Survey finds Great Recession leaves indelible mark on workforce

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Posted by Joel Capperella

December 7, 2010

Today, we are happy to release the results of a study we commissioned on the impact of the Great Recession on workforce composition in the United States. The survey was conducted over a three week period in September, and focused on the use of the non-employee. For the purpose of the survey, a non-employee was defined as temporary staff, consultants and independent contractors.

To provide some context to the findings, I thought I would give you a little more information on who was surveyed, and what they were asked.

This research was conducted with firms that have at least $750 million in revenue, annually. The industries these firms represent include high tech, consumer products, financial services, health care, life sciences, product manufacturing, telecom, professional services, media/entertainment, and the public sector.

The focus was to gain an understanding of how companies are leveraging any type of contracted labor, and respondents represented human resources, business leadership and procurement. Each of these business units has a hand in bringing temporary workers into the organization or managing temporary labor while they are with the company.

All respondents were asked the same questions regarding temporary staff, which covered their company's response to the financial crisis, how this response will change at the advent of fiscal recovery, and what investments are being made to better manage this segment of the workforce.

The results were very interesting. Here are some highlights:

  • Eighty-five percent of respondents stated that the size of their contingent workforce (i.e. non-employees) stayed the same or increased since September 2008

  • Eighty percent of respondents said that these levels will either stay the same as the economy rebounds or that they will add more employees that fall into the non-employee description

  • Sixty-three percent are beginning to make significant investments in how this segment of the workforce is being recruited, engaged and managed.

The take-away here is clear. The composition of the workforce in the U.S. is unlikely to ever look like it did before September 2008 again. This dependency on the temporary worker has increased dramatically during the downturn. In fact, BLS statistics show an addition of over 490,000 new temporary employees since September 2009 alone.

Keep in mind that none of the companies surveyed are considered "small," so in most cases, the recruiting, on-boarding, management and payment of non-employees is certainly not new to the organization. The fact that the number of temporary workers has gone up is representative of these organizations consciously prioritizing this category of labor as they execute business objectives on a day-to-day basis. The investments being made to better manage the non-employee workforce, as well as the statistics which point to an increased number of temporaries in economic recovery, indicate a decision to strategically fit them into an overall workforce plan.

The research also shed some light on where the danger areas might be as the number of temporary workers increases. One of which would be the low priority that many respondents gave to assessing co-employment and independent contractor compliance (both of which was rated the lowest on factors that most concerned respondents where contracted labor was concerned). We've discussed the hostile attitude that some state governments take when it comes to the use of independent contractors. The federal government is on the hunt for this revenue as well. Firms that don't take that reality seriously are likely to be in for a rude awakening as they leverage temporaries and contractors more.

That was not the only harsh reality we found. One thing that jumped out was that even though there seems to be a consolidated effort to capitalize on the cost efficiency of contracted labor, the three parties responsible for such talent (human resources, business leadership and procurement) seem to be disconnected and isolated from each other. For instance, when we asked where the "buying" authority of contracted talent lies, the businesses saw that it was completely their decision. Meanwhile, procurement saw the relationship with their business partners a little more clearly, responding that procurement's role in the process is to support the business with process and cost controls.

Another area of disconnect was the vision for how this category of talent fits into the overall strategic plan. In this case, human resource respondents (over 85 percent) stated that more use of contract labor was in the cards for 2011. Meanwhile, the number of procurement professionals who saw that vision fell under 70 percent. This indicates that the organization is preparing to source more temporary labor into the organization, but the contracting area of the company might not be prepared to do so.

One highlight that exposed the potential lack of preparation for handling an increased contract staff is the investments being made to better manage this talent. At face value, the 63 percent that are making investments is encouraging, but a closer look shows that no one category is gaining exclusive focus. So, while investments are being made in a shotgun approach, we are likely 18 to 24 months away from having an agreed upon strategy for where these investments ought to be concentrated.

We are continuing to break down the results of the survey as we speak to our clients, partners and contractors. Such a shift in the workforce composition is rare and frequently not only driven by economic conditions, but by some disruption in technology. Therefore, it's a unique year in which to chart the strategic course of the workforce. Stay tuned for more information on how this will impact your 2011, and what you ought to be doing now to ensure that your organization is prepared to navigate the change.

Topics: Staff Management, HR Strategies

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