Bill Kerr: With the recent rollout of vaccines, the end of Covid-19 pandemic may soon be on the horizon. As businesses contemplate the new normal, one key change has been the widespread adoption of remote work. This, combined with an increasing pool of highly skilled talent looking for work on a variety of terms, is bolstering the top end of the freelancer market. But so far, businesses have been mostly taking a project-by-project approach to engaging high-skilled freelancers, typically through digital talent platforms. Instead of resorting to these experts-for-hire and white-collar contractors in a reactive mode, organizations would benefit from a more-systematic approach. What’s driving the trend, and how can organizations make better use of both internal and external talent?

Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Bill Kerr. I’m joined by my podcast cohost and co-chair of the Managing the Future of Work Project, Joe Fuller, and by Allison Bailey, managing director and senior partner at Boston Consulting Group. Joe and Allison are co-authors of Building the On-Demand Workforce, a November 2020 report from the Managing the Future of Work Project and BCG’s Henderson Institute. They’re here today to discuss the rise of the high-skilled freelancer market and how organizations can be more proactive in tapping into it. Allison, welcome to the podcast, and Joe, I guess it’s, “welcome back.”

Allison Bailey: Nice to be here.

Joe Fuller: Thank you, Bill. It’s fun to be on the other side of the table for a change.

Kerr: Joe, why don’t we begin with you. The Managing the Future of Work Project has been tracking contingent labor—broadly speaking, the gig market—for some time. And of course, BCG has been advising its clients on these types of issues. What prompted this particular research on the high-end freelancer segment?

Fuller: Well, Bill, as you mentioned in your introductory comments, Covid has caused a significant acceleration of companies of all sizes’ efforts to digitalize their products and services. It has raised the requirements for various types of tech support as companies have gone to distance work. And this acceleration just meant the supply-demand imbalance, in terms of people with digital skills. Big companies had not budgeted for this sudden surge in their need to support remote work and to accelerate digitalization efforts. They started to turn to talent platforms to supplement that work. Similarly, they were suddenly confronting all sorts of business and management questions that they hadn’t anticipated, whether it’s how is Covid going to affect the way their customers experience their brand or what would be new business opportunities that would be created by Covid or seeking expertise as to how they reconfigure their supply chains to respond to the real disruption in historical patterns of trade. So all of those things put a sudden premium behind getting access to highly skilled talent in some meaningful numbers now. And as you know, we’ve long thought that there was clear data that this growth in high-skilled gig work was going to continue. But this really seems to have slammed on the accelerator.

Kerr: Allison, I get a paycheck for dealing with Joe Fuller, but you’re voluntarily signing up to do this. What prompted the interest from the BCG side?

Bailey: So I think we had seen for some time, actually, the emergence within a number of our client organizations in pockets of the use of freelance talent—and use in very innovative ways. And so we were eager to know, was this part of a larger megatrend? And I think, where we came out at the end of this work was, in fact, that many organizations have under-leveraged this opportunity to rethink fundamentally their business models in ways that leverage freelance work, leverage the opportunity to get access to world-class talent in new and differential ways, and offer an opportunity to change fundamentally their cost structures at the same time.

Kerr: Ok, so tell us a little bit next about the design of the survey. Who were you trying to reach? How did you conduct the polling? And also what were you hoping to understand or bring to the surface?

Fuller: Well, Bill, we sampled almost 700 US-based companies. We focused just on the US because it’s the most-advanced market in both supplying and using these services. So we thought it would give us the best insight as to what the future might hold for other global markets. We were looking for several different things. First of all, we wanted to just find out how extensive was the use of these platforms. We looked at three different types of platforms: 1) crowdsourcing platforms, where firms solicit opinions about specific questions from a wide array of people, sometimes for pay, sometimes literally for prizes, sometimes just seeking contributions and by asking provocative questions; 2) freelancer platforms, where people just have credentials which they post and you can rent in some unit of time; and then 3) more-curated online demand platforms, like a Toptal or a Catalant, which offer more-specific services, higher-skilled work, and often are a channel for small groups of people or firms to offer their services. How widespread was the use? To do what? And also we wanted to understand some of the organizational dynamics in companies in putting gig talent to work. Most companies aren’t configured to have on-demand workers as integral to important projects. They’re unused to structuring work that way. We wanted to understand how companies were accommodating this, what barriers were they bumping into, how different levels in the organization experienced this, and very importantly, how they viewed this, as Allison suggested, as a strategic resource. Is this something they view they’re going to rely on more in the future? To do what? How integral is this becoming to their thinking?

