Freelancers, Fracking and Burning the Midnight Oil Kaitlyn McAvoy and Andrew Karpie - November 24, 2015 8:11 AM | Categories: Services and Indirect Spend, Services Procurement & Contingent Labor, Services Procurement & Contingent Labor Management, Talent Management | Tags: L1, Process & Best Practice Companies are shifting employment strategies and considering new ways to engage workers on a contingent basis. The factors of technology, labor market dynamics and perhaps behavioral shifts — voluntary or involuntary — seem to be complementing the trend toward lower fixed cost, more flexible non-employee enterprise workforces. But from the point of view of a contingent workforce or services procurement practitioner, how do you really assess the potential for engaging what are being called freelance or independent workers, especially those that do not come through staffing firms? Are We Dealing With a Talent Gusher Here? This is a really a big question and not a simple one to answer. Recent studies by MBO Partners and Upwork estimate that tens of millions of Americans are engaging in freelance work. These estimates are not broken down by occupational or skill categories, but they are broken down, to some extent, by how much time these freelance workers allocate to their work engagements. According to the recent Upwork and Freelancer Union report, “Freelancing in America: 2015,” an estimated 53 million Americans are engaging in freelance work. The report also showed that 25%, or 13 million workers, are engaging in this contract work part-time after their day jobs end, also known as “moonlighting.” In addition, 26%, or 14.1 million, are considered “diversified” workers, meaning they are doing multiple jobs to support themselves. What is suggested here is that more than 50% of freelancers do not fully allocate themselves to the pursuit of the freelance life, and, in addition, they have various motivations for what they do. A recent San Francisco Chronicle article titled “Typical Bay Area Freelancer: Moonlighting IT Guy, Survey Finds” peaked our initial interest in this. The survey, apparently a derivative of the national survey mentioned above, found 29% of freelancers, or 1.5 million, are moonlighting across the San Francisco Bay Area. The article did not mention the category of “diversified” freelancers, but it did imply that Uber and Lyft drivers accounted for very small percentages of the workers. So, effectively, we are not really talking about “on-demand task workers.” According to the article, the typical Bay Area freelancer is “a highly educated male IT or consulting professional earning extra money by freelancing, often on passion projects, while also working a traditional job." The survey also found that 72% of those with traditional, full-time jobs said they would be willing to do outside work. So, relatively very few freelancers appear to be on-demand task workers, nor are they only full-time professional freelancers. The freelancers we are discussing above are not available 24/7 or even during traditional business hours. Many of them actually have traditional, full-time day jobs and are only available for contract work at night or as a side gig. Fracking the Next Generation of Contingent Workforce What conclusions can we draw from this research? Perhaps the freelancing trend is a bit overhyped. At the very least, there is still little clear understanding of what underlies the big numbers. How many different categories of freelancers are there? How many are relevant to contingent workforce programs? Of those, what are their numbers and availability? And, perhaps most of all, how can they be engaged and what is the cost-benefit of doing so? The independent workforce will be bringing new opportunities and challenges to contingent workforce managers. Taking the example of moonlighting talent, this becomes clear. Moonlighters may be extremely talented and offer skills that the organization desperately needs. To counter that, the terms of engagement may be restricted and may perhaps require your organization and business users to rethink and restructure how they organize their work. That may seem like a costly thing to do, but perhaps it is worth it. Consider that, because of the marginal nature of the moonlighter economic model, you may be acquiring hours of an expert’s time at a significant discount compared with the hourly rates the expert earns in his or her day job, not to mention what you would pay for such talent through a staffing supplier. (Let’s not even bring into this discussion the economics of when that expert is offshore in a lower-wage country.) Contingent workforce professionals today know the drill of placing a temporary worker here or there or organizing and controlling a statement of work (SOW) project. But when it comes to engaging freelancers, a whole different sort of calculus starts to come into play. Supply is no longer homogenous, and the economic models of engagement may vary widely — for example, depending upon whether the freelancer works that way full-time or is a moonlighter. An interesting analogy is to compare contingent workforce procurement to oil extraction. Perhaps extracting the value of independent talent will require a shift like the shift in oil extraction from direct drilling to fracking. The latter requires a whole different set of methods, technologies and economic calculations but nonetheless has very acceptable marginal net value. Perhaps rather than becoming a nation of freelancers, we are really more so becoming a nation of moonlighters or diversified workers. If so, tapping into that resource will become an important task for contingent workforce practitioners in the years to come. 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