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TTL-Twago-Whitepaper.Pdf THE WORLD OF WORK IS CHANGING Over the past decade, a growing number of organizations have adopted an increasingly sophisticated and effective integrated approach to managing their workforce. This approach is characterized by a greater use of contingent workers and inclusion of those workers, along with permanent employees, as part of a holistic talent strategy. This movement has largely been driven by a need for greater flexibility and cost control in staffing models, as well as a need to engage the growing number of workers who choose agile or flexible employment as a preferred career strategy. In particular, 38% of all millennials are choosing flexible work, according to Forbes. Since millennials will comprise more than half of the total working population by 2020, the flexible worker will become even more common. Independent studies by Staffing Industry Analysts, Bersin, and Baker & McKenzie show that the contingent workforce will grow to approximately 30-40 percent by 2020. While a growing number of companies are applying integrated talent strategies that utilize both flexible and permanent workers, there are challenges to this approach. Many companies struggle with compliance issues. These same employers may also struggle to implement effective recruitment, engagement and hiring strategies across a wide range of worker types, from contingent workers and contractors, to consultants and freelancers. In addition, there is often a lack of transparency for statement of work projects (SoW) that are typically managed solely by line managers. THE RISE OF MSP PROGRAMS AND THE CHALLENGE OF THE “CLOSED LOOP” These challenges are reminiscent of the early 2000s, when temporary workers became more widely embraced among organizations. The solution for many companies was a Managed Service Program (MSP), where the end-to-end sourcing, contracting and payment of temporary workers was handled by an outside MSP provider. The ability to create workflow consistency, minimize risks and better manage temporary workers, alongside permanent employees in an MSP, resulted in wider adoption of this strategy. As a result, vendor management systems (VMS) also became important in supporting MSPs. 1 Today, the annual cost of talent management has grown to more than $100 billion globally. This large number accounts for the increasingly diverse categories of workers, including traditional temporary staff (both light industrial and clerical), professional contingent workers and permanent employees, as well as a fast-growing number of independent contractors or freelancers. In line with demographic changes and economic cycles, this last group is rapidly becoming the biggest talent pool for professional skill sets in many markets. The challenge, for many companies, is that the MSP approach can lead to a “closed loop” that isolates certain talent from other parts of the workforce. Thanks to advances in technology and strategy, today’s organizations can now address and solve this isolation risk to create a more effective workforce engagement and a stronger talent strategy. To solve the engagement and isolation issue, consider the closed-loop process typical in many MSPs today. For example, the hiring manager first creates a requisition for each open position, at which time the approved requisition is distributed via the MSP vendor to hundreds of subcontracted staffing suppliers to assist in filling the position. The job description is only shared across the contracted suppliers. These suppliers source and provide the candidates under agreed contractual conditions. After the final selection by a hiring manager, the contract, the billable hours and the invoicing is fully managed by the vendor management software and MSP. The end result is that the entire engagement cycle is a single “closed loop” with little connection to other talent practices and processes, such as employee engagement, performance management and development. 2 When comparing the process to the world of permanent recruitment, several key distinctions emerge: When hiring for a permanent vacancy, most organizations maximize the opportunity to use the company brand to attract candidates and further their reputation as an employer of choice For permanent vacancies, companies typically use innovative recruitment marketing to find, attract and engage the best talent In order to attract permanent talent, a variety of communication channels are used to reach the ideal candidate (SEO, landing pages, mobile texting, job boards, etc.) After an employee is hired, most companies invest significantly in employee retention. Companies may offer free meals, free gym access and training or other perks. Additionally, parties or other team social events are hosted to create a positive company atmosphere and engage current employees Given the rapid growth of independent contractors and freelance talent, there is an opportunity to apply these permanent hiring best practices to the recruitment and engagement of these independent worker populations. In today’s environment, it’s not ideal or effective for organizations that are highly dependent on these workers to manage them in an independent, closed loop process. Simply put, organizations need to begin leveraging the best practices from the permanent recruitment world when recruiting for flexible workers. The same can be said for managing other talent groups, such as retirees or “silver medalists” (those who are not hired for open positions, but may be ideal candidates in the future). In short, all types of workers represent important engagement opportunities for companies today, both for current openings and for future opportunities. Enterprises will need to leverage the power of their employer brands to attract and engage with all types of top performing talent. “We see a significant rise in the number of freelance workers in nearly all our MSP programs, and delivering a quality talent experience to this population is a clear priority. An approach that leverages the client’s employer brand, and facilitates engagement of these resources, will allow us to deliver the same quality, speed and comfort level that the client is accustomed to when working with our MSP programs across all contingent workforce categories.” – Linda Galipeau, CEO, Randstad North America; Executive Board Member, Randstad Holding 3 Organizations today cannot afford to miss out on opportunities to attract and engage the freelance and contractor talent pool, both for current openings and future opportunities. Enterprises will need to leverage the power of their employer brand to attract and engage with these workers. FREELANCER MARKETPLACES GROW INTO THE ENTERPRISE SPACE When it comes to breaking open the closed loop of contingent workforce management, applying permanent employee best practices and better engaging freelancers, technology innovations have led the way. The history of that innovation, and the manner in which processes have evolved, sheds light on the opportunities that companies have in translating those opportunities into a competitive advantage today. It begins with the advent of the freelancer marketplace that led to today’s Freelance Management System (FMS). The rise of the first global freelancer marketplaces came in the late 1990s. Elance, vWorker and oDesk were the first platforms on a global scale. In 2009, Freelancer.com and twago followed that route. All platforms strongly grew their respective markets, but experienced similar challenges. The main challenge for open marketplaces is the client base, as pure self-service platforms typically attract customers that are small enterprises or even individuals. There were two main reasons for the early small client limitations of these platforms. First, the online self- service process does not fit into a corporate world with more complex components, such as multiple approval processes, compliance checks and SAP-based order processes. Second, these marketplaces acquired their customers mainly online, but large enterprises typically do not look for talent through a search engine. That meant the client base of small enterprises was basically built into the model itself from day one. The challenge with these customers is that they usually do not have a recurring need, and the average project size and the connected margin is rather small. At the same time, marketplaces are challenged with high customer acquisition costs due to the strong competition, such as agencies, with higher margins. These earlier marketplaces struggled with profitabilit, then the market started to consolidate around 2010. At that point, freelancer.com and twago acquired a number of smaller competitors. In late 2013, the merger between Elance and oDesk was announced, and the merged company became Upwork. The consolidation led to better economies of scale, and the marketplaces started to realize their first profits. At the same time, the marketplaces were striving to gain larger customers and a foothold in the enterprise segment. Upwork launched Upwork Enterprise in 2016. twago, the largest European marketplace, onboarded its first enterprise client into its enterprise portal in early 2017. 4 EXPANDING THE WAY COMPANIES MANAGE CONTINGENT LABOR Over the recent past, the capability and value technology solutions offer have grown significantly. To fulfill corporate needs, Upwork currently follows a strategy that WorkMarket (founded in 2010 and focusing completely on enterprise businesses) has laid out. Both platforms provide a comprehensive set of functions,
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