Rethinking The On-Demand Workforce

In this era of chronic skills shortages, rapid automation, and digital transformation, companies are confronting a growing talent problem, one that has the potential to become a strategic bottleneck. How can they find people with the right skills to do the right work at just the right time? The half-life of skills is shrinking fast, and many jobs now come and go in a matter of years. Not only that, but major demographic changes are under way: Boomers are aging out of the workforce, and Millennials and Gen Z are taking over, bringing with them very different priorities about who should do what work—and where, when, and how it should get done.

To help companies address these challenges, a new generation of talent platforms—such as Catalant, InnoCentive, Kaggle, Toptal, and Upwork—has emerged. In contrast to Uber, Amazon Mechanical Turk, and TaskRabbit, these platforms offer on-demand access to highly skilledworkers, and our research shows that their number has risen substantially since 2009, from roughly 80 to more than 330. Much of that growth took place during the past five years alone. Today almost all Fortune 500 companies use one or more of them.

Platforms that provide workers who have four-year college degrees or advanced degrees represent an increasingly important but understudied element of the emerging gig economy. To better understand this phenomenon, we undertook a survey of nearly 700 U.S. businesses that use them. We then conducted in-depth interviews with many corporate leaders whose companies are relying on the platforms and with platform founders and executives.

That companies are leveraging high-skills platforms in large numbers came as no surprise to us, because in recent years we’ve seen how they can increase labor force flexibility, accelerate time to market, and enable innovation. We were impressed, however, by the variety of engagements that companies are making with the platforms. They’re seeking help with projects that are short- and long-term, tactical and strategic, specialized and general. What’s more, 90% of the leaders we surveyed—C-suite and frontline—believe these platforms will be core to their ability to compete in the future.

But here’s what did surprise us: Despite the extent to which companies are now turning to such platforms, very few firms have developed a cohesive organization-wide approach to their use. Instead, operational frontline leaders who are desperate to get things done have been reaching out to them on an ad hoc basis, often without any central guidance. This approach is costly, inefficient, and opaque.

To compete in the years ahead, companies must do better. They’ll have to acknowledge and embrace the full potential of digital talent platforms—which is to say, figure out how to engage strategically with what you might call the on-demand workforce.

Though millions of workers were laid off this past spring, in the coming months employers will begin to rehire—and when they do, they’ll need to be more purposeful about their approach to talent. How can they access hard-to-find expertise? Which positions or roles have changed, and what new capabilities are required? What work can be done more successfully and efficiently by skilled freelancers? In an environment of ongoing uncertainty, employers will be even more attracted to the freelance route for a variety of reasons: It makes hiring easier for hard-to-fill jobs, offers access to a wider set of skills, reduces head count, and allows more flexibility during times of change.

In this article we’ll take stock of where most companies now stand on this front. We’ll show how some pioneers are speeding ahead to take advantage of what the new talent platforms have to offer, and we’ll explain how you and your management team can do the same.

The Maturing Gig Ecosystem

As the gig economy has grown, three kinds of platforms have emerged:

Marketplaces for premium talent.

These platforms, which include Toptal and Catalant, allow companies to easily source high-end niche experts—anybody from big-data scientists to strategic project managers and even interim CEOs and CFOs. Toptal, for example, claims it culls the “top 3%” of freelancers from across the globe. Experts might be hired for strategic initiatives or embedded in teams, and the projects they’re assigned to can range in length from a few hours to more than a year. The Covid-19 crisis is increasingly turning companies toward this kind of platform: Consider that this past spring Catalant reported a 250% increase in demand for supply chain expertise. (Full disclosure: Coauthor Joseph Fuller is an adviser to Catalant’s board of directors.)

Marketplaces for freelance workers.

These platforms, which include Upwork, Freelancer, and 99designs, match individuals with companies for discrete task-oriented projects—designing a logo, say, or translating a legal document. For example, when Amazon wanted to explore creating custom social-media content for its new TV shows, it tested the waters with Tongal, which connects companies to individuals with media know-how. Many freelance platforms offer access to workers from around the world with a wide variety of skills, and payment is often per completed task. Covid-19 is accelerating the move toward these platforms, too: As large swaths of society began working remotely, Upwork saw a spike in demand for digital marketing expertise from companies trying to reach consumers in their homes.

