The Temporary Workforce Changes the Nature of Corporations

“Companies need to reinvent themselves”

Companies increasingly hire more temporary employees and interim managers. This shift in their HR strategy will change the very nature of corporations. Instead of employers they will become providers of employment on a project basis.

The 93-year old Coca Cola employee Rocky Battista still checks in at his place of work every morning and has done so for more than 75 years. Battista is not only the oldest employee in the world, he is also a living example of how much the labour market has changed in the last half a century.

The time when employees would spend a lifetime at one company, to receive a golden watch upon retirement - a gift idea that apparently was introduced by Pepsi in the forties - only lives on in black and white photos. According to a recent study by Millennial Branding, 60 percent of the youngest generation of employees worldwide stay less than 3 years with one employer.

The rise of the on-demand economy

It has everything to do with the rise of the so called ‘on-demand’ or ´gig economy´. Both terms refer to the same phenomena: the ever increasing number of corporations that hire personnel on a temporary or freelance basis. According to the International Labour Organisation (ILO) independent contractors and temps now account for 75 percent of the global workforce.

Especially in developed economies they include highly skilled and experienced professionals. A recent study by PageGroup shows that almost 70 percent of temporary staff have higher education and 65 percent have more than 10 years of experience. Also the number of interim managers is increasing. “Especially in change management and in management of mergers and acquisitions, we notice a higher demand for people who work on a project basis”, says Marinka de Groot, Associate Director with Page Executive in the Netherlands.

The effect on companies in the long term

Presidential candidate Hillary Clinton recently commented that the consequences of this shift in the labour market will be huge.  “The gig-economy is creating exiting opportunities and unleashing innovation, but it’s also raising some hard questions”, she said in a speech at the New School of Manhattan earlier this year.

How, for example, will the growing flexible workforce layer affect companies in the long term? According to Charles Hardy, acclaimed author of management books about organisational behaviour, it will change the very nature of businesses. Already in the eighties Hardy predicted a future where companies would evolve from being ‘employers’ to ‘coordinators of employment’. He foresaw that complete flexibility was the only way companies could compete in a global market that’s unpredictable and constantly changing.

That’s why Hardy came up with the idea of the so called Shamrock Organisation Model: where companies would consist of a small core of managers and professionals, who collaborate on a project basis with freelancers and hire employees on a temporary basis.

Companies finding new business models

This future is already happening. New technologies force many companies to reorganise their traditional business model. “We live in a time of constant change”, says Marinka de Groot.  “So companies need to reinvent themselves. This also influences their HR strategy. Look, for instance, at the publishing industry, which is shifting from a model based on print to a digital revenue model. Not only does this completely change their product, it also changes the way they recruit.” Just like Hardy predicted, the majority of companies in the printing industry nowadays work mostly with freelancers and a small core of managers, who are responsible for the long term strategy.  

And not just publishers but companies across all industries are changing their HR policies. The TSM Business School in the Dutch university town Enschede is a perfect example: only 1 out of 8 employees have a permanent contract, the rest are employed as independent contractors. It’s just one of many organisations in the Netherlands that rely heavily on a flexible workforce. “There is no other country in Europe that has so many self-employed, temporary employment and part-time jobs,” says Guy Ryder, Director General of the International Labour Organisation, in an interview with the financial newspaper FD. He thinks sooner or later the labour markets in other European countries will go the same direction.

Netherlands and Denmark as testing ground

The hardest question governments are facing is how to combine this new labour model with a solid social security system. The model of the welfare state in western economies was built in a time where permanent contracts and lifelong jobs were the standard. As the recent strikes in France show, it’s not easy to find a middle ground between good social benefits, job security and a flexible job market.

“The Netherlands could serve as testing ground,” says Guy Ryder, “Is it possible to combine flexible jobs with social protection and regulation?”  Both the Dutch government and civil organisations are working hard to solve that issue. The most recent fruit of their efforts is a collective pension fund for the self-employed.

Another country that seems to have found the answer to that million-dollar question is Denmark, whose former Prime Minister Poul Nyrup Rasmussen coined the term ‘flexicurity’: employees are not protected against dismissal, but get high social benefits in return. The result is that companies are more willing to hire new personnel, because it’s easy to dismiss them in case they become redundant. Although every year 1 out of 5 people in Denmark is unemployed for some time, it’s also the number 1 European country where people are less afraid of losing their job. Because being unemployed doesn´t mean financial disaster.

Companies becoming membership communities

Does this mean that the labour market model in Denmark and the Netherlands could be used as a blueprint for other countries? Unfortunately, it’s much more complicated than that. For one, both systems are embedded in long lasting local traditions of dialogue between employers, unions and civil organisations.

Second, there is an equally important issue that also these models don’t have the answer to. It was Charles Hardy himself who warned for the danger of his own flexible working model: that corporations will become just a box of contracts with no commitment on anyone's part at all.  How do companies in the future make sure that the people they work with feel some sort of belonging, a sense of continuity? Hardy proposes to turn corporations into some form of ´membership communities’, where the members - depending on their responsibilities - have a say in the strategy and the future of the company.

If his prediction becomes true – and Hardy’s predictions have a tendency of becoming reality – in the near future celebrations of lifelong employment will sound like ancient history. Instead self-employed accountants, designers and managers will celebrate their several community memberships, which lasted somewhere between a few years and their whole working life.