Talent marketplaces – workforce composition under a Trump presidency

SUMMARY:

A Trump presidency presents many uncertainties but would appear to propel business towards greater consideration of talent marketplaces. How does this work? Den explains.

talent marketplaceRight now it is difficult to be certain how a Trump presidency will impact the economy and in turn the future of the US workforce. Regardless, there are plenty of factors in play that suggest a degree of resetting workforce strategy to accommodate what we know so far represents an imperative that American business would be foolish to ignore. In my view, this represents an important opportunity to consider how talent marketplaces could help.

The economic backdrop

First, let’s start with a brief discussion of the economic conditions that have got us to this position. Here I will paint a very broad canvas that appears full of contradiction.

On the one hand general consumer demand is sluggish (Black Friday/Cyber Monday aside), levels of top line unemployment are at a low, automotive makers and their suppliers are having a great year. Yet alarmists predict the bursting of an automotive led financing bubble that could wreak more damage on an already fragile economy.

Add in ongoing debates around the gig economy and what this means for the wider workforce and we’ll forgive CHRO’s who are confused as they enter into the final throes of the 2017 planning season.

What’s going on?

I’ve spent a lot of time post-Brexit trying to get my head around the likely factors that led to that outcome and subsequent Trump victory. There are plenty of people prognosticating upon the topic and while it is possible to emphasize one or more factors, I believe the results come down to two main issues. I’m sure there are plenty more.

  1. The average (if there is such a thing) working man and woman on Main Street and in both geographies was fed up of feeling they have been left behind in an economy which demonstrably benefits a small sliver of participants. The Leave and Trump campaigns demonstrated an ability to tap into those resentments in a visceral way that had very little to do with articulated policy and everything to do with a populist rhetoric.
  2. In both cases, the winning campaigns made extensive and incredibly smart use of new analytical techniques to target specific people and then align adverts and messages to their concerns.

On the first issue and regardless of the talk around racism, xenophobia, mysogyny etc, I am convinced that it is the economic reality of the situation millions of people find themselves in that is the most important factor. Why? In the numerous conversations I’ve had with those who voted to Leave or for Trump, the one thing that comes across time and again can be distilled into these three sentences:

I feel betrayed by a system that promises me betterment if I work hard and play by the rules. I’m worse off and see no end to that. There has to be an alternative and I don’t care where that comes from.

Faced with that reality, the results were predictable. In fact if you trawl through the inter webs, you’ll find that there were some who saw these outcomes a long way out. Principle among them is Dr Mark Blyth, a Scottish political economist at the Watson Institute at Brown University. As a side note, I encourage everyone to find his video collection and tune into some of the lectures he has given the last few years. They are incredibly incisive and serve as object lessons on the effects of politically motivated economic policies over the last 30 years. They also serve to inform some of what follows.

A Trump led impact

If you accept that there is a significantly disaffected community of people then the allure of the on-demand/independent contractor (IC)/ gig market makes an awful lot of sense. But of course life is never that simple.

Listening to Jeff Wald, co-founder and president WorkMatters, and an expert on US labor law and practices, the sense I get is that while it may take time, a Trump presidency will endeavor to simplify the spaghetti mess that is the US labor market and tax system. On a call, Wall theorized there could be an end to the distinction between 1099 and W2 workers but regardless, he said that we can expect an almost immediate dismantling of the misclassification of independent contractors project that has been ongoing for years under the Obama regime.

In Wald’s view, the messages he hears from the Trump camp are that simplification will lead to a massive expansion in the on-demand economy. That is predicated on the fact that in services industries, from which the US derives most GDP, contractors are much more productive on a unit cost basis than employees. Wald argues that employees are 40-50% productive per hour worked while contractors are much closer to 100%. I am not going to disagree with the former but I think there is a degree of kidology going on with the latter assertion. But then that fits Wald’s narrative and business model so let’s give them a pass.

Regardless, the notion that we will see an expansion in the IC part of the labor force dovetails to the ongoing discussion about the impact of automation in the workplace and what I see as the inevitable rise in what I term talent marketplaces that serve the needs of real time/right time businesses at a fractional cost of holding a static workforce.

There are plenty of ways this could go wrong. For example, policy makers will have to determine the impact of a relaxing of the rules on the expected tax take. ICs have a variety of deductions that are not necessarily available to employees and this might weigh on how a simplification policy works out.

