Bersin research bulletin sep2011

Research Bulletin | 2011 BERSIN & ASSOCIATES September 9, 2011 Volume 6, Issue 45 The Rise of the “Insourced” Employee: Adding Intellectual Capital to the Workforce About the Authors Preface Always a critical concern for organizations, ensuring a competent workforce has assumed increased importance for companies today. While they may have reduced talent during the recession, companies are cautiously adding more permanent employees even as they face growth. (A recent Bersin & Associates study1 shows pressure to meet Katherine Jones, the company’s growth strategies is the number one concern.) In Principal Analyst addition, companies face increasing competition in the marketplace for top talent (the second major concern cited in that same study2). Compounding this issue more are those employees, retained through the recession, who are indicating that they are current flight risks.3 Furthermore, locating the required talent, particularly specialized talent, is increasingly difficult. The World Economic Forum reports that, “We are entering the era of unparalleled talent scarcity, which will put a brake on economic growth around the world and will fundamentally change the way we approach workforce challenges.4” 1 For more information, Changing the Way the World Works: The Strategic Free Agent in the New Economy, Bersin & Associates / Katherine Jones, September 2011. Available to research members at www.bersin.com/library.BERSIN & ASSOCIATES, LLC 2 Ibid. 180 GRAND AVENUE SUITE 320 3 Source: The Great Recession from the Employer Perspective: The Workforce and the OAKLAND, CA 94612 Future of Work, Monster.com, August 2009. (510) 251-4400 4 Source: Global Talent Risk – Seven Responses, World Economic Forum Report, 2011, INFO@BERSIN.COM http://www.docstoc.com/docs/70316364/01-11-WEF-Global-Talent-Risk-2011-Seven- WWW.BERSIN.COM Responses_2_. THIS MATERIAL IS LICENSED TO CLARITY CONSULTANTS FOR DISTRIBUTION ONLY. BERSIN & ASSOCIATES © 2011

Research Bulletin | 2011 Research Bulletin | 2011 BERSIN & ASSOCIATES BERSIN & ASSOCIATES In this climate, organizations are tasked to find creative ways of KEY POINT recruiting and utilizing talent, relying on short-term experts to meet their business requirements. “We are in the middle of a From Outsourcing to “Insourcing” revolution of the We have long heard about work previously conducted within businesses organization that has been outsourced beyond the corporations themselves. of work.” Sometimes sent offshore, sometimes addressed domestically, bodies of work deemed other than “core” to the business model have been – Dennis J. Snower, extracted and relocated, to be done in total by others. Those “others” President, Kiel may be separate businesses dedicated to that particular activity – as Institute for the in recruiting process outsourcing (RPO), complete human resource World Economy5 department outsourcing (HRO), or electronics manufacturing services (EMS) whereby the design and manufacture of electronic parts are outsourced to companies other than those that either assemble or simply resell the completed product, among others. Today’s businesses are part of another global trend, “insourcing” – bringing professional workers into the corporation on a project or short-term basis, rather than sending the work out to be accomplished. Reliance on contracted professional workers, widespread in Europe, stemmed from its use as a business phenomenon in the Netherlands in the 1970s. Now, on an average day, three million temporary and contract employees go to work for American businesses.6 Bersin & Associates defines “insourcing” as the bringing in of free agents required on an “as- needed” basis to fill a specific talent gap. This is a resourcing model that is generally project-based and for a specifically defined (often short-term) duration. The resulting blended workforce is thus a combination of free agents, consultants, contractors, temporary workers and the salaried employees hired directly by the company. Our research found that almost all organizations have someBERSIN & ASSOCIATES, LLC 6114 LA SALLE AVENUE SUITE 417 5 Source: Global Talent Risk – Seven Responses, World Economic Forum Report, 2011, OAKLAND, CA 94611 http://www.docstoc.com/docs/70316364/01-11-WEF-Global-Talent-Risk-2011-Seven- Responses_2_. (510) 654-8500 INFO@BERSIN.COM 6 Source: Employment and Sales Survey Report, Fourth Quarter 2005, American Staffing WWW.BERSIN.COM Association, February 27, 2006. The Rise of the “In-Sourced” Employee Katherine Jones | Page 2 THIS MATERIAL IS LICENSED TO EXPERTUS FOR DISTRIBUTION ONLY. THIS MATERIAL IS LICENSED TO CLARITY CONSULTANTS FOR DISTRIBUTION ONLY. BERSIN & ASSOCIATES © 2011 BERSIN & ASSOCIATES © 2011

