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The Pressure to Strike the Right Balance
CTDO Magazine

The Pressure to Strike the Right Balance

MM
Friday, March 15, 2019

Four steps can help hiring managers empower independent workers while following company policy.

In some organizations, it is becoming tougher to manage people—regardless of whether they are employees or contract workers. As more and more high-level, independent workers are staffed on projects, hiring managers are learning that they must follow new rules to manage these gig workers, rules that may not seem intuitive and may even seem harsh. Consider the recent kerfuffle at Google.

In December 2018, The Guardian published the rules Google had adopted for managing its “two-tiered” workforce. The exposé cited in detail the specific practices this large, global tech company had for managing its temps, vendors, and contractors—or TVCs. These individuals comprise about half of Google's workforce. The policy explains that because these workers are not employees, they cannot be treated as such. Employees need to monitor—and most often withhold from TVCs—invites to meetings, off-sites, company parties, and training opportunities. Hiring managers are expected to complete a thorough training program about managing TVCs, including reviewing specific situations that could arise.

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For example, one training video instructed managers that, when celebrating the success of a project team, they need to be sure that TVCs do not receive the commemorative company T-shirt. Similarly, Google employees are encouraged to ensure that contractors do not identify themselves as Googlers on social media or recruiting sites. The article quotes one employee as saying, “We are legally in the clear to treat people like garbage.”

Insider or outsider?

The Google policy may seem extreme to some, but it is the company's way of reducing the risk of bringing outsiders into a firm's working environment. Some risks like confidentiality and proprietary information are handled contractually with nondisclosure and consulting agreements. A second risk Google cites is the danger of a TVC not following the company code of conduct in such areas as harassment or discrimination. (That said, the hope is that the opposite also is true and that Google protects TVCs from harassment and discrimination by Google employees.) But the true risk Google wants to avoid is co-employment.

Co-employment is a risk that a court case involving Microsoft made famous nearly 20 years ago. When the Internal Revenue Service fined Microsoft for independent contractor compliance for what it referred to as “permatemps,” Microsoft tried to make these independent workers the employees of staffing firms. Some refused, and others who became such employed temps initiated the suit, saying that despite their staffing company W-2, they were really Microsoft employees. The federal court ruled that these temporary workers were common-law employees and therefore eligible for participation in the company's 401(k) and stock purchase programs. This ruling stood on appeal, which sent a shudder through the business world and left Microsoft with a nearly $1 billion settlement cost to the class action lawsuit.

Not only was this a landmark employment law decision, but it was also one that affected primarily knowledge workers and the high-end, independent talent market. Despite the chilling decision, the professional independent talent market has flourished. In 2018, more than 57 million people identified themselves as independent workers, according to the annual Freelancing in America survey that Upwork and the Freelancers Union conducted. In the meantime, the human capital industry has developed sophisticated and often cumbersome structures to manage external workers and minimize the corresponding risk. In doing so, they often take the talent acquisition function out of hiring managers' hands and place it in the domain of purchasing and sometimes HR.

Meanwhile, the rise of digital talent platforms—such as Upwork, Fiver, and Catalant, which consider themselves technology companies and not human capital providers—have opened up resource conduits that may be less sensitive to the co-employment risks. Their contracts absolve them of any responsibility for employment compliance. As such, many companies devise their own compliance methods. This may explain why Google has a policy that may seem inhumane to some, since its purpose is not to empower talent but to mitigate risk.

So, what should hiring managers do? Clearly, they must follow company policy about managing resources. But just as important, they should empower these resources who are brought in to achieve results to do so as quickly as possible. This tension is exacerbated by how other employees may view the external workers.

Yet, managers can make the most of this situation. These four steps—known as TACK—can help them do just that:

  • Take steps to get top talent.
  • Articulate a talent value proposition.
  • Communicate, communicate, communicate.
  • Keep your eye on the prize.

Take steps to get top talent

One of the things that has changed of late is the increasing leverage top independent talent has with companies. At the Collaboration in the Gig Economy conference in fall 2018, the purchasing manager of a Fortune 500 firm noted that price used to be the most important aspect of a deal with an outside contractor. Now, it is more important to get the right person. The wrong talent at a lower price can be very expensive.

