September 11, 2013
The autumn conference and webinar season is underway, and at each event industry prognosticators are talking about the “next big thing” in contingent work. This year, many have selected the ‘human cloud’, also referred to as “Worker as a Service (WaaS).
In fact, this concept is now a decade old. Numerous companies have been launched as ‘online labor marketplaces’, ‘talent exchanges’, or ‘labor exchanges’. Regardless of what you call it, the concept is the same: a flexible model is provided in which clients go certain sites to advertise jobs and tap into a pool of resources who will bid on the opportunity to fill those jobs. While the job being advertised may be a permanent position, it is more likely task based, project based or position based. In general, the work location is flexible (work where appropriate and needed) and the worker chooses the time to conduct the work.
This business model is more appropriate for some jobs than others. In fact, today it is most widely used by companies that desire to outsource tasks such as language translation, proofreading, or designing a brochure. The value proposition offered by these sites is one of “lowest cost”. Workers from around the world bid on each job, applying rates that reflect their local markets. As in most social media sites, quality assessments are based on “reputation ratings” (rankings of others who have previously used that individual to provide a service). The service providers manage payments, allowing buyers to establish escrow accounts with funds not released until projects have been satisfactorily completed. Many sites offer automated tools to help with contracts, project management, payments, and resolve disputes. A few offer a proof-of-concept option to help build trust between buyers and providers.
While many of the early pioneers in this space have fallen by the wayside, the industry leaders are beginning to see traction with collective 2012 revenues of $1 billion. While growth projections are strong, the $1 billion of work done through talent exchanges in 2012 is only 0.03% of the estimated $300 billion spent worldwide on temporary workers.
The exchanges claim that they are providing opportunities for entrepreneurs to build a business, not just to find one-off jobs. They cite cases in which individuals created such demand for their services that they were able to increase their rates 8-fold and hire others to assist them. While there may be isolated cases where this has happened, remember that this is a model based on cheapest price. The vast majority of assignments posted on these sites are short-term and not considered of strategic importance to a company. As such, they are viewed as commodities and buyers expect to pay commodity prices.
Initially, most of the jobs on these sites can be performed virtually, requiring skills in information technology such as web programming and mobile apps. Yet the range of work offered is expanding to include project management, translation and copywriting among the fastest-growing. Specialty sites offer access to local tradespeople (builders, plumbers, drivers, etc.) who can provide onsite services.
All of this sounds great, but where is the downside? This is the classic example of using the right tool for each job. While the model has demonstrated its value for securing resources to perform straightforward tasks, the buyer’s risk profile rises dramatically when using talent exchanges to staff complex projects or longer-term engagements or when needing resources who hold required licenses or certifications.
- Worker screening issues. Anyone who has ever had a bad experience at a restaurant or hotel with a high reputation rating knows that more rigorous screening is required. Who will verify prior employment, ensure that licenses are current, and conduct criminal background checks on individuals who will have access to your proprietary information? What protection does the buyer have against IRS misclassification decisions? What are the implications of using resources based beyond US borders? If a buyer must hire attorneys and human resources experts to address these issues, then any savings gained through the use of the talent exchange may be lost.
- Worker management issues. When outsourcing an assignment, the manager must be prepared to invest some time to ensure that the task is fully understood and expectations are properly set. If the individual(s) will contribute to larger, complex projects, who is responsible for coordinating resources? What flexibility exists in terms of pay models (e.g., time-and-materials vs. fixed price)?
DCR Workforce is pioneering an approach that brings companies the benefits of the ‘human cloud’ without the risk. By tapping into social communities and the extended networks of workers, suppliers and professional associations, clients are given access to specialized talent exchanges that consist of communities of fully vetted candidates. These individuals are offered as W-2 employees of DCR or its suppliers – eliminating co-employment and misclassification risks – at a lower price point than charged for traditional agency-sourced contractors. All workers, regardless of whether they are sourced through these exchanges, by staffing agencies, or through other means, are managed under a single talent management system.
Technological advancements are redefining what a “job” is or isn’t and how markets function. Companies must think of their workforce as made up not just of current full-time employees but also of the vast army of potential workers that are a click away. Your workforce strategy must address the role that social sourcing will play in your overall recruiting strategy. Identify the most effective sourcing strategy for each type of need, and then consider how to bring this together under a single workforce management umbrella.
The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.