Does your brand reflect the composition of your workforce?

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EY Reporting

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Reporting, EY Global Assurance’s insights hub, provides high-quality content tailored for board members, finance directors and audit committee chairs.

7 minute read 29 Mar 2018
Related topics Digital Workforce Automation AI

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EYQ recently spoke with Stephane Kasriel of Upwork about changing labor market dynamics.

“Current labor markets remain virtually unchanged since the Industrial Revolution despite the fact that the jobs that people do have changed radically in the last 50 years,” says Kasriel. “I see inflexible labor contracts tied to benefits going away and being replaced by a superfluid approach that matches supply and demand in real-time and completely irrespective of where workers are based.” This will necessitate changes in how companies build and grow their people brands (the attractiveness of a company’s brand or image to current and prospective workers).

Contracting with individuals to perform work—back to the future

If markets were perfect, individual specialists could be hired to perform every task. But markets aren’t perfect. Market participation comes with transaction costs. In the past, companies hired large, permanent and generalist workforces as a way to help reduce these costs.

But fast forward to today and transaction costs have fallen dramatically. Stephane Kasriel, CEO of Upwork, a prominent freelancing website, explains what this means. “The downside of contracting with freelancers is being mitigated,” he says, “whereas the upside that was always there — hiring specialists to complete specific tasks over specific timeframes —remains. What this means is that companies and workers are now more likely to choose freelancing as an engagement model because the transaction costs are so much lower than they used to be and the benefits greater.”

Technology makes it easier but people are increasingly choosing to freelance

There are three drivers behind the increased corporate uptake of freelance labor models:

  1. Technology. Technologies—broadband, videoconferencing, PC webcams, cloud computing and more—have made remote work and off-site collaboration possible. Technology advances have also contributed to the subdivision or atomization of work into tasks, making it easier to distribute work across different categories of specialists.
  2. Company need. To compete and to satisfy shareholders, today’s organizations need to innovate and be agile while also improving the bottom line.  Moving from siloed work models to flexible, project-based work is one way to accomplish these objectives. Across industries, the search for talent continues to be relentless. Most companies find it impossible to source all of the talent they need locally, which is another reason freelancing work models are gaining in popularity.
  3. Worker preferences. Workers increasingly prefer to work independently rather than as traditional employees. Freelancing in America, an annual report conducted by an independent research firm and commissioned by Upwork and the Freelancers Union, shows that 55 million people, or 35% of the total U.S. workforce, now freelance in some capacity. But what really stands out in the research is that the majority (63%) of freelancers across all age categories are voluntarily choosing this mode of working. From a motivational standpoint, the biggest reasons for selecting to work in this fashion are the freedom and flexibility the freelance model affords.

Will the traditional employment model be missed?

Kasriel also suggests that the oft-cited benefits of the traditional employment model may be overblown.  “We tend to have a very romantic view of the value companies provide to employees. But every study I’ve seen, including ours, shows that freelancers are much happier than employees. And that’s true across the spectrum. It’s true for the high-end talent—about 80% of freelancers that use our website have a college degree or above. On average, those who have made the leap to freelancing from a traditional job tend to be happier than they were when they were employees.” One obvious reason is that freelancers tend to get paid more than traditional employees.

We tend to have a very romantic view of the value companies provide to employees. But every study I’ve seen, including ours, shows that freelancers are much happier than employees.
Stephane Kasriel,
CEO of Upwork
Stephane Kasriel, CEO of Upwork

Freelancers do admit to facing challenges, but missing the role of employee is not one of them. According to Freelancing in America, income predictability is freelancers’ leading concern. Freelancers need a reliable stream of jobs. Their second biggest concern is getting paid. Today, the reality is that some companies treat freelancers like large vendors—getting paid late or not at all is a common problem that vendors face.

Upwork—connecting businesses with great talent

Working via a freelancing website like Upwork can help solve some of these challenges. The company’s vision is “to connect businesses with great talent to work without limits. And by work without limits, we mean that location should not matter and that speed is essential. Half of the jobs on our site get filled within the first 12 to 24 hours compared to the traditional job market where jobs get filled in weeks if not months.” Representing over 100 work categories, Upwork has grown to facilitate over $1 billion in transactions each year and is used by roughly 100 of the Fortune 500, as well as by small companies and sole proprietors.

