Think you know who’s doing the work? Think again
Visiting your brokerage firm? Actually, your advisor is an independent contractor. That insurance commercial you just watched? An external agency created it. You get a new loan and, you guessed it, the underwriting analytics were created by consultants. Meet today’s contingent workforce: individuals or companies that provide services for a client, are not employees, and have direct or indirect contractual agreements. For financial institutions, the contingent workforce comes in three flavors: third-party service providers, independent contractors, and agency/temp resources.
Not long ago, you probably wouldn’t have seen so many examples of contingent work at a financial institution. And, if you did, it wouldn’t have been in areas that felt core to the business. Quietly, this continues to change, and many firms haven’t fully considered the implications. When so many workers at financial institutions are contingent workers, what does this mean for accountability? Risk management? Legal and confidentiality issues? Building out capabilities for various tasks? Compensation? It’s a lot to consider and, often, firms aren’t doing enough considering.
Should firms be concerned about transferring more work to contingent workers?
Yes and no. Many companies seek to use contingents to supplement employee skill sets they may need only temporarily or when they can’t attract permanent replacements. They recognize the real benefits contingent workers can offer, such as temporary access to niche or specialized skills, a flexible workforce that can scale with the ebb and flow of demand, and ways to reduce costs. However, a contingent workforce may come with real risks. It’s possible to strike a balance between mitigating risk and engaging contingent workers to meet business demand, but this certainly won’t happen on its own.
It’s time to pay more attention.
At some of my financial services clients, I’ve seen contingent worker estimates in the 10%-30% range. And now, with the level of uncertainty we are seeing in the current geopolitical landscape, I expect that these numbers are going to shift even more. As a result, firms will need to be more focused on developing dynamic workforce supply and demand models. And contingent workers must be factored into these models too.
How you run your contingent workforce program matters
I know a thing or two about contingent workers because I am one. I spend time with multiple financial services clients offering professional advice. And when I visit them, I see a wide disparity around how they approach their contingent worker programs. Some clients give me a badge allowing me to move easily around their offices. Others restrict access. Some firms require mandatory training. And some conduct background checks, fingerprinting, even blood tests. It really varies.
When I start human capital projects at these firms, I try to gauge how their programs are working by asking some key questions:
- How is your contingent worker strategy mapped to your human capital and workforce strategy?
- How many contingent workers do you have? If you don’t know, could you tell me by the end of the week?
- What is your annual spend on contingent workers and which business units have the highest spend?
- Who owns the governance of your contingent workers? Do your policies and procedures include contingent workers?
When I ask these questions, I’m sometimes met with blank stares. Some firms just don’t know what’s going on with their contingent workers. On the other hand, at least they acknowledge this and want a better path forward.
Make the right plan
As with many organizational challenges, you need to understand the implications of contingent labor and then put meaningful controls in place. You can safely assume that your external workforce will grow, as will the complexity in managing it. You need to effectively plan for today’s environment while considering what tomorrow’s human capital landscape might look like. When you do, include a strong governance program as part of your contingent workforce management strategy. In particular, you’ll need to:
- Decide who owns the program. There may not be a right answer, but there needs to be an answer. In some cases, this may rest with procurement. In others, it might sit within human resources or finance.
- Communicate program standards and changes. If you change policies and procedures, don’t forget to notify the right people. This includes the hiring managers, vendors, and contingent workers.
- Understand organizational risks and regulations. You need to make sure your whole organization knows how to minimize the risks related to contingent workers. If regulations change, you need to make sure that your teams comply with those changes as well.
- Demonstrate your program’s success. Once you’ve come to think about how your financial institution uses such workers across the enterprise, you’ll want to know if you’re using them effectively. And you’ll need to show the right metrics to leadership.
Governance is only one part of a strong workforce strategy. You’ll need to get commitment from all parties involved and focus on organizational changes, policies and procedures. Technology and data, too. But the effort you put in now to get better at managing contingent labor will be worth it.
Flexible staffing almost certainly will be a growing part of your firm’s future. It’s time for your human capital strategy to catch up. Wouldn’t you rather plan and manage now instead of reacting later?
To learn more, read our latest thought leadership, “Here today, gone tomorrow: Contingent workers in financial services"
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