External workers are employees who work for a company but who are not on its formal payroll. This includes temporary staff, contract employees and freelance or “gig workers.” External employees are a critical and growing portion of the workforce. Estimates suggests the number of external workers in the US is somewhere between 16 million and 57 million employees depending on how labor data is collected and categorized. Large organizations rely on external workers to perform core business operations, and many business leaders expect use of external workers to stay constant or grow over the coming years. Yet few companies have formal talent management strategies focused on ensuring effective work experience for this critical part of the organization.
Failing to manage external workers
The following are just a few of the reasons why companies should invest in managing the work experience for external workers:
Many companies use contractors to handle customer service issues. This work is often governed by service level agreements (SLA) that outline specific criteria that the contracting organization must fulfill. However, no SLA will create the same level of customer service that comes from employees who feel a strong emotional connection to the mission and brand of the company they are representing. Customers can often tell when a service representative is just going through checklists mandated by an SLA. If companies want contractors to provide truly exceptional service, they must ensure contractors feel positively toward the company they are representing.
Companies often use contractors to perform tasks that require specialized skills and have a lot of variability in demand (e.g., installing technology solutions or fixing specialized machinery). How well contractors perform this work directly impacts company business operations. And it requires employing contractors who have the right skills and competencies. A company’s ability to consistently recruit skilled contractors is directly affected by the experience contractors have working for the organization.
How a company engages external workers can impact the attitudes of full-time employees. Companies that rely on hiring lower paid contractors to perform less skilled work run the risk of alienating more skilled full-time employees who may feel overworked.
I saw this happen at an airline check-in counter that was staffed by one full-time employee qualified to issue tickets and three contractors hired to load bags. This process worked until a storm required passengers to re-book their flights. The full-time employee was overwhelmed by frustrated passengers who saw one person helping them and three people standing around doing nothing. And the contractors showed anxiety from being forced to interact with customers they were unable to help.
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The commitment of full-time employees can also suffer if they feel the company is using temporary contractors to avoid incurring health care benefits costs associated with adding full-time staff. Full-time employees develop working relationships with contractors and may resent contractor management practices they perceive as exploiting people they value and care for.
Ineffective management of external employees can lead to extremely costly corporate catastrophes. The corporate brands of several global companies have been damaged as a result of contractors creating environmental disasters, systematic labor law violations, and widespread worker exploitation. These catastrophes were caused by contractors, not full-time employees. But in the eyes of the public, companies are responsible for the actions of anyone who does work on their behalf regardless of whether they are internal or external employees. The problem was the companies failed to pay enough attention to the working environment and management conditions of the external workers they were employing.
Improve the external worker experience
The answer to these problems is not about reducing use of external workers. To the contrary, companies are likely to rely even more on external workers to manage challenges associated with skills shortages and the volatility of business demand. The answer lies in figuring out how to create more positive, engaging, and effective work experiences for external workers. This starts with collecting experience data to understand what factors impact the quality of work for external workers. And then developing effective talent management methods for this critical but often overlooked part of the employee population. This will also require dealing with legal complexities associated with contractor employment. But the benefits of improving the external worker experience greatly outweigh the mounting risks of doing nothing.