In the pursuit of ‘new, green and better,’ are firms leaving behind sustainable talent systems?
It’s no secret that consumers show a marked preference for environmentally friendly and sustainable products. Large corporations around the world are falling over themselves to demonstrate their commitment to the environment. Unfortunately, in their quest for sustainable practices in one area, they run the risk of eliminating the sustainability within their talent pipelines.
Blame the harsh economic climate or the increasing commoditization of work, but some organizations have trended into toxic talent practices. They’ve swapped talent development for bringing in third party contractors, training for firing and getting someone else, and relationship building for outsourcing. The results can be seen in firms that are stagnating in place or “suddenly” having a talent crisis. The reality is that by understanding the rise of the contractor space and the business case for inter
nal talent development, even firms in crisis can build sustainable talent pipelines that work in the modern age.
The Rise Of The Contractor
Independent contractors are one of the fastest growing worker pools in North America. Industry practice group MBO Partners estimates that there are 16 million freelance or independent contractors in America alone. Most are between 30 to 49 years of age, and more than half hold a college degree. Some 47 percent of this pool are male, and 55 percent say it was their own proactive choice to be an independent contractor. With an average annual salary of $52,600, more than 60 percent report that they are extremely satisfied with their work choices and wish to continue to work independently.
On one hand, this is great news for large corporations. Independent contractors work on specific project contracts with no corporate obligations to continue the employment relationship or pay expensive benefits. It’s affordable talent for the moment – and corporations have increasingly made use of such workers to replace expensive in-house staff or avoid making permanent employment offers.
On the other hand, these contractors have no reason to remain loyal to any one firm or share their skills after the project has ended. As a result, corporations can end up with a rotating string of workers who provide no continuity for customers or projects. Information can and will be lost, especially since experienced contract workers with hands-on knowledge of the inner workings of the firm can leave at any time. Corporations have the affordable talent they wanted in the short term, but in the long run they may find their practices unsustainable as market demand for key talent may leave them without anyone available to help them or service critical client needs.
A Case for Internal Growth Practices
This potential to be left without key skilled talent at any moment is a primary element in the case for internal employee growth practices. A sharp skills gap is another, since more than 80 percent of manufacturers report that they can’t find the skills they need. The Small Business Administration (SBA) backs up the existence of this issue in other sectors of the economy, reporting that most businesses complain about a lack of skilled talent despite record US unemployment numbers.
Examining the issue for the Wall Street Journal, Dr. Peter Capelli of the Wharton Center for Human Resources notes that while 52 percent of employers (across all sectors) report difficulty hiring the right candidates, only 28 percent report that they are increasing staff training as a result. He noted that US firms were more likely to hire contractors or blame poor education than to make internal training investments. Thus, their talent problems continued since they had no sustainable pipeline for promoting internal talent and many independent contractors were not offered permanent positions.
The Society for Human Resource Management (SHRM) has noted that it can cost as much as 1.5 times salary to bring in a new hire. Why not make that cost investment in lower-level jobs and grow the talent rather than trying to fill gaps after the fact? By investing internally in development programs, corporations have the potential to preemptively fill talent gaps and lower their overall staffing costs, according to Chief Learning Officer magazine.
Making Talent Pipelines Sustainable In the Modern Age
Though independent contractors and freelancers as a group are growing, corporations have the chance to create sustainable talent pipelines by taking a second look at their bottom lines. Talent within the wall can provide better long-term returns on early training investments, while freelance talent takes systems training and walks when the job is over. Firms have the choice to make a large investment once, or smaller investments over and over again.
Workers leave where they feel there is no opportunity for additional skills building. This has been one of the top eight reasons cited for exiting a firm. Corporations that choose to be known as training organizations have a chance to boost retention, growing a skilled pool of workers intimately acquainted with the nuances of the internal culture and what the customers want. This is a much more sustainable model over the long-term, though it may be a higher upfront cost than hiring a random talent from the freelance world.
Presented with an attractive work environment and the chance to develop a skilled worker who will stay, both sides can emerge as winners. Let other firms pursue the latest and “best” free-market talent – talent with no loyalty beyond the final check. Firms that want to build an outstanding and unreplicatable workforce invest in their teams, building a sustainable talent pipeline that offers up quality employees year in and year out.