will actually deliver
are looking to find contractors to fill gaps in specialized skillsets
Questions to consider
The Right Technology is Paramount to Effectively Managing an On-Demand Workforce
While organizations can benefit significantly from using contractors, in practice, managing a widely dispersed, on-demand workforce can be complicated. In fact, 94% of respondents acknowledge that managing a contractor is different than managing an employee. Success in doing so will likely be dictated by the strength of the technology used. To that end, 62% of our respondents say they use a professional services automation (PSA) system to manage their contractors and the diverse projects they work on; 47% use time tracking systems.
However, a whopping 84% of those surveyed say they believe their organization has a technology gap in managing contractor resources. This becomes clear as we look at the number of respondents (70%) that say they still use spreadsheets to manage their on-demand workforce.
Our report shows significant differences among specific sectors as to how they manage their on demand workforce. For example, 79% of respondents in accounting and financial services rely on spreadsheets, as compared with 60% of respondents in marketing/agencies.
Those numbers change to 60% and 62%, respectively, when the same respondents were asked about their use of PSA systems. More than 50% of our respondents in the technology sector say they use time tracking systems to manage their diverse (full time, part time and contractors) workforce and the projects they work on. But only one-third (35%) of organizations in the accounting and financial services sector can say the same.
We suspect these deltas are a result of how differently these industries deliver work. It’s important to note, however, that shifting consumer behaviors brought about by the pandemic have forced many organizations in these sectors to accelerate their adoption of technology solutions, so we may yet see this delta narrow over the next year and beyond.
Use Time Tracking Systems
Use Professional Services Automation
Use Spreadsheets (Excel, Google Sheets)
Questions to consider
While this report shows the growth of contract work and the common needs to be filled in professional services organizations specifically, there remains a challenge: the lack of innovation in technology to support a dynamic workforce.
Indeed, professional services organizations — uniquely people dependent and often facing challenges in scaling — have remained underserved by technology, with little innovation to support a modern, on-demand workforce. These organizations must choose between leveraging ERP or CRM systems, project centric point solutions that create silos of information, or legacy PSA systems built for a different era. As a result, opportunities to scale, grow margins and maximize outcomes for every project are difficult to realize.
But there is a path forward, and it begins with the Kantata Industry Cloud for Professional Services™ — purpose-built to liberate professional services organizations and help them find and engage with their ideal dynamic workforce. With the Kantata Industry Cloud to manage the resource relationship at every stage of the professional services engagement life cycle, businesses can optimize demand forecasting and match project needs.
Organizations gain a new level of visibility across the entire resource value chain to drive scale, profits, and competitive advantage, and they can drive more predictable outcomes by improving their processes and practices. Finally, the Kantata Industry Cloud integrates seamlessly with key systems, data, and workflows to maximize the value of the tech stack.
The ability to optimize and manage a liquid workforce is increasingly important and will continue to be a cornerstone of success. Meeting the moment with tools that are purpose-built for optimally managing dynamic resources will ensure organizations have the right mix of resources that underpin a competitive edge and drive greater profits.