This is an in-house special episode featuring an insightful conversation exploring the rise of contingent working models. The speakers on the show are talent leaders – Sriram Rajagopal – Founder & Director of Diamondpick, and Arvind Ramani – President of Account Management and Operations Strategic Accounts at Diamondpick, who share their expertise on the topic.
The duo discusses the dynamics of the contingent workforce, the mindset shifts for both employers and employees and how this trend shapes the talent market. Arvind is instrumental in developing the contingent staffing models for the company, and he shares some interesting thoughts and anecdotes from client experiences on how this agile workforce model can be engaged and leveraged dynamically for organizational success.
Sriram: To perform specific tasks, to meet specific goals, freelancers, consultants, contractors, part-time workers, and moonlighters are all going to become a critical and strategic part of our organizational workforce around the world.
There’s been a lot of talks lately about flexible work in hiring for specific needs, paying for project effort versus time on the desk, and so on. The need for high-quality on-demand contingent workers or flexpreneurs is gaining rapid momentum.
This year alone, the contingent workforce is projected to grow by 53% worldwide, according to the latest talent insights by Eightfold.ai. I like the term flexpreneurs. It has a nice ring to it. How did this term come into being?
Arvind: Flexpreneurs is a word that we collaboratively coined after a lot of brainstorming within the Diamondpick team, this essentially brings together two words, flexibility, and entrepreneur, to perfectly represent those who specialize in flex working models.
Sriram: As the economy continues to recover from the pandemic, more and more companies are turning to contingent staffing as a way to meet their workforce needs. In fact, a recent report by SIA predicts that the global contingent workforce will reach 50 or 51% by 2025.
You’ve been in this space for a long time, and you probably have a dynamic take on the state of the contingent and extended workforce. What are your thoughts on the growth of the contingent workforce, its impact, and where do you think we are heading?
Arvind: The benefits are multi-fold for all corners of hiring for the work, worker, and workplace. From a work perspective, workforce agility and on-demand fulfillment is the biggest advantage a flexpreneur brings in. From a worker’s perspective, the autonomy and flexibility to pick projects and skills that he/she wants to develop. And from a workplace perspective, the availability of skilled workforce project-ready from day one and the ability to try and buy talent before bringing them on board as full-time employees. Thus, the future is obviously very positive for a flexpreneur, and the demand and supply for skilled workers are catching up with the quality of products coming into the geography as well.
Sriram: The employment cost structure is changing, with some organizations opting to pay by the project or by the hour instead of monthly salaries. The higher rates that companies pay to strategic contingent workers are more than offset by the cost savings in terms of onboarding and indefinite salary paid to permanent employees making this a key element to the rise of skilled flexpreneurs. The cost-benefit ratio is comparatively higher to onboard a flexpreneur, especially with respect to filling open positions, cost of hire, cost of separation, or replacement. What are your views on this?
Arvind: It’s a common notion to compare only the budgeted cost of hire. A full-time employee comes at a certain cost, say x, a month, and a contractor comes at 1.5x, this is unfortunately not the right representation of spend. A fully burdened and benefited employee as a full-time resource on an organization’s payroll is almost 40% more expensive than a flexpreneur.
Sriram: So you’re saying the total cost of ownership is not considered by many when they look at contingent labor, and then it’s just an apples-to-oranges type comparison. Your point is if you get a total cost of ownership view, you probably get a very different answer than the assumption that you make at the very beginning that contractors are more expensive.
Sriram: From your client interactions, can you share with us a scenario to help our listeners better understand the cost benefit this working model brings to organizations?
Arvind: A full-time employee comes at a cost which includes the wait time until the FTE onboards and the notice period that a person has to serve before he or she comes in. That wait time comes at a huge cost to the company. Typically these costs don’t get factored into the wait time or the fully burdened cost of the FTE.
A couple of other costs include:
The cost of separation is another massive cost,
All of these cumulatively, if put together, bring about a 40% increase in the cost. And by choosing a contingent worker, you can benefit from this 40% saving.
Sriram: Add to this the fact that employees get paid while on the bench, especially in IT services organizations. So if organizations are running at the utilization of 80%, so 20% of unbilled time technically is fully paid time, which won’t be the case with a flexpreneur.
Flexpreneurs have a pretty clear future of work as employers transition from traditional to flexible workforce strategies, and they rely heavily on the vital contributions of contingent workers. The same research that we spoke of earlier was about 40% of leading global organizations and their plans to increase their use of contingent labour by at least 25 plus percent over the next five years.
Sriram, why do you think contingent staffing is becoming one of the most powerful employment strategies today, and why now?
Sriram: I agree with you. In fact, we were in a conversation with one of our customers in the US. Considering the recessionary nature or indicative nature of the market, they have been advised to only look at temp labor. They don’t want to add fixed costs. So, as a result, much of the demand that’s coming our way is not for FTE but for the flexpreneur-type capacity. So that element of risk is well understood by organizations, and I think we are starting to see signs of that manifesting itself in the nature of demand that’s coming our way.
So let me ask you this if you think about the customers that you have serviced in the past. You know, there is a notion, at least in the US, it’s not there. But in India, contingent labor or sub-con is considered sub-par, or at least that is a perception.
Well, I can tell you it is not necessarily true. Do you get to hear that? And what is your view or take on it?
Arvind: Yeah, we get to hear it more so from audiences who haven’t baked in flexpreneurs or contingent staff as a part of their strategy. And, while I say that, there’s also an uptake in its usage by most firms, and it’s about spreading like word of mouth. We have a few experiences that go well, and then those experiences speak for themselves. So yes, there is an upshift or an upswing to using more contingent staff, but still, the general motion is that the quality or availability of good talent for good projects and then finding the right match is still a gap.