Kerr: Joe, household names that come up in the gig sector include the Ubers of the world and the TaskRabbits. Is there a clear line or boundary between this high-end freelancer segment that you were just parsing into three different bins versus this broader gig landscape?

Fuller: I think, as you pass through the freelancer-type sites where... There are quite a lot of numbers of sites—Fiverr would be an example; Upwork, certainly, in its early days would be an example; Freelancer.com—where a lot of the work is essentially very closely defined skills and much more analogous to gig platforms, for example, like a Handy or a Home Advisor. You go there to find a master plumber or carpenter or house painter. Similarly, on a Freelancer, you can find somebody who is a web designer or can build you basic, let’s say, Excel spreadsheets. But there is a break when you get to talent that is dealing with more-complex problems, often to take on the entire project or major elements of a project, as opposed to simply someone who is going to provide a very closely defined service which requires skills that are fairly easy to validate as an input to some broader piece of work in which they’re not integrally involved.

Bailey: We had a two-by-two matrix, and on one dimension, we talk about the nature of the work. Is it physical or is it cognitive? And on the other dimension, we talk about the degree of labor-value-add. How high or low is it? And what you find is that the Uber and Lyfts of the world are in the physical and lower labor-value-add quadrant, whereas the high-end gig workers that we’re talking about are largely involved in cognitive work that has a high degree of labor-value-add to it.

Kerr: Among your clients, is there more demand or more challenges in certain parts of that quadrant?

Bailey: I would say that the upper-right—cognitive and high labor-value-add—quadrant is one that organizations are now really digging into. Again, they had experiments with it over time, but more on an ad-hoc basis. And I would say now—because they’ve started to realize the promise of fundamental business model changes as a result of tapping in there—they’re really eager to take advantage of them. That having been said, the organizations of today largely were built for full-time employees—meaning the policies, the procedures, the processes in which you recruit people are all designed to have a full-time worker. One of the things that you see organizations really challenged by is, how do we actually hire a freelancer? Or how do we get access to one of these platforms? How do we think about our IP [intellectual property]? How do we think about the loss of that knowledge when that individual is no longer working in our organization and has gone on to their next project? And so a wide variety of, I would say, institutional matters need to be rethought in order to appropriately facilitate organizations operating in that upper-right quadrant in a more significant way.

Kerr: Allison, one of the things we’re obsessed about at the Managing the Future of Work Project is trying to identify the forces that are influencing the future of work. What are the things that you typically focus on, and how has Covid-19 influenced the trends around this?

Bailey: There are both significant demand- and supply-side forces, which are acting in concert. On the demand side—and I think Joe referenced this earlier—there’s a major trend toward digitization and digital transformation of organizations, which, therefore, means that everyone—meaning your largest multinationals to your entrepreneurs—are all looking for highly skilled digital talent, en masse. And obviously, that leads to a significant degree of shortage, as well as a need for people to become more creative in terms of how they access that talent. At the same time, as these organizations are going through digital transformation, there are also significant demographic shifts. We have the largest number of folks actually retiring as the workforce ages. And you see that especially acute in some sectors, like Air Force and Defense. You also have the emergence of the Millennials, who are really coming into their own at this point, and they’re a group that really has a changing set of aspirations. They want more autonomy. They have a greater interest in learning new skills, potentially, than even moving up through the corporate ladder. And my own personal experience with an education publisher, where we interviewed the technology organization to try to think about how to redesign career paths and career ladders to better support them, they said, “Look, we’re really not interested in becoming a manager and moving up through the ranks. We much prefer getting greater and more-interesting experiences, because that helps us actually think about where we’re going to go next.”

Kerr: So thinking about all of these forces that are pushing forward this high-end freelancer segment, the [Building the] On-Demand Workforce report is very clear that most employers have been approaching this in an ad-hoc manner. Help me understand, like, what accounts for this? Is it that the world is just moving too fast and the employers are flat-footed? Or is it an under-appreciation for the potential benefits? What did your research uncover?