Platforms for crowdsourcing innovation.

These platforms, which include InnoCentive and Kaggle, allow companies to post problems among large communities of technically sophisticated users—and reach a far broader base of them than could ever be found or developed in-house. The challenges run the gamut from simple coding projects to complex engineering dilemmas. Working with the platforms, companies often create competitions and offer prizes for the best solutions. The U.S. Transportation Security Administration, for example, ran a $1.5 million competition on Kaggle to help improve the algorithms that predict threats using images from airport scanning equipment. Enel, the Italian multinational energy company, uses multiple crowdsourcing platforms to generate ideas for a host of issues: how to improve recruiting, how to mitigate cybersecurity risks, and even what to do with defunct thermal plants. And the pharmaceutical company AstraZeneca has turned to InnoCentive’s “solvers” to develop molecules used in genetic research and testing.

The Growing Supply

Millions of well-qualified Americans today are attracted to contract work. Freelancers are now estimated to make up roughly a third of the U.S. workforce, and those who are highly skilled represent a small but growing slice of it. And for the first time since 2014, the number of freelancers who say they consider gig work to be a long-term career choice is the same as the number who consider it a temporary way to make money. Early signs suggest that Covid-19 will also speed up this shift.

Much of the shift is the result of demographic changes that have been under way for four or five decades but that traditional organizations have done little to recognize or address. There are at least four key trends:

Care responsibilities.

Single-parent and sandwich-generation families are on the rise. Burdened with childcare and eldercare, many employees are dropping out of the workforce or struggling to manage full-time jobs. Gigs allow them the flexibility to handle their family obligations while delivering quality work.

Female employment.

Women’s participation in the U.S. labor force has been declining steadily since 2000. Highly skilled, experienced women who take time off to have children and for other life events are finding it difficult to restart their careers or are seeing themselves get sidetracked in traditional organizations. According to a 2009 Center for Work-Life Policy survey, more than two-thirds of “highly qualified” women—that is, those with advanced degrees or high-honors BAs—who drop out of the workforce would not have done so if they’d had access to more-flexible job arrangements. Online talent platforms allow them to more smoothly reenter the workforce and advance their careers.

The aging of America.

Workers who are laid off or edged out of traditional firms once they hit their fifties often find that talent platforms offer them a way to continue to use their skills and experience—while maintaining satisfying work/life balance. Given that by 2030 one in five Americans will be older than 65, talent platforms expect that experienced workers with hard-to-find skills will flock to their fold.

The Millennial ascendancy.

Millennials, who are already the largest generational cohort in the workforce, tend to be tech-savvy and to prefer to work for themselves rather than for traditional organizations. They want more autonomy and control over their job security than previous generations had.

Early Lessons

In studying how talent platforms are being used, we’ve identified three areas where companies have consistently found platforms most useful:

Labor force flexibility.

When the head of technology at the PGA, Kevin Scott, found himself frustrated by the need to constantly improve and upgrade the organization’s digital capabilities and offerings despite a lack of in-house digital talent, he partnered with Upwork to quickly engage software engineers to generate and develop promising ideas. Using Upwork, the PGA was able to get projects started and finished considerably faster than before.

Time to market.

Many managers have turned to talent platforms to fast-track processes, meet deliverables, and ensure outcomes. When Anheuser-Busch InBev wanted to quickly expand into new, disruptive products, it realized that despite having a workforce of 150,000, it needed outside help. By tapping into Catalant, the company was able to rapidly get consumer data analyzed and find experts to help roll out products like kombucha tea and spiked seltzer. Similarly, when Matt Collier, a senior director at Prudential PLC, was on a tight deadline to overhaul the training given to insurance agents in Singapore, he turned to Toptal to find designers and other talent that could help him create course materials quickly—and ended up getting the job done for less than it would have cost with traditional vendors.

