HR and the gig economy

Ronald Coase, Nobel Prize winner for Economic in 1991 had proposed the theory that the fact that aggregating assets together has led to the creation of the modern day firm due to the cost advantage of aggregation under a single roof. In line with this proposal, corporates today thrive by holding ownership of production plants, suppliers and vendors, processes, ideas, innovations and ultimately, people themselves. This extensive ownership model has till date led to large corporations doing business successfully.

However, the advent of technology slowly started challenging this paradigm. Ownership was no longer the source of competitive advantage, knowledge and customer satisfaction emerged as the new tenets of business in the services economy. As technology advanced at a rapid pace and started decentralizing, single-hold ownership was replaced by a sharing model. A case in point is the open source economy, which allows users to share code and other resources to build software, and products and services. The new-age normal emerging from this trend is the gig-economy, where even the resource called “people” is shared. Freelancers, contract workers, part-time workers—these form the core of the gig economy which is touted to be the way ahead for the workforce. But is HR ready to take on this huge change?

The gig economy is a result of knowledge and services-orientation, as is the decentralization of power and resources with technology. The anything-as-a-service model is the latest rage, allowing those who are capable to offer their skills to a host of companies parallely. Moreover, corporations too are realizing the advantages of having an on-demand workforce at hand, posing a cost advantage by way of reducing employee retiral costs and other benefits. A McKinsey report states that about 20% – 30% of the workforce in Europe and the US engage in some form of independent work. But many organizations struggle with managing this fluidic workforce. HR managers are either unable to understand the unique needs of the workforce, or not able to cater to those needs due to misaligned HR processes. Here is what HR must keep in mind to make the most of this gig economy.

1. Recruitment: Recruitment for gig-workers needs to be swift and sweet, not long-drawn. From sourcing to selection to onboarding it must be a matter of weeks, not months. HR tech can come to the rescue. Consider having an Uber-like exclusive rating and sourcing platform in place for freelance workers.
2. Performance management: Such workers must be evaluated on different performance standards. HR and line manager must allocate them short-term, outcome-based objectives.
3. Employee retention: Retention and attrition management takes on an all-new meaning. HR must not incentivize gig-economy workers to stay, they must compel them to come back to work with the company again and again.
4. Training and development: If a person is expected to work for the organization only for 6 months at the outset, learning goals must be curated very differently for such a person.  Intense, bite-sized learning that delivers immediate results on the job is the way to go for the capability building strategy.
5. Succession planning: A gig economy means HR must prepare for frequent exits and hires. The uncertainty of employment is a factor that must be managed very well. It is therefore important to have a contingency plan and a succession plan, considering the mix of full-time and part-timers.

Managing a gig economy workforce is not easy. It requires HR to have an in-depth understanding of such workers- their needs and aspirations. With this population growing, and the business situation becoming more dynamic, turning to the gig economy for talent solution is no longer a choice. It is a mandate to stay cost-effective and agile.