Bailey: What we saw over and over was this tendency for the organization to be wired for the status quo. It’s wired to support hierarchical organization, it’s wired to support the recruiting, onboarding, and retention of full-time employees. And it’s not really wired to think about, “How do we innovate on that model to accommodate freelance talent and take advantage of these new digital talent platforms?” It’s as much about the wiring of the organization as it is the culture of the organization.

Fuller: The notion of transitory employees—who are virtually employed by the company on a full- or heavily part-time basis for a project—that come and go, it swims against everything—from the way managers experience controlling resources, what kind of power and influence they have over the behavior of their employees, the conduct of their employees. “How do I evaluate a high-skilled gig worker effectively? How do I cause them to bring me their best effort when I don’t have hiring and firing power? Their contract and compensation is probably largely set. How do I manage the difficulty of having a high-skilled member of the team, who’s on a per-diem basis or per-hour basis, making considerably more than the full-time employees that they’re working with?” I think Covid is going to be a historic break point in that, because suddenly all the reasons a company could say, “Well, I don’t want to do it that way,” or “Let’s go slow,” or “I’m not sure that’s going to work,” get put under a bright spotlight—everything from “We don’t want to rely on people who aren’t physically here”—well, if nobody’s physically here, I guess that hurdle’s passed—to “How are we going to manage the cybersecurity with all this staff not on-prem?”—same thing—to “We just don’t have the capacity to do some of this stuff. We have to find someone else to do it.” And I think a lot of companies are going to learn fast, as they often do as we’ve seen across our research, that when forced to innovate, when under duress, companies try new work practices, and then suddenly see some of this is valuable to us, helps us get our work done more effectively, helps motivate employees better, helps us become a more-flexible, nimble organization. We saw that in 2008–2009 with the shift to more part-time work. I think Covid is going to have that type of aftereffect.

Kerr: Well, let’s continue on this, because I think at this point we’ve got a pretty clear future vision that this is going to be important, and we’ve got a whole bunch of challenges or impediments that sit inside organizations. But let’s move more toward the prescription and not just kind of think about, “Well, some practices that we adopted in Covid may persist, but how can we be more strategic about this?” Allison, let’s start with you. What can employers do to just be more strategic in their use of this high-end talent?

Bailey: Well, first of all, they need to understand the opportunity that it represents. And the degree to which they have some micro-experiments that actually prove that out is helpful. The degree to which you get C-suite involvement and sponsorship of the move in this direction is incredibly helpful and a really important ingredient to sort of bringing the organization holistically along. Ultimately, you have to start to remake the culture of the organization, where you change the definition of success to focusing much more on outcomes over the number of people you’re managing or how a new idea gets generated. We need to rethink the employee value proposition, meaning that it should be in an employee’s interest to think about how to leverage these outside platforms to do the work better, to drive better productivity, et cetera. And then, one of the other things that I would say is that organizations through this process, and especially through Covid, have actually taken an assessment of their own skills—i.e., the internal employees’ skills—and thought about much better matching platforms to enable that. And so I think of that as a second-order effect that we’re going to see more of as time goes on. And folks like Unilever and Deloitte have done really significant work in this area, and I expect more organizations to follow suit. But overall, you need a recognition that tapping into digital represents a real strategic opportunity to reinvent business models, drive fundamentally different productivity levels, bottom-line impact, and increase the competitiveness overall of the organization.

Fuller: Bill, I think one of the interesting data points in our survey is that C-suite executives express higher levels of satisfaction with the type of productivity, efficiency, innovation improvements experienced by using these platforms than do operating managers—the people who are actually either running these projects or supervising people who run these projects. The incentives and metrics that most managers currently operate under don’t really encourage the use of these things. Running one of these projects well is different than running a project that just relies on internal resources in a traditional fashion. For example, you’ve got the hard challenge of really thinking through what you’re asking these gig workers to do. Creating a design for the project and doing the hard work of thinking through “What are the questions I want to ask, what are my definitions of satisfaction with this job?”—that requires a different type of thinking. Companies that want to take advantage of these platforms are going to have to both think through and probably train managers in best practices as to how to put these resources to work or fall into this trap of a self-fulfilling prophecy that under-prepared people don’t design the work and execute the work in a way to maximize the impact and, therefore, find fault with the outcome and are dissatisfied.

Kerr: Allison mentioned a little bit earlier Unilever and Deloitte. Can you give us a couple of micro examples of how some leading organizations have approached this and, to the extensive set of challenges that Joe was just talking about, how they may have tackled some of them?

