With increasing corporate reliance on contract and temporary workers come more challenges for HR departments.
According to a Deloitte report, the number of non-employee workers can reach up to 40% of a company. Not only has the percentage of non-permanent employees increased, but also their roles have expanded to include interim management, contractors with specialized skills, and coaches.
IT and manufacturing have embraced outsourcing in the last few decades, and IT resourcing in particular has extended well beyond traditional hiring to include these non-employee workers, who often play an important role in a company’s success. Skills gaps among specialized workers and structural differences in the economy should reinforce the trend towards hiring temporary workers.
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Systems approach |
Human-resources management (HRM) is about actively looking at resourcing and planning the human capital – i.e. the talent – in the company. Agile in that context means quickly finding and hiring more short-term workers who have relevant expertise. That process is faster and more efficient than finding and hiring someone for a full-time position, offering a contract, and getting them on board and up to speed. This is particularly true for temporary needs like transient surges in production or to compensate for employees on leave.
But core HRM responsibilities like training/development, compensation/benefits, and mobility normally apply solely to standard company employees. Responsibility for non-permanent employees usually falls to their own initiative or to intermediary companies like employment agencies. In reality, few employment agencies provide adequate talent management, if any, to temporary employees or contractors.
With up to 40% of the workforce external, HR must consider people from a total point of view. At a worldwide HR conference in 2013 (SIA Executive Forum 2013 in Orlando, Fla.), the keynote speaker called this “total talent management”.
Employment laws, however, dictate what HR can do. Laws concerning the engagement of temporary workers are strict to protect the rights of part-time or contract workers – for example, to ensure they can take advantage of employee benefits or how long they can work before being considered a full-time employee. Limitations vary from country to country; in Europe, the legal restrictions are stricter and penalties harsher. Whilst the terms of work and the representation have evolved, the laws have not. As a result, HRM practices are limited and archaic.
While laws set a floor for HR’s approach to temporary employees, the threat of alienating full-time workers or the threat of legal actions by their unions establishes a ceiling. Established employees and unions may not appreciate a situation in which temporary or contract workers gain as much from employment as full-time employees. If non-permanent employees make up a mere 10% or less of a company’s workforce, HR might be better off by doing the bare minimum and otherwise ignoring them. In this situation, HR would be better served to focus on the full-timers with potential return on investment during their tenure.
The challenge lies in finding a proper balance between minimum and maximum efforts. HR must decide either to step up and step beyond the comfortable legal restrictions on human capital or to take cover under the law and abdicate responsibility to management. The consequences can affect the quality of short-term talent the company will attract, and may prevent or hasten the company’s potential extinction.
I once helped a client through a digital transformation in IT. The employees’ skill sets did not match with incoming new technologies so while transitioning to the newer tech platforms and business models, the company had to engage independent contractors, outsourcing companies, and internal mobility programs for relocation. Eventually, more than half the workers had come from outside the company. While the external workforce focused on designing and implementing changes, the internal workforce maintained existing work while upgrading skills and learning from the outside experts.
Outside employees, contractors, and consultants not only bring their knowledge and expertise, but also their ways of working, cultures, and beliefs. These various systems interact and integrate, and as they do, they impact the workers.
Imagine throwing a stone into a pool of water. The expanding ripples represent the layers of these systems at play. There is a central, immediate system (the central splash) and external systems connected to it. Now, imagine immediately throwing another stone into the water. Its ripples interact with the previous stone’s ripples, and the waves enhance or counteract each other. It is almost impossible to isolate these interactions unless the stones are thrown very far apart. How can we ensure that systems enhance and not counteract each other?
While the change in the example above mainly took place within the IT department, it also affected other departments: sales and marketing had to adopt a new business model, finance had to review funding and budgets of new projects, and internal operations had to examine portfolio management. The ripples hit all these other systems.