Research Bulletin | 2011 Research Bulletin | 2011 BERSIN & ASSOCIATES BERSIN & ASSOCIATES level of either contingent or independent contractor talent at work in KEY POINT their businesses today.7 On the average This Bersin & Associates research bulletin summarizes research on one day, three million of the most important employment trends facing business today – the “workers under growing reliance on the intellectual capital provided by the “insourced” worker. contract” go to work for American Insourcing: An Overview businesses.8 While organizations have long focused on engaging and developing their employees, salaried employees with benefits may turn out to be a smaller part of many organizations’ future workforces.9 Demographic and workforce trends, including the difficulty of attracting top talent and openness to nontraditional work arrangements by the Millennials, Gen-Xers and Baby Boomers, are leading both individuals and employers to consider alternatives to full-time employment. Research by Bersin & Associates in 2011 demonstrates a 32 percent anticipated increase in the procuring of professional workers under contract.10 These insourced professional workers are expected to provide the same level of service as permanent, full-time salaried employees, but are used by the organization to design or execute a project, or fill a position for which there may not be an internal employee. Recently, more than 20 percent of the freelance employees used by American companies fill professional and managerial roles.11 7 For more information, Changing the Way the World Works: The Strategic Free Agent in the New Economy, Bersin & Associates / Katherine Jones, September 2011. 8 Source: Employment and Sales Survey Report, Fourth Quarter 2005, American Staffing Association, February 27, 2006.BERSIN & ASSOCIATES, LLC 9 6114 LA SALLE AVENUE For more information, “The Contingent Workforce: Managing Your Total Talent Pool,” The Business of Talent Newsletter, Bersin & Associates / June, 2011. Available at SUITE 417 http://www.bersin.com/News/Details.aspx?id=14211. OAKLAND, CA 94611 10 (510) 654-8500 For more information, Changing the Way the World Works: The Strategic Free Agent in the New Economy, Bersin & Associates / Katherine Jones, September 2011. INFO@BERSIN.COM WWW.BERSIN.COM 11 Source: American Staffing Association http://www.staffingtoday.net/. The Rise of the “In-Sourced” Employee Katherine Jones | Page 3 THIS MATERIAL IS LICENSED TO EXPERTUS FOR DISTRIBUTION ONLY. THIS MATERIAL IS LICENSED TO CLARITY CONSULTANTS FOR DISTRIBUTION ONLY. BERSIN & ASSOCIATES © 2011 BERSIN & ASSOCIATES © 2011