Business model innovation.

Digital talent platforms can also help companies reinvent the way they deliver value. In 2015, when Enel made the strategic choice to embrace the United Nations’ 2030 sustainable development goals and build new businesses around them, it engaged the services of several crowdsourcing platforms, among them InnoCentive, which alone gave Enel access to more than 400,000 of its highly skilled problem-solvers worldwide.

Overcoming Resistance

In our survey, C-suite executives in particular seemed to envision a future reliance on talent platforms: Half thought it “highly possible” that their core workforce (permanent full-time employees) would be much smaller in the years to come, and two-thirds told us they expected to increasingly “rent,” “borrow,” or “share” talent to meet specialized needs.

Why, then, have so few companies designed strategic approaches to working with talent platforms? Because the structures and processes that most organizations have in place have been designed expressly to protect them from external vendors, much as white blood cells protect our bodies from pathogens. If companies want to work successfully with digital platforms, they need new structures and processes that function as immunosuppressants.

That’s a major change, and many vice presidents and directors are worried about the practical implications of embracing it. Integrating an on-demand workforce into a firm’s strategic core, they recognize, means questioning and redesigning every aspect of the organization. For managers already in the throes of a digital transformation, the prospect of taking on another massive project is hardly appealing.

But a digital transformation requires a talent transformation. The two go hand in hand. Company leaders understand this. Nearly two-thirds of our survey respondents reported that “understanding the digital skills needed for the future” had been a top priority for them in the previous three years. The very nature of work changes with more technology and automation, as does a company’s ability to find the skills needed to do that work. Online talent platforms provide a way to develop that ability rapidly and with much less effort.

Engineering the Talent Transformation

To engage with the on-demand workforce at a strategic level, companies will need to focus on five main challenges:

Reshaping the culture.

When a company decides to turn core functions over to freelance workers, permanent employees often feel threatened. They struggle with sharing information, raise doubts about the values and work habits of outsiders, and assume the worst. That’s what happened when NASA began using crowdsourcing platforms to generate innovative ideas: The organization’s engineers began to worry about their job security and question their professional identities. As one employee put it, his colleagues were not used to saying, “Hey, we have a problem and we don’t know how to solve it. Can you help?”

Often, the strongest opposition comes from employees who have the least exposure to high-skills talent platforms. The members of Enel’s leadership team saw this when they decided to seek external innovation help. Pushback came not just from the rank and file but also from senior leaders who were nervous about the message this approach would send. Was turning to freelancers a sign of weakness? Did it signal that the leadership team lacked confidence in the permanent staff? But with some careful attention to cultural change, the company managed to overcome that resistance. Instead of allowing employees to fear the unknown, Enel focused on educating employees about how they could benefit from an on-demand workforce. According to Ernesto Ciorra, the company’s chief “innovability” officer, the first step was to help all full-timers understand that they could use talent platforms to tap a powerful new source of strength. (“Innovability” is Enel’s term for innovation plus sustainability.) “We had to become humbler,” Ciorra told us, noting how important it was to recognize that at times “the best ideas lay outside the company.”

Rethinking the employee value proposition.

Companies need to get employees to see how they personally can benefit from talent platforms. That’s what one private equity firm did when it rolled out plans to collaborate with Upwork. According to Hayden Brown, Upwork’s CEO, the message the firm sent its employees was “This is a way to help you. There are a lot of things that you may be doing in your day-to-day work that you can offload so that you can do even higher-order work or free yourself up to do more strategic thinking.”

However, as more teams include full-time and gig employees, working norms will have to change. Full-time employees will often need to step into coach and “connector” roles—asking questions of outside colleagues, identifying discrete pieces of work for external partners, and making it possible for gig workers to tap institutional knowledge. Full-time and gig employees will also have to learn how to work productively across dispersed, often remote teams. They’ll have to become adept at collaborating with a revolving set of teammates, articulating previously tacit team norms, and making progress easy for everybody to track. Companies will have to base promotion incentives for managers on outcomes attained rather than full-time employees overseen. Some talent platforms have already created tools—available through their enterprise agreements—that can help companies with these sorts of transitions.