In the transformation discussed, progress was thwarted in a few areas. Agile adoption within the IT department did become a unifying cultural change and helped provide focus, but while the IT system was working itself out, other systems provided more formidable counteracting forces. Within the IT department, integration of the external workforce and vendors was not easy. In particular, the partnership of various vendors was marred due to politics. Waterfall-type budgeting and the release of funds coupled with traditional portfolio management added hurdles to delivery. The costs of overhead while waiting for budget approvals depleted funds with no evidence of delivery. Investors lost confidence and management lost ground.
HR should act like a business partner to overcome some of these issues, and can use total talent management to unify the various systems and parties in play. Here are a few considerations.
Ensuring common ways of work in selection
A company, like a system, has an established way of working (often referred to as culture) that it must consider in selecting independent contractors and even outsourced partners. In the example above, agile should have been a key consideration in selecting external IT contractors or outsourcers because that’s what the IT department had become familiar with. Personnel selected for the finance department and project-management office should also have been working in an agile manner.
An external injection into the existing system of a completely different way of working and functioning creates misunderstandings and slows work. People will expend effort to correct missteps that could instead have gone toward progress.
HR has started to play a greater role in hiring and engaging individuals on temporary or contractual bases but can have greater impact when injecting a group of people such as outsourcers or consulting partners. HR must ensure that there is enough common ground in ways of working at the selection stage. HR can participate in setting criteria for the selection of partners, typically at the stage of request for proposal. HR can also participate in selection interviews.
Currently, purchasing departments typically manage outsourcing whilst HR manages external individuals. HR can work more closely with purchasing and business in the selection of vendors, as well.
Ensuring teamwork in integration
Most HR staff will recoil from providing any training or leadership development to non-employees as this can give rise to lawsuits or ambiguity, but when two or three different systems come together (as in the example above), integration of the teams is not a given. A team can benefit from good facilitation during the integration process, so HR must explore potential and legal ways to help teams function. This can mean facilitation workshops, identifying problem areas, and viewing partner companies and individuals as valuable additions to an organization rather than as a threat. Sometimes, an external party can also be engaged to act as facilitator; agile coaches often act as facilitators, for example. In addition, an orientation session for non-employees concerning the company and its objectives will also be helpful – and legal.
This is one the most challenging areas, for which HR must seek an innovative approach. In some instances, HR staff can engage third parties to act as trainers or facilitators, and recuse themselves from actual involvement. They can also agree with external parties on set, clear expectations and on team-building exercises. In most cases, only a couple of sessions will greatly help, without having HR step over the legal line.
Ensuring sustainable benefits in knowledge transfer
Finally, the benefit of relying on external workers is the expertise they bring during productivity hikes. In this article’s example, the hiring of experts to help accelerate transformation had to be matched with internal transition to the roles the external parties were performing. To take advantage of this outside expertise, HR can consider a skills-transfer programme rather than replacing the existing workforce and hiring new recruits, for example. Those internal staff willing to participate can be placed as understudies to external staff. In IT development, we call this pair programming – but it is not limited to programming. We can create an apprenticeship programme for any role.
External parties can learn about the internal culture and business to better serve the company. Internal staff can take advantage of external expertise to raise in-house knowledge. Working in pairs, mentoring, and strategic placement of external workers are ways to put this into practice. With a concerted effort, knowledge transfer does not happen merely by chance.
External workers can also provide objective feedback on teams and leadership. Their exit interviews and handovers are just as important as those of employees. These interviews can identify management oversights, internal challenges that frustrate employees, and potential improvements. In a recent acquisition project, I was engaged as an external consultant to conduct systems interviews to expose internal challenges. HR and management received the outcome of interviews as feedback to help them integrate an acquisition.
The challenge for HR is not lessening. A company will greatly appreciate an innovative HR department that participates in the company’s growth. To be that department requires a dose of good sense, a couple of steps outside the comfort zone, and a big sip of courage. Think about your resources and not your lack thereof. You’ll be surprised at how much you and your team can achieve.
About the Author
Jas Chong is a change-management consultant who uses agile methods and a systems approach to effect change. She works continuously to build bridges between IT, business, and HR to allow a common language of change. Jas is a Singaporean currently living in Paris and working internationally. This is her website and linked in profile.