Bailey: Enel is a good example. It’s an Italian energy and utility company, and not usually who you think of as somebody to take advantage of innovative opportunities around digital talent platforms. Senior leadership thought that actually they might be helped by going outside and utilizing one of the crowdsourcing platforms to get some additional ideas, some additional brainpower, and some additional expertise to actually help them on their most critical problems. And they actually tapped into several crowdsourcing platforms and fundamentally helped themselves to both do things that are more mundane, like redesign their recruiting processes, all the way to more-fundamental things, like what to do with defunct thermal plants. It took a certain amount of humility for them to actually move in this direction, as well as, very importantly, senior leadership to drive the organization to have a willingness to, one, put out the types of questions into the open market that they did, and to have a willingness of their employees to be receptive to the feedback and incorporate it and what came back around their strategic priorities.

Fuller: I think another example that I’d point out is Shell, the energy company. They’re using on-demand talent platforms for high-level work, principally relying on Catalant. But they’ve also deployed software inside the company, increasingly to really try to meet the standard of the right talent on the right projects at the right time, irrespective of their employment status. So you could unlock the productive capacity of people inside the four walls of your organization by making sure that you align them with the projects that have the most import, the most impact, for the organization, irrespective of organizational status. And when you don’t have either sufficient talent or the right type of talent, being able to draw on that from the external market and mixing and matching those types of resources. And I think this blends very nicely with what we are observing with some of the more-advanced companies in deploying agile management practices.

Kerr: We’ve focused a lot in the podcast on business strategy and operations. Gig is also fascinating due to all the intricate policy questions that it raises. Joe, what are some of the key policy considerations that are most relevant to development of this market?

Fuller: It’s everything from tax—since an employee of a company, let’s say in the United States, has their taxes paid by payroll deduction, whereas a freelancer is probably paying taxes quarterly—to obviously benefits are a huge issue, particularly in markets where there are not social benefits for things like health care. And so there are a lot of impediments to this. And of course, this raises completely legitimate concerns on the part of policy makers and advocates that gig work can become a way both to avoid responsibilities of employers to offer certain benefits or services, but also as a way to offload existing employees and leave them essentially by the roadside and perhaps having to become recipients of social benefits. So there are some very interesting choices here policy makers are going to have to face up to. The first is that this is a very buoyant market. People who work in it generally report high levels of satisfaction with their working arrangements, desire to continue it. More and more young workers, who, of course, that’s co-linear with being the type of digital natives, they express outsized interest in this type of lifestyle, and that very importantly, companies are not going to be able to get a lot of the skills they’re going to require in the future simply by hanging out a job advert and expecting someone to show up who’s highly qualified and motivated for accepting the terms of employment that are being offered. So while it’s important that policy makers think through what are the appropriate types of safeguards or rules that should be considered and perhaps imposed on these types of worker relationships, they should go lightly, especially as it relates to these higher-level, higher-income workers, because imposing restrictions or requirements may seem like a way to protect the workers and only come at the cost of the platform companies. But in fact, they may be denying the ultimate customers of the platform companies—their corporate customers, the enterprise or institutions relying on this type of gig talent—access to the skills that are required to keep them competitive.

Kerr: The earlier examples that you gave were global companies, often, in fact, headquartered in Europe. How does this freelancer market vary across geographies both within the United States and also internationally?

Fuller: There aren’t many scale platforms that are home-based outside the United States. The US platforms have a huge draw of global talent. So if you get on an Upwork, there’ll be many, many service providers located in Asia, South Asia, particularly India, Bangladesh, Pakistan. But if you go on platforms like Toptal that provide a high-level software, data analytics, artificial intelligence, machine-learning professionals, they’ve got people from all over the globe, heavy concentrations in places like Ukraine, but also the Philippines. But in terms of being a home base for platforms, heavily oriented to the United States. And I think that reflects the fact that the demand has really emerged here. Historically, as our colleague at Harvard Chris Stanton would say, supply has outstripped demand in most markets here, that there have been more gig workers available, and there has really been work to occupy them. In the United States, that’s been changing. Matching global supply is primarily to US demand more to big, global multinationals that are essentially adopting best practices drawn from across the world; it makes sense that the US platforms are out in front. In addition to that, markets like the EU, which have much less flexible labor markets and much higher levels of regulation of labor markets and the nature of working relationships between employers and employees, that doesn’t create the type of what our colleague Mike Porter would describe as a competitiveness “Diamond” that really leads to innovation—where you’ve got world-leading buyers, world-leading suppliers, enabling rules and legislation, and institutions that cause a virtuous cycle of innovation and competitiveness to emerge.

