As Information and Communications Technology has been improving and skills getting more specialized, vertically integrated organizations have gotten into outsourcing over the past few decades. Rapid improvement in internet penetration and digital awareness of people, remote working, and freelancing has been on the rise.
As per McKinsey Global Institute report, in developed economies, anything between 20-30% of the workforce is already engaged in some form of freelance work. With technology, this talent pool can be better utilized in companies and for developing economies there is a large untapped potential in this space.
Employment and transaction cost:
One of the roles of the formal organization as against the free-agent market is to reduce the transaction costs associated with hiring free agents in the market. Organizations need to spend a lot of resources in search and selection, bargaining, and decision-making while hiring full-time employees. If they need to do this every time in the market for getting a job done, it would be extremely inefficient. Hence the formal organization works towards converting these external transactions to internal transactions by employing full-time employees.
Internal transactions also have their cost in terms of appropriating benefits without contributing to value creation and promoting self-interests. HR Technology through an AI-enabled platform for Gig professionals and Gig employers can reduce these external and internal transaction costs through transparent and efficient on-demand talent availability.
While not all jobs can be completely converted to gig-work, a blended workforce will reduce the transaction costs, improve efficiency as well as the employer brand as GenY and GenZ employees prefer the autonomy that comes with freelance work.
Gig-professionals for Modular development for product innovation:
Where R&D or new product development can be broken up in to modules or where the entire product development needs certain expertise, it can be more cost-effective to engage expert talent for a fixed tenure through gig-employment. This will allow for lower cost as organisations don’t have to hire the talent on a full time basis and will also allow for access to specialised expertise. With reduced cost of R&D, companies can improve their profitability.
Building a talent pipeline:
Through the platform, potential gig professionals can be shortlisted and engaged to keep a talent pipeline ready for trending skills. Analytics on trending skills will be available through the platform and proactive talent engagement will allow for higher success rate even for highly in-demand skills. With a steady talent supply and AI-enabled fast selection, organisations can harvest revenue generation opportunities through increased talent supply chain efficiency.
The platform provides for AI-enabled matching for gig professionals and gig employers. Talent is available to organisations on demand. This ensures that turnaround time to hire is drastically reduced. Further platforms can manage custom onboarding for gig professionals. This allows for reduced training time for gig-workers.
Reduced overall employee cost
The on-demand model ensures that there is no need for organisations to overhire. Due to shorter period of hirings/project-based hiring, there is also no need to pay continuing annual salaries. Certain statutory benefits may not be applicable for gig workforce and these can be optional for the organisation. Although the new labour code does cover the gig workforce, hopefully the compliances associated with it will be much simpler when compared to permanent employment.
Organisations will have choice to select a more efficient benefits package if required. Further training and skill development get democratized and ownership lies with gig professionals. Hence organisation’s training cost will come down. With the overall total cost of employment coming down, organisations can enhance their profitability. By converting some of their fixed costs to variable costs through gig-employment organisations can manage the risk of underutilised human capital assets.
Enhanced productivity through blended workforce
The platform also addresses internal transaction costs as there is reduced level of monitoring required with gig professionals. Gig Platform provides complete accountability of the work to the gig professional. Further the performance is focussed on outcome and not on inputs. It also reduces the risk of poor performance as organisations don’t need to continue with a poor performer beyond the contract / project duration. Besides remote working has been shown to increase productivity in organisations during the current pandemic.
In the VUCA world employee productivity cycle has been coming down since the time available for organisations to recoup their initial training investments is getting shorter as skills are getting outdated faster. Employee tenures are also getting shorter as concept of loyalty has shifted from being towards the company to being towards ones profession. Hence the value provided by FTE overall can be seen as shrinking faster. Gig professionals will always provide higher value overall than their cost as it gains from market efficiency and organisations have lower risk of continuing with poor productivity.
Manage demand volatility with a blended workforce
Often there is volatility of demand for certain skills. Forecasting and hiring models don’t always provide for a steady supply of talent. With a blended workforce employers can balance the volatility as they can “hire as they go”. Platform provides analytics on skill availability on a snapshot and on a rolling basis using which organisations can address the demand volatility with a higher success rate.
Investments in Gig professionals engagement and automation support
Organisations need to invest in automation support through subscription of the platform and through new productivity and engagement tools for gig professionals. Current set of technologies and systems, whether applicant tracking system, ERP system, Job design have been designed primarily keeping the full time employee in mind. Organisations need to support the gig-employees through suitable infrastructure, processes and also culture.
In order for these initiatives to work, organisations would also need to support this way of working through automation and commitment to engagement of the gig-workers. Organizations would also need to work on building the supporting culture to ensure the freelance workers are not treated as second citizens but an integrated part of the blended workforce through remote working options for FTEs, fluidity to move across FTE and gig professionals, equitable compensation, and benefits etc. In absence of these there is a risk of commodification of jobs and informalisation of formal workforce.