Contractors: the forgotten third

by 24 Feb 2009

As the importance of specific skills to the overall economy increases, so does the popularity of contract work, writes Allan Schweyer

Today’s employment marketplace con sists of a diverse composition of labour and talent from a variety of sources. Among them is a group that is collectively known as contracted talent or the contin gent workforce. This group includes con tractors, consultants, freelancers, tempo rary help, interim executives and others who are not part of an organisation’s full- time or part-time workforce.

A Human Capital Institute study recently found that more than 90 per cent of the 319 organisations surveyed use contract talent. Moreover, 34 per cent say that their use of contract talent has increased or increased dramatically in the past three years, while fewer than 20 per cent report a decrease.

The role of HR

Given the importance of contract talent and organisations’ emphasis on skilled and pro fessional level contractors, one would expect that HR or talent management professionals would be in firm control of the process.

After all, even in firms where line managers are conversant with the principles of talent management, HR and talent management professionals remain the custodians of com petency and skills management, quality of hire measures, regulatory compliance infor mation, market rates for various talent and the best sources for talent acquisition, to name just a few. To achieve volume, quality, performance and compliance in a contract talent management program then, HR and talent management must be involved.

According to the respondents to our sur vey, HR/talent management is indeed in volved in the process more often than not. 57 per cent report that HR is either primarily or partially responsible for contract talent management. It is alarming, however, that a full 43 per cent of organisations appear not to involve HR/talent management at all in contract talent management. This almost certainly leaves those organisations at a disad vantage, and one that will grow as more of the workforce is comprised of contract workers.

Shifting the balance

With a compelling need to respond quickly to marketplace dynamics, most businesses are continually looking for ways to benefit from the flexibility of converting fixed-cost struc tures to variable ones. One way companies accomplish this is to reduce their number of full-time hires in favour of contingent or con tract talent engagements.

Yet few organisations appear to be ready for this shift. Contract talent management tech nologies are underutilised and responsibility for contract talent acquisition and management is often too narrow in organisations or is a free for all, with few rules and little accountability. Con sequently, the contract talent pool is too often ignored and undermanaged, resulting in higher- than-necessary costs and risks.

Approached strategically, the contingent workforce can provide key skills and compe tencies on a just-in-time basis with greater flexibility and reduced wage and benefits costs. To deliver on this potential, the com bined and aligned efforts of several parts of the organisation are needed, including procure ment, legal, IT, senior management, business units and HR/talent management.

Regrettably, in many organisations, HR and talent management professionals are marginalised where the management of contract talent is concerned. Yet it is clear from our research that if this increasingly critical component of the workforce is to be managed effectively and strategically for competitive advantage, HR and talent management must play a prominent role.

This article contains excerpts from HCI’s January 2009 whitepaper: The State of Contract Talent Management and the Role of HR. To download a copy, please visit