New McKinsey Report Brings WIPs into Focus

Analysis Analysis

If you’re still unsure about the relative importance of work intermediation platforms (WIPs) as a potential game changer in enterprise direct sourcing and engaging the contingent workforce, a recent report by McKinsey & Company may help you make up your mind.

The report, “A Labor Market that Works: Connecting Talent with Opportunity,” takes a wide-angle perspective on the increasing role of platforms in the total labor market, not just the growing contingent workforce segment. The analysis of labor platform developments emphasizes the likely macroeconomic impacts, but it only scratches the surface of how enterprises are responding to these trends.

Notwithstanding, the report is a clear bell weather for the rising tide and significance of online platforms in intermediating labor supply and demand and is well worth a complete read for CPOs and contingent workforce management practitioners.

Report Highlights

  • McKinsey is pretty gung-ho about the effect of online platforms on the growth of labor market transactions and work arrangements in the global economy. It forecasts that, by 2025, online platforms will increase workers engagement by 72 million full-time equivalents. The platforms will do this by: bringing more workers into the available labor force to engage in work in different shapes and forms; supporting better matching of needs and capabilities; and using data and analytics to feedback into and support other processes that drive needs and capabilities into alignment, including forecasting labor and skill shortages, guiding education systems on demands for skills and knowledge and providing career navigation to workers.
  • McKinsey divides its category of what it calls online talent platforms into 3 sub-categories:
  1. Platforms connecting candidates with traditional jobs – The largest segment of the 3, these match individuals with traditional jobs. They are effectively hundreds of job boards – think Monster and CareerBuilder--or social networks like LinkedIn or job aggregator Indeed. These platforms tend to perform only the match of hirer and worker but don’t do much more (for example, enabling a complete end-to-end work arrangement). The majority of matches that occur via these platforms relate to traditional, permanent jobs, though contingent worker placements are also supported.
  2. Platforms connecting freelance workers with specific assignments, projects or tasks – Somewhat simplistically characterized as “online marketplaces for contingent work,” this category appears to more or less the same as the Spend Matters’ WIPs category (though Spend Matters views a marketplace as a one of a number of work intermediation mechanisms that a WIP might support). Interestingly, McKinsey discusses examples of these platforms, ways in which they function and what issues might be arising around them, including quality of jobs, worker classification and others. The report strongly suggests the importance and the growth of WIPs, but it only scratches the surface of what is really happening in the WIPs space: the emergence of a digital contingent workforce ecosystem that will supply significant talent to enterprises well before 2025 (a set of trends and developments that Spend Matters is following closely).
  3. Platforms that help companies even after hiring by making workers more productive – This category includes old and new systems and platforms that can support a range of applications. The reports cites platform enablement “to assess candidates’ attributes, skills, or fit, to personalize onboarding, training and talent management, to optimize team formation and internal matching, to determine the best options for training and skill development.” All of these seem like conventional enterprise talent management activities being applied to permanent employees, so it begs the question of what platforms and tools will provide similar support for the extended, non-employee workforce. In such an extensive report, most likely this was a branch that McKinsey could not follow out.
  • As noted above, McKinsey’s report takes a very wide-angle view of digital platforms’ accelerating and high potential impact across the whole global labor market. It clearly predicts the potential for significant transformation ahead:

“Online talent platforms are reaching a new stage in their evolution. Having attracted hundreds of millions of individual users as well as the world’s major employers, they are rapidly spreading around the world and into additional sectors of the economy… In a world that will have more than eight billion smartphone subscriptions by 2025, online talent platforms have enormous room for growth. Existing platforms will continue to expand their networks, new platforms will be created, additional functionalities will be added and the data sets created by this activity will grow richer and deeper.”

Key Takeaways

The McKinsey report authoritatively brings into focus and validates a broad set of economy-wide and labor-market wide trends and developments that until recently have been taking shape almost unnoticed. In a nutshell, digital platforms – and digitalization in general – are starting to radically change the way the world works (Uber in transportation, Airbnb in lodging, et al). But more importantly, the McKinsey report appropriately shifts the focus from the broad-platform, economy-wide discussion to the discussion of platform revolutions occurring in the domain of engaging labor and talent – one that has been happening for some time and will continue with transformative consequences.

In validating these broad trends and developments labor-market-wide, McKinsey is also validating those trends and developments within specific segments of the labor market. At least strongly implied  in the report, the most significant impacts and the fastest changes connected with the emergence of talent platforms will be in the area of contingent, extended, non-employee workforce. These changes are already widespread and evident--but what remains is for them to be harnessed by enterprises, a goal currently in progress.

In a follow-up post, I’ll step back and take a look at, from a contingent workforce management perspective, what the McKinsey Report may have missed or failed to elaborate on.

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