Unbeknown to the management team, a hidden workforce exists in nearly every large organisation. Unchecked, uncontrolled and unseen, it creates cost inefficiencies, security issues and regulatory risks.
In this guide, we'll explore some of the issues that create an organisation's hidden workforce and look at how to begin reclaiming control.
In this guide:
For about 31 million people in the UK, the working day means being a productive component of a larger organisation. From the smallest businesses to the largest corporates, people are organised by function, department, division or discipline. There is a hierarchy and defined relationships between the various points on the hierarchy.
However, technology is disrupting and transforming every industry. Consumers, workers, supply-chains are all undergoing digital transformation. Capgemini's report on the Digital Advantage shows the impact digital is having on businesses in mining, gambling, fashion and every industry in between. Product lifecycles are getting shorter and shorter, with Accenture saying customers now expect product innovations every 6 months - 'exponentially faster' than ever before.
With customers demanding faster and faster changes to the products and services they buy, a slow business is a dead business.
It's no longer true that business is predictable, repeatable and fits the rigid relationships defined in a traditional organisational model. This new business environment is putting pressure on organisations to look for faster, more cost-effective ways of operating.
In response, businesses are turning to a new organisational model that enables them to resource projects faster and more cost effectively.
Instead of the traditional organisational structure, designed to maximise efficiency with a predictable and repeatable process over a long period of time, the new organisational design model being adopted is designed with 'consistent flexibility' in mind.
It provides an organisation with a flexible, adaptable way of responding to rapidly changing business environments, market conditions and consumer demands.
The new model consists of three core components:
This diagram represents how the three components interact to deliver product and service improvements for an organisation's customers:
The Management Team and Consistent Core of full-time employees provide the 'consistency' element. The team typically includes all key department heads: sales, marketing, finance, human resources and IT/operations.
The Consistent Core turn the Management Team's direction and investment into projects of determinable length and outcome, and resource the projects with the specialist expertise required to affect the best result.
The Consistent Core is also responsible for creating and nurturing talent pools of pre-vetted workers to eliminate costly delays and deliver project results efficiently.
The flexible contingent is an on-demand 'cloud' of specialist workers who form the project teams and deliver the required outputs. The project members provide the required cross-functional skills and experience, without traditional departmental barriers getting in the way. The project team comes together for as long as needed then disperses as soon as the project is delivered.
The pace and flexibility of the new organisational model is ultimately the root cause of the hidden workforce epidemic, stemming from how easy it is to hire a freelancer for a project: Freelance marketplaces enable any line manager with a credit card to hire a freelancer.
The ease of hiring creates unchecked and mismanaged hiring processes, often bypassing existing HR and established onboarding processes, and results in an organisation having an unchecked, uncontrolled, and 'hidden' workforce.
When you consider, a typical large, enterprise-sized publisher, marketing agency network or media company can use hundreds, if not thousands, of freelancers, the hidden workforce is an epidemic.
As discussed in the guide to overcoming the challenges of managing a freelance workforce, the resulting problems include:
Without visibility of where and how freelancers are engaged in an organisation, it is possible for 'phantom' skills shortages to appear. For example, one department can have a number of freelance software developers engaged but underutilised, whilst another department could be struggling to find and hire freelancers with the same skills.
Frequently unnecessary hiring is a by-product of the apparent skills shortages caused by a lack of visibility. It's easy to see how an organisation, in it's desire to move projects along, can hire freelancers unnecessarily when they could have unseen, underutilised freelancers already engaged elsewhere.
Where there is a lack of visibility, no single point of 'truth', it's common for an organisation to be engaged with a number of very similar freelancers, doing very similar jobs, but paying very different rates. Of course, this creates cost inefficiencies (compounded by the unnecessary hiring and underutilisation factors).
It's possible to engage a freelancer with as little as a verbal brief. Without a formal contract or statement of work, this exposes the organisation to a risk of incorrect or incomplete work being delivered.
Unless there is a system in place to remove the freelancer from accessing sensitive business information when their contract finishes, freelancers with access to internal systems or those who are included on internal email distribution lists pose a data/information security risk.
An example of regulatory risk is the IR35 legislation in the UK. If a freelancer is deemed to be a 'disguised employee', both the freelancer and the organisation could be liable for financial penalties. Without the right checks being made, it is possible for a line manager to unknowingly create an IR35 risk by hiring a freelancer for a role that looks like employment.
As discussed in the guide to getting started with an FMS, the solution to enable an organisation to remain flexible and adaptable but avoid the issues created by an organisation's hidden workforce, is the correct mix of people, process and technology:
Getting started with a freelancer management system is a four step process:
Discovering the size of your hidden workforce issue is the crucial first step in the process. Gathering the right information at this stage is key to develop the right strategy.
To begin, you need to examine your internal systems (email, IT systems, invoice payments) to discover where freelancers and contractors are used throughout your entire organisation. It is important to get down to an individual level view of the data. You should be very clear exactly who is hiring and using freelancers and what this is costing your organisation.
Now you have a clearer picture of how many freelancers are being used throughout your organisation, it is time to apply a layer of context.
Next, you should interview internal departments and survey external freelancers to understand:
With both quantitative and qualitative information gathered and analysed, you are ready to create your action plan. This may include:
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