Looking ahead, the company’s plan is to grow significantly faster than the industry. Gaining market share will be accomplished by investing in the technology platform, improving data analytics and real time matching. Growing services with existing large clients, as well as getting more of the Fortune 500 to use the Upwork platform is also part of the company’s plans. Category and geographic expansion is also expected to drive future growth.

Kasriel believes that Upwork is well positioned vis-à-vis the superfluid direction in which labor markets are headed. “Ultimately, we are a reflection of the labor market,” he says. “We get an ever-increasing share of that market by understanding where the world is going and building compelling solutions that make people want to use us. But ultimately jobs change, a site changes. And typically we are ahead of the curve. Companies tend to hire freelancers with specialized skills that they don’t have in-house. That puts Upwork at the cutting edge of skills development so we tend to have a nice view of what the labor market will look like a couple of years down the road.”

I don’t think AI and robotics will be as disruptive as some think they will be.
Stephane Kasriel,
CEO of Upwork

Tearing down the barriers of skills and geography

Advances in artificial intelligence (AI) and other technologies will undoubtedly change labor markets. But Stephane Kasriel is not taking a gloom and doom position.  He views AI as part of a long continuum of productivity-enhancing technologies. “I don’t think AI and robotics will be as disruptive as some think they will be,” he says. “Yes, certain tasks will be automated, but new jobs will be created. And if we want GDP to grow, productivity needs to go up and this is what these technologies are meant to do. The real question is whether our society is going to be able to create more work than we automate and are the people being displaced going to be able to access the jobs that exist?”

The real question is whether our society is going to be able to create more work than we automate and are the people being displaced going to be able to access the jobs that exist?
Stephane Kasriel,
CEO of Upwork

Kasriel contends that work is created by problems that need to be solved and the economic opportunities that arise from solving these problems. And by any standard, the world is not running out of problems to solve. The barriers to meeting demand are skill- and geography-related. In the first instance, the skills needed to be valuable in this new age are evolving faster and faster, thus becoming obsolete faster and faster. Workers will need to reinvent themselves many times, which will require continuous learning, as well as the platforms and funding to facilitate it.

Geographical barriers are where a labor platform like Upwork can be invaluable. “Location-based jobs in the knowledge economy don’t make sense,” says Kasriel. “A prospective hire based in Louisiana that has the skills needed for a company based in San Francisco should be an acceptable candidate, either as a freelancer or a remote employee. If jobs get destroyed in one place and new jobs get created in another place, workers can’t be expected to move to the new job. The system needs to adapt to workers doing jobs remotely.”

Location-based jobs in the knowledge economy don’t make sense.
Stephane Kasriel,
CEO of Upwork

Rethink your people brand

Building and leveraging a superfluid workforce is becoming a mission critical task for companies. Tomorrow’s organizations will rise and fall on how well they adapt to emerging people models, including larger freelance workforces. But this isn’t an area where companies have spent much time to date.

Kasriel says: “Today, you’re a traditional employee and you are managed by human resources (HR) and they really care about your engagement and retention and they do everything they can to build a good reputation, a good people brand. But if you aren’t an employee, to some extent the company does not care about your experience.” That needs to change.

As freelancers comprise a greater share of each company’s labor, companies must rethink their people brands. It matters from two perspectives. Building a people brand that is synonymous with being a good client for contractors will help companies attract the best talent. And it’s a sound strategy from a reputational standpoint. Freelancers’ work represents your company, your culture and your brand—their happiness and satisfaction matter more than ever.

Generated by EYQ, an EY think tank that explores leading and emerging trends, focusing on “what’s after what’s next?”.

Summary

The future of work is here, and people are choosing to freelance. Employers need to rethink their people brand to retain talent.

About this article

By

EY Reporting

Insights from external journalists, academics, practitioners and EY professionals

Reporting, EY Global Assurance’s insights hub, provides high-quality content tailored for board members, finance directors and audit committee chairs.

Related topics Digital Workforce Automation AI