Contingent labor is frequently sourced from staffing agencies and treated separately from employees. A better approach is to develop a staffing supply chain that can offer quality diverse talent who are included in the diversity program.
There are varying estimates as to the size of the contingent workforce, but in all cases, it is large. According to research by CXC Global, a global contingent workforce staffing agency, the contingent workforce will significantly grow over the next five years. The statistics presented in the 2020-2021 CXC Contingent Workforce Global Trends Report say 77% of executives surveyed believe “freelance and gig workers will substantially replace full-time employees within the next five years”. This is not mainly for cost savings. It is to gain the services of people who have the desired skills. In fact. 98% of executives planned on redesigning their organizations to better fit the contingent workforce. This can include the diversity program, because the contingent labor force is an excellent source of diverse talent who should be counted with the diverse employees.
Building Diversity into the Contingent Labor Force
Many companies use a supplier who can provide contingent labor on an as-needed basis. Contingent workers include consultants, freelancers, and independent workers who are hired for project work or to fill other roles but are not employees. Some people refer to them as the shadow workforce, because they are never fully included in Human Resources management of employees. They are hired on demand, filling skills gaps by bringing needed and often specialized experience for a fixed and limited time. In many companies, they have critical responsibilities, working closely with employees, and they are often indistinguishable as employees because the work they do is so integrated into the workforce. Google is one of the more well-known companies using a sizable contracted workforce obtained through staffing agencies, with estimates set at 40-50% of the total workforce.
Despite their importance, these contingent workers are excluded in important ways. As companies strive to increase diversity in the workforce, the focus is on employees on the payroll – the employee base. This leaves a significant portion of the workforce not subject to diversity initiatives. Since many firms use staffing agencies, employers usually do not require diversity principles built into the contingent staffing equation. Some of the slow progress in this area is due to the global labor shortage, making employers satisfied with accessing any contingent labor that helps them continue operations.
Out of the Shadow of Procurement
There is growing momentum to address diversity in the contingent labor force, to help businesses reach diversity goals. Think of it as a contingent workforce diversity initiative, in which the contingent labor force suppliers are assessed as to their ability to supply diverse talent. The program includes using a diversity lens, to rank staffing companies on their ability to contribute to the organization’s overall diversity goals concerning talent acquisition. Using contingent labor to reach diversity goals makes sense from every perspective, but what can companies do concerning the staffing supply chain?
There are several steps a business can take to bring the contingent workforce out of the shadow of procurement and into the talent management process. The first step is to revamp the data collection system, to measure diversity in the contingent workforce across the entire organization. Since some functions (for example technology) have some of the highest utilization rates, it is natural to focus on those functions. As the use of contingent labor grows, all functions need inclusion in the data. This establishes a baseline to build on and measures the performance of staffing companies in the supply chain. Human Resources and procurement will need to collaborate to integrate the data.
Something to keep in mind is that contingent workers are a major source of full-time employees. If the staffing agency mostly supplies non-diverse workers, the organizational efforts to realize workforce diversity goals are hampered. In addition, hiring diverse contingent workers is important to bringing new perspectives to organizational projects. It only makes sense to incorporate Diversity and Inclusion (D&I) practices into the contingent workforce, but that leads to practical issues concerning staffing partners supplying the workers.
One approach is to embed performance targets around diversity in procurement staffing contracts. Staffing company partners are asked to meet established diversity goals that are part of the organization’s larger diversity goals. Staffing agencies are also likely to have their own D&I goals. Procurement, working with Human Resources, can negotiate the integration of diversity goals to come to a suitable compromise. The staffing agency should provide information about its diversity plan and metrics, and the corporate client is transparent about its needs. However, it is also important for procurement to work with the staffing agency in a way that gives the supplier a fair opportunity to meet client needs. For example, giving the supplier enough lead time is important to finding the right diverse talent when needed.
Outsource to More Than One Diverse Supplier
A successful strategy for managing diversity in the contingent workforce is to outsource to one or more diverse suppliers. In other words, diversify the contingent labor program. By diversifying the supply chain, the contingent workforce can be diversified also. For example, utilize a Black-owned supplier and a woman-owned supplier, with each dedicated to working with clients who belong to their underrepresented group. Minority and women-owned staffing companies have a better understanding of how to find the most qualified diverse talent, making it more likely they can offer diverse contingent workers who meet client needs.
Thomson Reuters Corp has a global external workforce program, and 90% of the suppliers used for the contingent labor program are small, niche, and/or diverse-owned companies. Wend Stenger oversees the program and says, “In my opinion, small, niche, diverse-owned suppliers have a deeper understanding and passion for inclusion,” and “There is a better opportunity to see the different types of labor, capturing everyone for the jobs that we have to get the most qualified candidate and then to create a diverse and inclusive environment.” Thomson Reuters also attracts contingent labor directly.
There are many ways to embed diversity and inclusion principles into the contingent labor program. Though there may be challenges, such as the process of revamping the supply chain, the effort can bring enormous benefits to the organization. One is the ability to meet commitments made through diversity goals. Just as important is the fact the organization attracts workers who bring unique experiences and new perspectives, both needed for creativity and to remain competitive.