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Remote work has opened the door to a new approach to hiring

March 13, 2022

Imagine a consultant telling a C-level executive in 2019 that huge swaths of their company could transition to remote work with only a few days’ notice, they would experience a productivity boost after an adjustment period, and many of those workers would not want to return to the office. The consultant’s contract likely wouldn’t be renewed. Even so, surveys conducted independently by both authors indicate this is an accurate description of the remote work evolution for many firms. The forced experiment with remote work over the past two years has shown some organizations the upside of approaches to work they would never have otherwise considered. It also showed workers that they aren’t as locked into the traditional, in-office 9-5 at one company as they might have thought. For both, there’s no going back.

Hybrid and remote work aren’t the end of the story, however. The new capabilities organizations have for remote work have opened up new possibilities, and now is the time for leaders to assess how other changes to the employment model could work for them.

A flexible or open talent model is particularly worth considering. Flexible and open talent are broad terms, covering scenarios from local freelancers coming on-premises to globally distributed online contractors to innovation sourcing through tournaments or contests. The defining feature is project-based or temporary work that is staffed with workers who are not permanently attached to a company. If done correctly, these ways of working can help organizations access skilled talent while providing the flexibility that many workers increasingly crave.

Just like with remote work prior to Covid, companies have been slow to adopt these models. As the chief economist of a large work marketplace, Upwork, and an academic who has studied open talent for more than a decade, we tracked a slow uptick in enterprise use of open talent in the years prior to the pandemic. But now, as remote work has become normalized, we’re seeing a rapid change.

To help companies understand and take advantage of new possibilities that open talent allows, we want to highlight some trends in the flexible/open talent landscape, comment on what jobs or tasks are most amenable to this model, and outline considerations for managers to get started.

Why Use Flexible and Open Talent?
Flexible models have traditionally served three purposes.

First, flexibility allows organizations to scale staffing up and down, accommodating labor demand variability.
Second, flexible models allow small-task outsourcing for situations where hiring a full-time equivalent would not be justified and where the overhead requirements of traditional temporary staffing solutions would slow the project or be cost-prohibitive.
Third, flexible talent strategies provide access to innovative or diverse skillsets beyond traditional recruiting pipelines. Industry leaders like Netflix and NASA have found that contests with external participants often beat internal innovation benchmarks for similar projects.
Still, there have been barriers to organizations adopting the open model. At Upwork, a leading online labor market, the sales team saw some common stumbling blocks from potential clients. Discomfort with remote work was one of the most significant, as flexible talent is disproportionately remote. Resistance also comes from enterprise inertia or bureaucracy, concerns about IP or security risks, and a lack of familiarity with the tools and management practices that make open talent effective. As a result, companies sought talent primarily in their local labor markets or de-facto recruiting networks, and primarily for traditional hiring arrangements.

Things are beginning to change, however. In surveys conducted by Ozimek from a representative panel of firms, more than half of hiring managers indicated that remote work has opened up their ability or willingness to utilize remote freelancers, both during the pandemic and going forward.

The supply of workers interested in these models has simultaneously swelled. Self-employment rates have surged over the past year, supporting anecdotal reports that many considering adding to the Great Resignation were seeking more flexibility and control over their lives. In a representative survey of working-age people in the U.S., one out of five respondents who could work mostly remotely during the pandemic reported considering freelancing to stay remote. Among those who would consider freelancing, a more flexible schedule was what they value most.

In a series of Upwork surveys, respondents reported both opportunities for and interest in using more freelance options. Respondents who had worked with or hired independent staff in the last year said that, without the external help, they would have done the work themselves (35%) or asked their teams to do it (28%) — options that could contribute to burnout. Twenty percent said they would have hired an outside service company; 3% would have hired a staffing firm. Just 8% said they would have made new full-time hires, and 6% said the work simply wouldn’t have been done.

Respondents also reported having contracted significantly more freelancers during the pandemic (53% said they made more use of remote freelancers compared to their pre-pandemic baseline, vs. just 6% who hired fewer freelancers) and planned to make more use of it over the next two years (47% vs. 11%).

What Jobs or Tasks Are Most Amenable to the Flexible/Open Talent Model?
The flexible/open model has proven effective for a wide range of jobs and tasks. The top skill categories on Upwork are administrative support (including relatively rote tasks like data entry) and web/software development. These skills run the gamut from easy-to-find to rare, highly specialized, and highly compensated. Other platforms, such as Topcoder, concentrate on contests — a model that has proven incredibly valuable for innovation — with typical tournaments containing high-level programming or machine learning work or more subjective design work.

Given the range of skills available on open platforms, there are a few situations where it makes particular sense to use open talent. Specifically, when:

Insiders cannot be redeployed easily.
Outsiders are less expensive than hiring a new insider or paying overtime to existing ones.
Highly specialized skills are needed and they are not available internally.
Returns on exceptional solutions are high.
In the first three situations, companies are responding to a simple need for talent, but the last underscores another important motivation: In many contexts outsiders have been found to beat insiders head-to-head. Outsiders can provide many different approaches or solutions to a given problem, allowing the organization to choose the best one.

But, perhaps even more important than the situation that brought firms to open talent, there’s the nature of the task itself. There are a few important variables that companies should weigh before deciding how to utilize open/flexible talent.

For one, the level of firm-specific knowledge required for a project will typically tip the balance between insiders and outsiders. While freelancers can build complex database-driven web applications from scratch — perhaps more efficiently than the internal employees of many firms — a project that requires interfacing effectively with existing applications that require significant firm-specific context will mean either: a) an internal employee is needed to form the bridge; b) the freelancer must learn the internal systems (potentially at higher cost than an internal employee); or c) an internal employee will serve an integration role that builds on the freelancer’s work.

Then there’s the question of whether a project or task is recurring. All hiring and onboarding has some costs — whether screening a freelancer, setting up a contest, or hiring a full-time role. If a project or task is going to be repeated over time, the scale tips toward making a more permanent hire to economize on these costs, especially if they involve training a new hire on firm-specific processes. On the other hand, a repeated task can be suitable for open talent if it involves common skills and requires little firm-specific context.

Finally, there are integration costs of incorporating work from an open talent solution into the larger organization. These tend to be low for projects that require little firm specific knowledge and can be very high for a project for highly firm-specific tasks. READ MORE

by Adam Ozimek and Christopher Stanton


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