87% of global professionals consider contractors to be part of their workforce

A new study from MIT Sloan Management Review and Deloitte finds that only 28% are prepared to manage those external workers, and advocates for "workforce ecosystems."

Workers shaking hands

Image: Stock-Asso/Shutterstock

Today's workforce is frequently composed of people beyond internal staff—including contractors, service providers and gig workers—but often, companies don't have an integrated approach for how to manage them. Yet, 87% of global managers believe these people do significant work for the enterprise.

SEE: IT expense reimbursement policy (TechRepublic Premium)

A new way to strategically manage a diverse group of internal and external workers has led to the idea of a workforce ecosystem, according to a newly released report from MIT Sloan Management Review and Deloitte on the future of the workforce.

MIT SMR and Deloitte define a workforce ecosystem "as a structure focused on value creation for an organization that … encompasses actors from within the organization and beyond, working to pursue both individual and collective goals."

The concept of hiring outside workers isn't new but the scale at which it is happening is, the authors said. This growth has been driven by several significant shifts, including the nature of work, worker preferences and how technology is used to engage with and manage workforces.

Today, most workforce-related practices, systems and processes focus on employees—not external workers, the report said. Consequently, organizations often lack a cohesive approach to managing a workforce in which external contributors play a large role.

Yet, the study also found that 33% of organizations in a wide range of industries will rely more on external participants, such as gig workers, in the next 18-24 months. This makes a compelling case for implementing a strategic management approach, the authors said.

SEE: Juggling remote work with kids' education is a mammoth task. Here's how employers can help (free PDF) (TechRepublic)

"The search for an integrated approach to strategically manage a diverse group of internal and external contributors has led forward-thinking executives to adopt a workforce ecosystems approach," said Elizabeth Altman, an assistant professor at the University of Massachusetts Lowell, and the report's coauthor, in a statement. "This new, more holistic view of workforce management provides executives with new perspectives and flips a perennial strategic question."

Rather than asking, "How can my workforce support my strategy?" workforce ecosystems enable leaders to ask, "What strategies become possible with my workforce ecosystem?" Altman said.

Key findings include:

Workforce ecosystem participation is increasing, yet preparation is lagging.

  • Fifty-four percent of survey respondents said they place significant value on gaining ideas and skills from contributors who do not work for their organization.
  • A staggering 91% of survey respondents agree that upcoming changes to their organization's business strategy require them to improve access to new capabilities, skill sets and competencies.
  • Fifty-two percent expect to use online platforms to access external talent in the next 18 months.

Organizations are demanding new skills and increasing the use of online platforms to access talent.

  • Risks and challenges of workforce ecosystems exist, calling for caution.
  • Strong, internally focused organizational cultures, resistance to change and organizational silo behavior can stifle workforce ecosystems.
  • Labor-related legal and regulatory issues worldwide present complex hurdles.
  • Quality, brand and intellectual property questions arise such as, "Who has the right to use created property and under what conditions?"
  • Pay inequalities and parity within and beyond organizational boundaries may cause social justice issues.

Management practices within the workforce ecosystem approach need to change across several areas: workforce planning, talent acquisition, performance management, compensation and rewards, learning and development, career paths and organization design.

  • Workforce planning could transition from taking a narrow view of employee roles to adopting a definition that includes both internal and external human and digital workforces.
  • Talent acquisition could change from a decentralized HR function to an integrated, multifunctional process that spans HR, procurement, IT and other teams.
  • Performance management may move away from annual reviews to become better aligned with ongoing organizational needs.
  • Learning and development efforts should support strategic skills and competencies.
  • Organizational structures could change to accommodate all aspects of the workforce by shifting toward more team- and network-based approaches.

Project-based demands can be met more easily.

"When the workforce changes from being primarily employee-centric to encompassing a diverse community that crosses an organization's boundaries, core talent processes must evolve," said Robin Jones, a principal at Deloitte Consulting and a coauthor of the report. "Most of these processes have been in place for generations and were designed to support a traditional employee life cycle. Moving to a workforce ecosystem approach calls for a shift in practices, including adjustments to underlying philosophies, systems and processes."

The adoption of a workforce ecosystem has significant implications for a wide range of management activities, including strategy, leadership and culture, diversity, and equity and inclusion, as well as workforce governance, the authors maintain.

This type of approach has many benefits, such as more efficient and effective collaboration among workers, flexibility in how talent is used, more detailed data on projects, removal of geographic constraints for both organizations and workers, and the ability to match project-based demands more easily with appropriate types of workers, according to the report.

MIT SMR and Sloan said the global survey conducted in the fall of 2020 includes insights from 5,118 professionals and leaders across 138 countries and 29 industries, plus 27 executive interviews. The goal was to understand how they approach strategic workforce management issues.

Also see

By Esther Shein

Esther Shein is a longtime freelance writer and editor whose work has appeared in several online and print publications. Previously, she was the editor-in-chief of Datamation, a managing editor at BYTE, and a senior writer at eWeek (formerly PC Week)...