The Gig Economy: Hype or Reality?
During conversations with clients recently, we’ve been asked for our opinion on the evolution of the ‘Gig Economy’. It has sparked interesting discussions as to the future of the employee-employer relationship and whether the gig economy will become the new norm.
What is the Gig Economy?
This terminology refers to a perceived transition in the labour market, away from the typical employer-employee relationship toward a more transient or short-term work force consisting of increasing numbers of fixed term-project based employees or contractors. It can also refer to workers who supplement a full-time role with ‘gig’ style fixed term or contract work to supplement their income, but for the purpose of this article we’ll focus on the former.
Our opinion will obviously be formed by the experience and interactions we have daily. As a recruitment partner to high-performing companies, we may be somewhat biased. Our job is to support these companies in their acquisition of high-performing talent, therefore in turn supporting the traditional employer-employee model. Sceptics could also argue that we have a vested interest in encouraging a mind set of retaining the traditional model as a mass shift to gig work could negatively impact recruitment based on the traditional model, but let’s put that to one side for the moment.
Here at Alcon Maddox we don’t think the gig economy is growing or expanding at the rate that some commentators would have us believe, and we don’t think, as some of the more extreme business thinkers have suggested, that gig style working will outweigh the traditional model in years to come. Here’s our rationale:
Contracting and short-term employment has always had its place. There are some industries and projects that lend themselves to this short-term relationship between a provider of talent/skill and a company/customer. The benefits of this relationship centre around cost transparency and management, and reduced long-term risk and exposure. Ultimately, it provides the opportunity to source talent that may not be at an affordable price point for a long-term relationship.
The traditional model of employer-employee relationship will continue to constitute the primary talent resourcing model for most businesses.
Adopting this as a primary talent strategy presents more risk than benefit in the long-term:
Any business, from greenfield site start-up to a huge multinational, works to create a winning culture. The culture is the sum of the people within your business. If those people are primarily transient gig workers, the opportunity to embed or retain a successful culture becomes hugely diluted.
Performance management becomes increasingly difficult. In many geographies, exerting managerial influence over a contractor has the legal effect of creating an employment relationship as opposed to a commercial one. Effective performance management is therefore only truly achieved through the financial terms of the fixed term contract potentially creating a short-term inflation of costs.
Transient or mobile working also impacts the level of domain knowledge that the company has access to. Regardless of any company’s efforts to document processes, practices and procedures, employees will develop tacit knowledge over their period of employment that is of great value to their ability to perform and ‘do their part’ for the company. The short-term association that a gig worker has with a company does not facilitate the development of this knowledge or a deep understanding of the business context in which they are working.
The two final areas of impact that we would share our opinion on are stability and the development of the worker. Stability of engagement impacts both the worker and the business. From a business perspective, opting for a short-term engagement structure does not provide opportunity for teams to truly gel and progress to a level of peak performance. From a workers perspective, if engaged in contract or fixed term work, there always needs to be a consideration of the future and the next gig - securing those future mandates will always represent a stressor that may affect performance that a permanent employee does not have to contend with.
Great companies develop their people, they support programmes of learning, define career pathways and support employees in their efforts to develop new or increasingly higher levels of skills. The gig worker who is engaged to fulfil a specific function won’t receive that investment, with their development being primarily self-funded both financially and in terms of the time required to engage in the development activity.
We believe the traditional model of employer-employee relationship will continue to constitute the primary talent resourcing model for most businesses. Contract and temporary work will always factor into any holistic view of a company’s workforce, but we don’t agree with commentators who point toward a future where the gig economy becomes the norm.