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Why HR needs to monitor line managers’ hiring of independent contractors
As the gig economy takes hold, many HR professionals find themselves left out of the loop as hiring managers make their own arrangements to bring in talent to meet immediate and long-range needs.
"Often, a manager brings someone in and pays them, and it doesn't even show up in HR's system," observed Jens Audenaert, vice president and general manager of ADP Ventures in New York City. Such situations, he believes, highlight the need "for an end-to-end HR process" that includes contingent workers as well as full-time employees.
But for that to happen, HR needs to inject itself into the processes surrounding the acquisition and management of these independent contractors, many of whom may be hired through marketplaces for freelancers like Upwork or Fiverr. In smaller firms, this might mean educating managers about why it's important for HR to keep track of how many hours a contractor has worked over the course of a year, for example, or how HR can help simplify and compress the onboarding process.
Gig or Freelance?
"The gig economy" is the term often applied when organizations contract with workers for short-term engagements through new technologies. In essence, some argue, it's simply a subset of the market for contingent workers, contractors or freelancers who are hired for specific projects or periods of time.
However you define it, there is now a brighter spotlight on how contingent workers are engaged and managed because technology makes it easier for line managers to do so.
HR professionals and their organizations will need "a complete HCM ecosystem around 1099 workers," one that includes budgets, time tracking and ratings for each worker.
At smaller companies, those processes can be somewhat informal.
"In terms of hiring freelancers, I get looped in on the administrative end by more experienced managers," said Brian Murray, director of talent and culture at the New York social media agency Likeable Media. "On the other hand, managers with less experience will ask me to take the lead when they need to find someone."
The issue is more complicated in larger organizations, where contingent workers are usually vetted and contracted through a formal procurement procedure, a situation that's far from ideal as far as HR is concerned.
"Procurement's not designed to negotiate with talent, but with entities," noted Stephane Kasriel, CEO of Upwork in Mountain View, Calif. Though his company works with a number of enterprise procurement departments, he wonders, "What's the best engagement model? HR needs more influence in the discussion."
President of SAP SuccessFactors in San Francisco Mike Ettling added: "HR wants to manage the total workforce." That's a big reason SAP in 2014 acquired Fieldglass, which provides technology for procurement and contingent workforce management.
"Now we can bring that data into the SuccessFactors platform so users can see a complete org chart that shows, for example, who's salaried and who's contingent, or allow recruiters to include contingent workers in their searches," Ettling said.
HR's Absence Hampers Tech Vendors
HR will find ready allies in its technology vendors as it seeks to exert greater influence over contingent workers. Though vendors are already paying close attention to the gig economy and how it may change HR's needs, they're hampered by HR's lack of involvement with contractors. Many believe HR must become more ingrained in the process as contingent workers become an increasingly important component of the workforce.
For now, many vendors—like ADP and Saba, to name two—are focused on addressing their customers' current "pain points" even while they consider strategies for addressing contingent workforce needs.
The fact that numerous vendors take that approach is a symptom of what many people believe is a pressing problem: HR is reacting to the gig economy more than planning for it—and that can't continue for very long. "As organizations take on more contingent workers, they'll need to meld them into their overall approach to performance," said Brent Skinner, principal analyst at Nucleus Research in Boston.
"Vendors are absolutely paying attention and tackling products as they're able to," Skinner said. Companies like SAP, Oracle and FinancialForce are "looking at how they can integrate their financial areas to accommodate this."
Through cloud-to-cloud partnerships, some companies—like Ultimate Software with its HCM tools and NetSuite with its financial, enterprise resource planning and commerce software—have already developed integrations between their respective systems in anticipation of inevitable changes in how the workforce is managed, Skinner said.
A lack of HR involvement in the process "presents so many challenges," added Penny Queller, senior vice president in the Americas for London-based talent acquisition and management company Alexander Mann. "How do you track gig workers? Communicate with them? Assess them? Connect with them?" Vendors, she says, "are trying to figure out what it all means and what HR needs."
Driving the Conversation
Vendors shouldn't be the only ones doing that. Ultimately, HR needs to lead the discussion about how contingent workers will be integrated with the organization's full-time workforce.
For one thing, HR leaders and practitioners must educate their organizations about how the current approach goes against the idea of the strategic workforce. When it comes time to argue that HR should take the lead in acquiring and managing contingent talent, the very dynamics of the gig economy provide plenty of ammunition.
"Years ago, not many experts were contingent," said Christopher J. Dwyer, research director of Boston-based analyst firm Ardent Partners. "That's not so true anymore. When you start bringing in more nonemployees of higher quality, you can't rely on procurement to handle them in terms of engagement and the like."
In addition, HR should map out exactly how contingent workers will be used and incorporated into the workforce.
At some companies, that's already happening.
Ben Willis, vice president of products for Redwood Shores, Calif.-based Saba, sees many companies "making requests for smarter systems, and that's becoming more critical." For instance, he hears discussions "about the concept of a lifetime ID within an organization, or even an industry. With that, all information would be in one place and companies could track a worker's training, for example, whether they were salaried or contingent."
HR also must work closely with—if not lead—vendors as they rethink their approach to the changing workforce. Willis notes that more factors than just the gig economy are influencing the thinking on both sides. Younger workers want more self-direction and more self-paced learning, for instance, while HR wants systems that can generate recommendations on what actions practitioners or managers might take when facing certain situations.
Ultimately, Audenaert believes, HR professionals and their organizations will need "a complete HCM ecosystem around 1099 workers," one that includes budgets, time tracking and ratings for each worker.
Such systems, he suggests, should take into account the needs of the worker as well as HR.
"We think about setting up workers for success," he said. "My instinct says you'll see solutions that incorporate both employers' and workers' needs."
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