Reorganizing work into components.

One of the biggest predictors of whether a company will get the most out of a talent-platform partnership is how well it can break work down into rigorously defined components that can be easily handed over to outsiders. Most companies haven’t focused on this, because in traditional workplaces, managers can afford to be vague when making assignments. They know that everybody on the project team will be interacting so frequently that they’ll be able to clarify goals and make course corrections over time. But when companies use talent platforms, they have to provide much more up-front definition. Enel learned this lesson quickly when it adopted its open-innovation approach. As Ciorra told us, “You can’t just say, ‘I need something useful for my renewable-energy problem.’ Instead, you have to be specific: ‘I need to reduce the usage of X when I do Y in Z context.’” Only after employees started providing this kind of clarity in crowdsourcing appeals did the company begin getting the help it needed.

Reassessing capabilities.

To engage strategically with talent platforms, companies need to develop a portfolio approach to skills. The first step is to understand which capabilities they have in-house, of course. Unilever uses the services of a company called Degreed, which allows employees to develop and certify their expertise in specific areas with so-called microcredentials. The employees get recognition for their know-how and understand exactly which skills they need to acquire to advance; the company benefits because it can now identify which skills the organization already has and who possesses them.

Once the company has mapped internal capabilities, it can prepare for step two: striking the right balance when dividing work up internally and externally. That’s something Royal Dutch Shell tackled after identifying an urgent need to generate new revenue through digital and services growth. Using a cloud-based platform called Opportunity Hub that it already had in place, Shell was quickly able to assess the areas where it had the talent to speed toward its strategic goals and where it lacked the right skills. Soon it realized that it had shortfalls in key areas such as digitization and the internet of things—and that it didn’t have the time to find and hire the right people. To get working immediately on projects in these areas, Shell partnered with Catalant.

Rewiring organizational policies and processes.

This can be surprisingly difficult, as Collier discovered when he tried to bring in Toptal to help Prudential revamp thousands of training slides. A new mindset and a different way of working were necessary. “To adapt our initial contract for freelancers,” Collier told us, “we had to navigate a number of necessary processes, including due diligence, intellectual property, technology risk, antibribery, even anti-money-laundering.” To get the talent he urgently needed, Collier positioned working with Toptal as an experiment and persuaded stakeholders to give it a try. That paid off. Today, Prudential has a standard service agreement with the platform, and Collier readily leverages it for design and other types of skilled work.

A major challenge for companies that want to harness the on-demand workforce is that they’re still subject to regulations and practices that evolved in the predigital era. At Unilever, for example, one struggle was figuring out how to pay freelancers from digital platforms. According to Adfer Muzaffar, a former Unilever senior manager for talent and learning, “Freelancers are accustomed to immediate payment on the platforms via a credit card. But we had longer payment terms, and credit card payment was not an option. We wanted to be able to track who we paid, what we were paying for, what was the quality of work, whether the rates offered were competitive compared to our local costs. So we had to find solutions so that our internal mechanisms and processes could support this new way of working.”

Talent transformations are often easier than they might seem. That’s because many companies have people on staff who already have a wealth of experience with talent platforms—the managers who have used them on an ad hoc basis. These people can provide valuable guidance.

Ultimately, however, to bring about change on the scale needed to innovate new business models, companies will have to appoint a leader to explore how online workforce platforms can unlock new sources of value. This has to be somebody from the C-suite. It might be the CTO, the CMO, the CFO, or the CHRO—we’ve seen successful examples of each.

In the end, of course, it’s not titles that matter. It’s finding leaders who understand their companies’ strategic positioning, who recognize the revolutionary potential of engaging with the on-demand workforce, and who can inspire a cultural shift in their organizations that will make a genuine transformation possible.

Rethinking the On-Demand Workforce [HarvardBusinessReview]