Contingent Workers Vs. Consultants
The decision to hire contingent staff is driven by "short-term project" requirements which have "specific outcomes." Consultants, on the other hand, are hired for longer running projects that require a specific "area of expertise." The following brief discusses trends in contingency worker and consultant hiring, followed motivations behind firms' decisions to hire each type of worker.
Contingency Worker and Consultant Hiring Trends
According to the United States Bureau of Labor, contingent workers constituted 40% of the labor force by 2016. 16.2% of these workers are hourly freelancers, 12.9% are independent contractors, 3.5% are on call workers paid hourly, 3.3% are self-employed, 3% are "contracted workers" and 1.3% are hourly workers from agencies.
The contingent workforce has been expanding rapidly as a result of technological innovations that enable people to work remotely. In addition, technological improvements to freelance management systems have made it easier for firms to hire remotely. Another driver of the growth of contingent labor is the need for individual "career mobility and diversity."
The Bureau of Labor Statistics expects management consultancy employment to grow by 12% from 2016 to 2026, outperforming "all other occupations" which are projected to grow at 7%. The demand for management consultants will increase as firms look to "improve efficiency and control costs." Sectors driving this demand include healthcare, information technology, small businesses and the government.
Why companies hire contingent labor
Firms that hire contingent workers are driven by the need to reduce costs, maintain their agility and improve their focus. With contingent labor, firms only spend on "productive time" and avoid "benefits" expenditures. In addition, contingent staff reduce the "payroll tax" burden and "administrative" functions. Companies that use contingent teams remain flexible to react timely to "seasonal and cyclical" trends. Contingent staff also enable firms to concentrate on their core goals and fill "skills gaps" to accomplish the goals. Engaging contingent workers, however, may involve legal, operational and competitive risks. Firms need to follow regulations to classify contingent labor properly to avoid fines. Companies also need to be wary of contingent workers who could "expose" their internal workings to competitors.
A study of contingent worker usage in the life sciences sector conducted by KellyOCG, an outsourcing and consulting consortium, established that the key drivers behind life science companies hiring of contingent workers include cost containment, demographics, skilled talent shortages, lifestyle/work style shifts, growth of technology and collaborations. One of the study's participants, an executive of a major pharmaceutical, indicated that their company hires 5 contractors for every employee annually, which enables the company to save on hiring full-time employees for short-term work.
Due to the fact that nearly 70% of contingent workers have a professional skill set, life science companies that engage them augment their team demographics. According to a PricewaterCoopers survey, 76% of pharma CEOs are "concerned" about skills shortages.
KellyOCG's survey further indicates that 31% of global workers opt for freelance work styles and 54% of professional freelancers are committed to their work style for life. Furthermore, technological innovations are fostering "fluid" workforces increasing the demand for tech competencies in life science companies. Finally, these companies are increasingly using "open innovation" collaboration models to work with free agents.
Information Technology (IT) leaders also agree that contingent staffing is necessary. Insights from Staffing Industry Analysts show that 69% of IT leaders believe that contingent teams are essential to their businesses. The main drivers cited by IT leaders for engaging contingent staff are they enable their teams to "adapt to workload spikes," meet "project skills gaps" and "add specialty skills."
Why companies hire consultants
Businesses that engage consultants are driven by the need for "specific expertise" to identify and solve strategic problems as quickly as possible. Quite often businesses will require a fresh pair of impartial eyes for ongoing problems. Consultants are also hired to deal with major issues that full-time staff cannot deal with because of their ongoing daily tasks. Firms also take on consultants to provide the requisite skills for corporate transformations and product launches.
Jillian Jitima, a project management consultant at Charles Aris, suggests that effective consultants solve business challenges by using objective "data-driven decisions," finding answers to business problems in the "numbers." Secondly, businesses value consultants that are "smart and think creatively." Thirdly, firms are attracted to consultants that come up with "practical solutions" that are implementable. Businesses are also driven to find consultants who will find "speedy solutions" to challenges and who also have good "presentation skills" to be able to communicate at all levels of the business. Greg Chambers, founder of Chambers Pivot Industries, a sales and marketing consultancy, adds that consultants are also hired as executive coaches after successful projects. Furthermore, businesses are driven to engage consultants who provide insight into "best practices" from other industries and "validation" for new pursuits.
Gairik Sachdeva, a healthcare consultant, indicates that pharma and biotech firms hire healthcare consulting companies with a "business strategy" specialty the most. The main challenges healthcare consultants are brought in to address centre around research and development (R&D), medial affairs and commercial affairs. Consultants assist R&D teams with "investment decisions" for new therapeutics that could be made internally, via acquisitions or collaborations. Medical affairs staff need consultants to help them formulate effective "communication strategies" for relevant stakeholders. Commercial affairs departments use consultants to help them improve operations and functions such as marketing and commercialization.
Consultants from leading consulting firm McKinsey, helped a global biotech firm launch a "follow-up blockbuster drug" by working with "several country teams" across "different functions." The company's work with the market access team enabled them to gain insight into "pricing elasticity." In addition, the consultants helped the market affairs department put together a communications strategy for "physicians" and "key patient groups."
McKinsey consultants also worked with another global healthcare firm to introduce "medical education" innovations. The company's consultants handled stakeholder interviews, developed and tested prototypes and eventually designed a business model for the client.
Finally, the creative services department at BlackRock engaged a consultant to assess their plan to consolidate "three regional teams into one global creative team." The consultant's assessment enabled the company to better understand their team requirements for the new organizational structure, in addition to the time wasted by creative team members on operational functions.
Contingency workers are hired to provide skills for short-term projects. Apart from filling skills gaps, contingency hires reduce costs for businesses, keeps them adaptable and sharpens their strategic focus. Consultants are engaged to provide longer-term specialized expertise for strategic business challenges such as corporate transformations and product launches.