Few managers would argue with the idea that you need to develop peo-ple in order to grow the organisation – especially given looming skills shortages and the knowledge economy’s need to harness top talent. At the same time, an increasing number of companies are using talent that is with them only for the short haul.
Outsourcing, short-term contracting and executive leasing are on the rise worldwide. There is now an expanding pool of talent in constant transit from one company to another, their loyalty aligned to specific projects rather than the organisation’s longer-term directions.
Add to that another trend becoming evident offshore – more companies opting to farm out their entire human resource administration to specialised professional employment agencies (PEOs) – and the vital link between companies and their “greatest asset” starts looking little tenuous.
That is something business should be worried about, according to American management guru Peter Drucker. Writing about the dual impact of these changes in recent Harvard Business Review, he issues warning. “The attenuation of the relationship between people and the organisations they work for represents grave danger to business.” Taking advantage of freelance talent or outsourcing some of the more tedious aspects of HR management is one thing, he says. “It’s quite another to forget, in the process, that developing talent is business’ most important task – the sine qua non of competition in knowledge economy.”
While Drucker is talking about business environment where such changes are more advanced than they are in New Zealand, there is no doubt that the short-term leasing of talent is an increasingly popular practice here.
Determining the exact size of the local contract workforce isn’t easy because it operates as kind of virtual talent pool. Hired for specific project or period of time, contract workers tend not to show up in corporate headcounts or on regular payrolls.
Payment for their input is often buried under budget headings ranging from IT to stationery, advertising or even office furniture. That contract workers can be kept off annual budgets is perhaps one of the least openly expressed advantages they offer employers.
The short-term nature of their employment also means contract staff are less likely to go through the sorts of induction processes that help permanent workers get to grips with company values, goals and their own place in the scheme of things.
They are also less likely to be included in regular planning or strategy meetings and probably won’t top the list of employees earmarked for training or career development opportunities.
So is there any concern that growth in the use of such transitory talent runs contrary to goodly corporate intentions of nurturing, expanding and making best use of the in-house knowledge pool?
Apparently not. Recruiters who regularly handle contract placements say the sorts of problems Drucker envisages are unlikely to occur under local business conditions.
For starters, the New Zealand market is too small to accommodate specialist PEOs. Outsourcing HR does happen to some extent at lower levels of staffing and has been trialled in the banking sector but there just isn’t the sort of scale here to support US-style agencies, says Kevin Chappell, managing director of Executive Taskforce.
“Our size precludes it as mainstream situation here.” And while the contract workforce is growing, its role has more to do with enhancing human resource capacity for specified time or purpose, says OCG chief executive officer George Brooks. He read the Drucker article and disagreed with its thesis – particularly with regard to the local market. “It doesn’t really hold up here because one of the main reasons for bringing in contractors is to introduce skill set the employing organisation doesn’t have on tap.”
New Zealand differs from bigger markets in that its companies already run on fairly stripped-down workforce. That means less HR padding to call on for projects or performance targets above and beyond core activities. Instead of well-peopled organisations where HR benefits are perhaps more widespread, attention is focused on smaller set of essential skills, says Dave Stewart, general manager of Clayton Ford in Wellington.
“You may be reduced to core set of skills, but it’s very well chosen and well-catered to core.”
Kevin Chappell makes the same point, rather lyrically describing that core group as “caretakers of the company’s soul”.
“They’re the ones closely involved with company strategy and direction – the linchpin of its personality or culture. But the knowledge base they represent is supplemented by contractors brought in as required for special projects.”
One of the best things leased talent can deliver is fresh outlook. “They are bringing in very clean, clear thinking process that is not infected by existing company politics or traditions,” says Brooks.
Such objectivity can be real asset, agrees Carmen Bailey, director of recently launched leasing specialist Emergent & Co.
“We’ve just placed project director on contract with company whose managing director was initially very doubtful about the value she could add. Now he is giving her nothing but glowing reports. She’s woman in very male-dominated manufacturing environment and was able to bring in an objective, external perspective that has really paid off. At the end of the day, contractors are very passionate about delivering good result for employing companies because they are only as good as the last job they’ve done.”
Dave Stewart also refers to the “strong loyalty component” around providing top customer service to clients. And it is no less potent for the element of self interest it contains. “There is lot of loyalty attached to the project they have been contracted to carry out. It’s based on good customer service. If you don’t provide quality service then you don’t get the good references you need to move onto the next one.”
George Brooks makes the same point. “Contractors know they are measured very critically on every project so their loyalty is driven by their own personal performance and brand.”
All of which also says something about the kind of people who are drawn to the contracting lifestyle. They are generally fairly independent, resourceful folk who set their own goals, like challenge and are good self starters.
Not everyone can be contractor, says Bailey. “A lot of people think they can but it takes certain personality. Contractors must hit the ground running and not be phased by new environments. They just go in and get on with the job.”
As much management literature has noted, the folk who are great at driving business start ups are not always those who are most effective at maintenance – and many contractors live in that profile. They get buzz from establishing new structures or reforming old ones, developing different products or services, or building new markets. Then, they start looking for the next challenge.
Because contractors are mostly self employed, they take responsibility for their own career development. But they are also in good position to gain fairly wide range of work experience and to chase contracts that provide personal ‘stretch’. That is something recruitment consultants need to recognise in their placements, says Paula Watson, an executive contracting consultant with Drake Personnel.
“While it’s not always possible for contractors to be too choosy, it’s as important for contractors to have challenges to develop their careers as it is for anyone else. When you’ve worked with them for bit, you know what’s likely to spin their wheels and it’s neat to see someone stepping up to more demanding role.”
However, individual need does have to be balanced against the company’s need, says Watson. “You have to be careful because the whole point of contracting is that the company is buying experi