Bailey: I would also add that, because of Covid and people becoming much more comfortable with managing distributed teams, there’s going to be an increased demand in many of these international markets, as well for exactly what we’ve seen in the US. So in addition to multinational sourcing from the Toptals of the world that actually draw their supply from lots of different geographies globally, you’re also going to see, I believe, the emergence in many more countries of those kinds of models, because people now feel that they can integrate freelance workers on distributed teams. And their capabilities to do so have been really enhanced through Covid. So I expect us to see actually a lot more growth in that area.

Kerr: Allison, let’s carry that thought forward a little bit and ask ourselves, what do you see as being the implications for education and worker training, when you have this hybrid workplace that has both full-time workers, part-time workers, and also contract laborers?

Bailey: The whole focus on upskilling and reskilling in its various forms is really a top topic for CEOs today, right? With a number of the trends we talked about, including the move to digital and so forth, the half-life of skills is getting shorter and shorter, and organizations realize that they have to upskill and reskill their workers if they’re going to actually be able to compete. They also realize that, when they’re tapping into contract or freelance workers, they also have to provide some level of equaling the playing field when folks come in. So you’ll see efforts to both integrate and onboard freelance and contract workers increasingly so that they can be as productive as their full-time counterparts, and that the amount of time for them to adjust is actually reduced. So I think, over time, you’re going to see increasing amounts of education, of learning opportunities, and development opportunities being offered more broadly, and especially in the managerial ranks, more efforts made to help upskill managers, to go beyond just managing a distributed team or workforce, but actually to put in place the various performance management and many of the other aspects of being a successful manager in place that work, not only for full-time employees, but also for contingent labor.

Kerr: That’s great. Let me ask maybe a final question for both of you, which is what are some of the kind of practical steps that the listeners of this podcast can take away in terms of as a leader, as a manager? How can they take a more-strategic approach to working with high-end freelancer talent? Is this an HR role? Is it a C-suite role? What’s the takeaway?

Fuller: So first, acknowledge that this is a strategic resource. It’s here to stay. It’s easily accessed now—over 300 companies are offering these three types of services that I mentioned earlier—and that it is a different way of working. And that requires some accommodation, some capacity to learn, some acknowledgment that maybe some early efforts are not going to go exactly as planned. I think another thing is companies—in light of this growing supply-demand imbalance for the types of professionals that have both high-level digital skills and analytical skills and the more-advanced social or soft skills that are increasingly required in high value-added roles and companies—that those are going to be hard to come by, and that running your entire logic of staffing on the basis of “I identify a need, I post a job offering, and I hire somebody full time, and that’s my default assumption,” probably isn’t going to work too much longer. That puts human resources or human capital management functions very much in the mode of providing a policy and a sourcing capability to the organization. But it’s got to be animated by a vision from senior management, that workforce planning indicates we’re going to have to rely on pools of talent not historically available to us, and that, as senior management, we’re going to take the steps necessary to encourage and enable operating managers to make full use of that resource, learn how to do it effectively, and learn how to make it integral to our approach to getting work done.

Bailey: I would just want to communicate to people the energy around how exciting this is and the benefits of increasing your speed to market or improving your innovation or, overall, increasing productivity in very significant ways, and how that can really contribute to new business models that really unleash competitiveness at a different level. And that, within that, people should be eager to experiment with this, think about how they can scale it over time, and think about really what a positive element in their arsenal that this represents.

Kerr: Allison Bailey is the managing director and senior partner at Boston Consulting Group, and Joe Fuller is from, obviously, Harvard Business School and the cohost this podcast. They are the co-authors of Building the On-Demand Workforce. Thanks, both of you, for joining us today.

Fuller: Thanks, Bill.

Bailey: Thank you.

Kerr: We hope you enjoy the Managing the Future of Work podcast. If you haven’t already, please subscribe and rate the show wherever you listen to podcasts. You can find out more about the Managing the Future of Work Project at our website hbs.edu/managingthefutureofwork. While you’re there, sign up for our newsletter.