The way we are bridging it is to speak about it beyond cost, beyond just quality of talent, and also look at opportunities that organizations are offering to the market. The more organizations and teams build a strategy around hiring contingent staff, the more you will allow the contingent workers to come at par or be better than some of the FTE hiring that organizations typically see.
Sriram: Apart from the cost, you know, there are the benefits of hiring flexpreneurs. I think we should highlight them. In my opinion, one is, filling in short-term requirements – or at least there are certain organizations that I’ve worked with in the past that have some sort of a decision tree that allows them to determine the roles that would go as FTE and the roles that can be earmarked for contingent labor. And it is a function of the relative demand-supply equation for those job roles in the market. And if you know that this set of jobs is required for a period of time or things that you don’t want to build as a strategic capability in your organization. All those are a part of the algorithm that is used to determine what gets marked as contingent. So the flexibility and the agility required for this is what I think is also an added advantage to having flexpreneurs.
But here’s another question. Now that we have at least determined that there is a lot of merits, if you look at the total cost of ownership. Contingent work provides flexible options with many upsides, with relatively low downsides.
It helps address skill talent shortage today by closing the skill gaps without adding full-time workers, gives the organization access to larger and more diverse talent pools, and can pave the way for underrepresented crews to enter the workforce, making organizations more diverse. I think more and more individuals in the millennial GenZ category like the freedom and flexibility they gain with this type of work. Including the ability to scale up and down in terms of what projects they want to work on, things that meet their aspiration, their career goals, etc. So what do you think about that?
Arvind: I’ll bring it in two points here, one remark and, you know, one kind of benefit.
The number of people working as independent contractors is growing. Just this morning, we spoke to someone who’s been doing gig work for the last 18 years, and this is India, and he has a bunch of people who do it along with him, and he’s built his own pod that does this. So What we are seeing is that more than one in three professionals currently freelance, and they want projects that allow them to explore freedom and flexibility.
Apart from that, many benefits are coming out from the voice of our current freelance market. They say that
So these options are seen in the light of building greater skills, more ready skills for the future of the workforce. And many of them seem to get it, but there are so many more who probably want to know more about it, and here’s a platform for them.
Sriram: That’s a very interesting observation that you made. People do get higher pay as contractors because the organizations don’t have that much of an overhead, so they can pass on much of that benefit. And there’s also an element of risk. But more than anything else, the benefit for employers, it’s people who are flexpreneurs always is current and up to date with their skill because they know that their skill directly correlates to their pay.
So they are always learning and improving so they can figure out what their next opportunity looks like and how they can command a premium over their previous assignment. And the only way they can do it is by learning more and contributing more, and getting more proficient with the skills that they process.
So it also has that indirect effect on people who will naturally have the interest and the inclination to keep learning. And growing their skill sets, so that it can correlate with their pay.
Let’s talk about a closer home here at Diamondpick. Any client experience that you would like to share with our audience to put things into perspective?
Arvind: The biggest that we at Diamondpick offer quite differently, and we have a line of clients today who are willing to experiment with this, which is quite different from the traditional contingent staffing offerings in the market. The solution we provide is to help our clients build pods of highly specialized resources that, when and if hired, bring about a multitude of skills that go beyond the single skill expertise. I’d like to take a reference to an age-old two-pizza model that was made famous by Amazon and its early days of inception. We take the cue from those two pizza modules, and we help our customers build pods of 6 to 10 folks. Smaller teams with specialized skills bring about better communication, increase efficiency, and of course, allow for every team member to contribute to solving the problem at hand. And when these folks come together in those pods, it’s only the problem and the team that needs to work together and get to the brighter side of the scene.
So our solution falls into the traditional hiring of contingent staffing as well. But the real differentiator where our clients are seeing Diamondpick as a differentiator is in these pods that we are placing across our clients.
Sriram: And are you doing anything specifically to curate that talent, what kind of promise do you give to the individuals that place their bets with you?
Arvind: Well, of course, there’s a heavy amount of curation, there’s a lot of peer engagement that we allow for, and we have our own community that talks to each other. We bring folks we have placed in our customers to our offices who engage in hackathons, who talk to our community, who talk to our next set of candidates, the next pod we are building, and who evaluate the pod strength.
We also have our own evaluation and assessment platform, which tracks each candidate’s fitment from a skills perspective, also from a cultural positioning. And all this gets recorded, and we are able to offer it to our clients to evaluate the entire pod, and they can make better assessments of what kind of a pod we are giving, who the members are, and how they have performed through the assessment stages. So the decision-making is tech-enabled, and it allows the candidates also to understand what kind of organizations they’re getting into and teams they’re getting into and what there would eventually be their experience when they join a firm.
It gives the client a well-vetted pod of individuals who have gone through the rigor before they even meet them for an interview.
Sriram: What I’d like to conclude is as the workplace revolution accelerates, working styles are transforming, giving flexibility a new meaning.
The talent marketplace will continue to evolve, and the best way a company can plan for future growth is to invest in a more flexible contingent workforce. Now, obviously, that requires a change in policies, change in types of employment contracts, and change in toolkits that you would use to engage with different employee categories, and organizations have to invest in creating those toolkits to be ready for that revolution. I think there’s a lot of good work that can be done.
This insightful episode is full of important takeaways on how this agile workforce model can be engaged and leveraged dynamically for organizational success.
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