Correlated to this is that top talent has many options. Not surprising, in today's fast-paced world, options can come and go quickly. Hiring managers' use of a deliberate process for hiring the right employee may be lost in the dust when dealing with the pace of the freelance community. Companies must be ready to engage quickly. From the start, they should define contracts, insurance provisions, statement-of-work documents, interview processes, budget authorizations, expected timetables, anticipated travel schedules, and deliverable requirements.

Getting the right person may not always be as simple as identifying that person, because in the evolving gig economy, top talent can choose the types of projects as well as whom they work with. Firms like Glassdoor have built a business on evaluating companies as an employer of choice, but increasingly companies likewise must be the client of choice. This aspect leads directly into the next step.

Articulate a talent value proposition

A popular notion in HR circles lately is the idea of an employee value proposition, which outlines the value an employee receives in terms of monetary reward, employee experience, and career development by being part of the company. The talent value proposition is a relatively new idea Willis Towers Watson—a global advisory, broking, and solutions company—has advanced. The talent value proposition lets external, independent talent understand the value of their time working in the enterprise. Here are some ways to enhance your client brand.

Enable independent contractors to set their own schedules. This flexibility, according to MBO Partners' annual The State of Independence in America study, is the top consideration for most independent workers. Sixty-three percent prefer flexibility over money. As long as their schedule preference is consistent with achieving the deliverables of the project or statement of work, such user control goes a long way to creating a happy worker.

Pay them quickly. Although many contractors may work through intermediaries, others may be paid independently. Make sure you set them up in your accounts payable system immediately. Moreover, if your firm tends to manage cash closely and pay suppliers slowly, set up your independent workers on a service such as Qwil, a startup that funds receivables for independent workers to ease the delay in payments.

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Treat them with respect. Even though you can't invite independent contractors to the company picnic, you can treat them as respected and valued members of a team—although temporary, they are still part of a team. Having a caste structure that suggests that external participants are less qualified, competent, or valuable than employees does not lead to high-performing teams.

Show them beneficial attributes of the company. For example, if your firm does not believe in stressing out employees, tell your independent talent so they can enjoy this benefit as well. You can also bolster their marketing efforts—offering written testimonials of a project well done goes a long way for most contractors. According to a recent Workspan article, 47 percent of companies offer L&D opportunities to independent workers, although making these optional rather than required is preferred from a risk-management perspective.

Be a great place to have worked. Independent workers are more adept than employees in developing their own skills, according to the recent Freelancing in America survey. Consequently, client pedigrees can matter to them, even for project work. Make sure your environment is a great place to have completed a project.

Communicate, communicate, communicate

Some organizations are mature in how they work with external resources, while others are not. It is important for the hiring manager to defuse any employee concerns about newly hired outside resources. Some employees may feel threatened by outside consultants' expertise. Others may be annoyed at the cost. Many staff members do not understand that the consultant who is receiving $200 an hour for a six-month project is not the equivalent of $400,000-a-year employee.

First, the contractor does not receive health benefits, paid holidays or paid time off, bonuses, contributions to retirement programs, or stock options. In some firms, especially fast-growing tech companies, this can be in excess of 40 percent of the employee's salary. Moreover, consultants also have the risk that once the six-month gig is up, they may not have another project to start on immediately; there is a real possibility of unpaid down time. Explaining this to employees so they do not hold a grudge about the compensation situation can go a long way to creating team harmony.

Similarly, it's important to communicate with the consultants. Many companies are developing an onboarding process for independent workers. Understanding how a project fits within the company's big picture gives independent contractors a greater sense of purpose and engagement. Because they are not employees, the process should differ from new-hire onboarding, but you can model the program after your employee onboarding. Set expectations, explain office logistics, and provide contact lists. It may be appropriate for employee team members to join the session and demystify the process, make introductions, and build relationships.

Keep your eye on the prize

Remember that the most important thing for the enterprise is achieving the best results possible. Keep not just your eyes on the prize but also the team's eyes. Let team members know that their collaboration on this effort will achieve the company's goals and enhance the standing of each member, internal or external, because of their contribution to the project's success. Recognition of individual team members, regardless of their employment status, rewards performance and sets the tone for the organization: Everyone will perform and will do so with a great team, a blend of employees and independent contractors. This mix will become even more commonplace in the future workplace.

Read more from CTDO magazine: Essential talent development content for C-suite leaders.

MM
About the Author

Marion McGovern is author of Thriving in the Gig Economy, co-founder and former CEO of M Squared Consulting, and founder of Collabrus.

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