On the other hand, we’ve heard that a Trump presidency will target a reduction in social and welfare costs alongside possible abandonment of raising the federally mandated minimum wage. Austerity by another name? I hope not. Unfortunately, Trump’s position is not entirely clear since he has flip flopped on this important topic.

And let’s not forget the many ongoing legal cases in a variety of states about what it means to be an IC and how that works for employers. Yesterday for example, I saw yet another round of proposed protests by Uber drivers for a $15 minimum wage, despite some evidence that Uber drivers do considerably better in major cities. Check this:

Infographic: Fare Deal? Taxi Drivers' Earnings Compared To Uber | Statista
You will find more statistics at Statista

The business response

I don’t believe that business has much of a choice. The climate wherein investors have the upper hand requires that companies report year-on-year improvement in performance and when the bulk of your costs are in labor (60% on average in today’s ecosystem) then labor is the obvious target. Outsourcing helped in the past but as we have seen and as is predicted, the days of labor cost arbitrage are coming to an end. Companies need new approaches that are aligned to the pace of change. Automation is part of that but then so is effective talent pool management.

The problem is that HR is not the strategic business partner it always should have been and must lift itself out of the dead wood of administration and compliance. Companies like WorkMatters provide an on ramp to ‘setting and forgetting’ policies around workforce composition but I have yet to see the generalized rise in the creation of talent marketplaces into which companies can tap as a part of their HR strategy.

There are examples here and there such as Upwork, where you will find pools of experts from a variety of professions, but the emphasis is on individual hiring. LinkedIn doesn’t provide that team assembly capability. Glassdoor offers a good way to assess reputation, but again we’re talking individuals and for permanent hire. Topcoder is one of the few stand out examples where projects meet experts in a true marketplace environment.

Some argue that the SI and outsourcer grip on companies means it is hard to dismantle and retool for the on-demand/gig/IC economy. After all, beyond a long term bulk order and a few documents, how many projects leaders have real insight into what they’re paying for? How many of those leaders know the quality of people being onboarded to projects? How much inbuilt slack can they count? Those issues are, to me, where the requirement for transparency is most pressing and where I see obvious opportunity for business to digitally engage in talent marketplaces.

Others will argue that talent marketplaces can only be useful in the context of ad hoc requirements. I don’t think so. Check out Phil Wainewright’s discussion of how ING bank adopted agile methods of service delivery to better serve customers. In an Agile environment, large scale projects are broken down into smaller components with the expectation that projects are delivered more timeously and with better outcomes. Well, if you’re planning for that then how about going to the talent marketplace to source requirements?

My take

A Trump presidency carries multiple risks and uncertainties but business cannot stand still or hold its breath. Trump’s mantra for simplification and with it, implied improvements in productivity and a fall in unit cost output should propel CHROs to think more strategically about workforce composition and the place that talent marketplaces have in that equation.

There is plenty of evidence that talent marketplaces provide good value for money but the most visible tend to be restricted to technology plays. Given that we are living in an age when ‘all companies will be software companies,’ it is not hard to imagine how the ideas I am discussing in this story could become more popular as delivery mechanisms.

The question remains, how will technology adjust to deliver on the ideas? What component parts are required for a good solution? How can business digitally tap into these emerging markets and use the data they both generate and consume to better inform their workforce composition plans? These are questions to which we will return in 2017.

Image credit - via ninjaoutreach

    Comments are closed.

    1. Easier to imagine talent market places taking off in the UK where the healthcare system is designed around individuals than the US where the system is designed around large employers. If Trump presidency addresses healthcare for Uberization that should be good for flexibility.

      Backing talent market places ‘surging’ in the UK over the USA for now.

      1. says:

        That’s not where I am seeing the center of gravity for talent innovation. Many markets that can be impacted. Topcoder in particular is impressive.

        1. On frequent basis (often daily) developers receive recruiter spam based on keywords (and generally not on skills). Generally because Fortune 5000 firms make extensive use of contractors via recruitment companies. I’m surprised Talent Markets aren’t operating more inside these corporations. Perhaps back to HR operating more as an admin, benefits and hamster wheel function than as an agent to spur talent market benefits.

          1. says:

            The integration between providers and consumers in this market has yet to happen. It’s an obvious weakness and opportunity.