The Gig Economy: New Door To Accessing Best Resources
When you hear the term “Gig Economy”, most likely you think of Uber, Lyft or Airbnb. Probably all of us have seen TV commercials for these companies. However, as we enter 2017 you would benefit from changing your opinion and realizing that the gig economy isn’t just about ride-sharing services and small odd tasks. Smart business owners are taking advantage of changes in the labor markets to gain access and engage highly qualified knowledge workers — and, with some will and a little preparation, you can too. Here are some key steps to take:
Learn about Gig Economy
The first step is to learn a more about what is the Gig Economy. This term refers to a new trend in the labor markets where jobs are performed by freelance resources that are engaged on specific tasks rather than employees.
The freelance economy grew to 55 million Americans in 2016 — 35% of the nation’s workforce – and the growth is likely to continue. This trend doesn’t just exist among drivers and simple service workers. It is growing among professionals who have been trained at tops schools and firms. It is also spreading among various age demographic groups. Why? There are a few reasons:
- Talented and experienced knowledge workers, historically employed on a full-time basis, are dropping out of the full-time labor force and joining the ranks of freelancers. Baby boomers who don’t want or can’t afford to fully retire, or Gen Xers craving flexibility to spend time with their kids and care for elder parents, and millennials who seek more freedom and independence in their work.
- Technology made it easier to do knowledge based work from anywhere at any time. While initially this trend made technology work a prime target for outsourcing, today more and more businesses are pushing other types of work outside of the office. The increased use of business process outsourcing has increased business owners’ comfort level with people doing work outside the employment boundaries of the firm and not tied to one location.
- The employee-employer social contract has all but disappeared over the past 30-40 years. Working for a business no longer offer long term security or many benefits, and individuals are not as loyal as they once were. In fact, for U.S. workers, the median tenure in a job is 4.2 years and no one thinks about lifetime employment. Mobility is here to stay.
Understand the benefits
Once you understand about the Gig Economy, you have to ask: What’s in it for me and my business?
The most immediate benefit is to shift labor costs from fixed to variable. As a business owner having variable costs and reducing overheads immediately adds to the bottom line and provides flexibility to scale costs in line with revenues. But there are other less quantifiable and possibly substantially more valuable benefits:
- You can source niche skills which may not be required on a full-time or ongoing basis, at least not for a while. Having access to a vast pool of on-demand talent can provide flexibility to innovate or develop products and services without committing to a longer term employment relationship.
- You can adequately staff projects without overloading your employees or yourself. Often, these projects become an employee’s third or fourth priority. With a freelancer, you get their focus because delivering on the project is their top priority.
- You can access top talent that can bring a wealth of experience gained in the traditional labor market without having to engage recruiters and hire away from larger firms.
- Last, but not least, working with a freelancer is perhaps the best way to assess his or her skill and cultural fit before potentially bringing them on board full time. Don’t underestimate this benefit — recruiting and selection processes are notoriously ineffective, and hiring mistakes are expensive.
But perhaps most important step is to prepare your business and your team to effectively use freelance labor. There are several aspects to consider, ranging from the budgeting to the cultural fit.
- You will need to develop an approach to managing freelancers that complies with labor regulations. Being compliant will allow you to retain the key benefits of freelance workforce without exposing you to the risk of fines due to misclassification or poor record keeping. This means you need to find a balance between managing compliance with regulations governing freelance workers and pragmatic way of managing your resources.
- You will also need to have realistic budget set to engage with good freelancers and give them enough resources and time to accomplish their task. Many business owners have unrealistic expectations when hiring freelancers and limit the budgets. Further, many firms treat budget set for freelancers or project based work as a separate pool from what they use for regular employees. This prevents easy and meaningful movement of resources.
- As a business owner or a manager, you will need to apply the same good management practices with your freelancers as you do with your permanent employees. Even if someone works as an external resource, they still require purposeful work, clear objectives, recognition and respect for the work that they do and value that they add to your business.
Once you understand how and why to engage the freelancers, you will need to access the freelance labor market. This is where technology has made perhaps the biggest impact.
Traditionally freelance market has been opaque and fragmented. If you didn’t already know someone or got a recommendation, the cost of finding, vetting and contracting with a freelancer was high. Technology has reduced this cost materially and made the market much more transparent. Online freelancer marketplaces make finding the right resources much less time consuming and costly. Plus you can rely on the feedback left for each freelancer by their prior clients.
Freelancers will become a key part of the knowledge work marketplace. The gig economy isn’t just for rides and the sooner your business taps into this trend, the more benefits you will realize.