Research Bulletin | 2011 Research Bulletin | 2011 BERSIN & ASSOCIATES BERSIN & ASSOCIATES The Growth of “Free-Agent” Nations12 Often, contract-based workers are increasingly utilized after a recession when companies are leery of making long-term commitments (especially in countries in which employment is an enduring contract). The first signal of new growth is the hiring, not of permanent employees, but of those contracted workers, whether they are consultants, project leads or interim executives.13 These hires used to be the harbingers of growth – but currently they are increasingly becoming the norm. Today’s business simply depends KEY POINT more on the concept of the just-in-time worker – the employee who can enter a corporation, and solve a problem or deliver a project. Today’s business That employee is very likely to move on to another contract with depends more on another business or another contract within the same business. the concept of the In the bigger picture, the use of all workers under contract, referred just-in-time worker to by the U.S. Bureau of Labor statistics as “contingent hiring,” – the employee grew in the U.S. nearly every week through the summer of 2010; U.S. contract help revenue is projected to reach $88 billion dollars who can enter a in 2011.14 The data from the last quarter of 2010 shows contingent corporation, and workers accounted for nearly 68 percent of new private sector jobs.15 solve a problem or In 2005, the U.S. Government estimated that 31 percent of U.S. deliver a project. workers were already contingent workers.16 Experts say that number could increase to 40 percent or more in the next 10 years.17 The use 12 Source: Free Agent Nation, Daniel H. Pink / Warner Books, Inc., 1997. 13 Source: Monthly Labor Review, U.S. Bureau of Labor Statistics, April 2011, http://www.bls.gov/opub/mlr/2011/04/mlr201104.pdf. 14 Source: “Contract Staffing Business Gains Momentum in Recession Aftermath,” Business Wire, January 27, 2011, http://www.businesswire.com/news/home/20110127005231/en/BERSIN & ASSOCIATES, LLC Contract-Staffing-Business-Gains-Momentum-Recession-Aftermath. 6114 LA SALLE AVENUE 15 Ibid. SUITE 417 OAKLAND, CA 94611 16 For more information, New Directions in Workforce Management, Bersin & Associates / (510) 654-8500 Katherine Jones, May 6, 2011. Available to research members at www.bersin.com/library. INFO@BERSIN.COM 17 Source: “Say goodbye to full-time jobs with benefits,”CNNMoney / Chris Isidore, June 1, WWW.BERSIN.COM 2010, http://money.cnn.com/2010/06/01/news/economy/contract_jobs/index.htm. The Rise of the “In-Sourced” Employee Katherine Jones | Page 4 THIS MATERIAL IS LICENSED TO EXPERTUS FOR DISTRIBUTION ONLY. THIS MATERIAL IS LICENSED TO CLARITY CONSULTANTS FOR DISTRIBUTION ONLY. BERSIN & ASSOCIATES © 2011 BERSIN & ASSOCIATES © 2011

Research Bulletin | 2011 Research Bulletin | 2011 BERSIN & ASSOCIATES BERSIN & ASSOCIATES of such workers has grown across the globe, led by Japan, and followed by the U.K., the U.S., Germany and France.18 Here we are only looking at professional workers under contract, unlike the data which combines these workers with administrative or other kinds of contingent or temporary help. Referred to as contractors or consultants in a recent Bersin & Associates study19, these workers may be a significant portion of a company’s workforce. Strategic Insourcing: The Business Value Insourcing is not the tactical quick fix to a sudden business problem – KEY POINT it is the deliberate and planned integration of professionals under contract into an organization’s workforce. Strategic insourcing then Today’s business is the planned incorporation of professionals under contract into an simply depends organization to perform work on-demand. Assignments are often more on the project-based, last for the lifetime of the project, and can be onsite concept of the or virtual. These consultants may fulfill a needed position because of just-in-time worker a planned vacancy, augment existing staff to expand capacity, or they may provide specialized talent that is not deemed needed or is simply – the employee not available at a dedicated employee level within the organization. who can enter a It is increasingly becoming a common way to evaluate a professional corporation, and for later employment with benefits, or of keeping a desired future solve a problem or employee engaged with the company until full employment is possible. deliver a project. Workforce planning activities should include insourcing plans as companies review their labor pool, their hiring timelines, their business objectives and their ability to fulfill those objectives with the existing workforce. The ability to bring in talent on an as-needed basis decreases cost, and often provides the organization with specialized expertise that may not be available, affordable or even necessary longer term. Insourcing is a key strategy for risk mitigation – it is a way to ensure rapid access to professional talent experienced at the task at hand, to 18BERSIN & ASSOCIATES, LLC Temporary employment levels grew in absolute terms in all of the industrialized 6114 LA SALLE AVENUE countries over the last decade, led by Japan, which saw the addition of 990,000 temporary workers. There were also large increases in the U.K. (603,000), the U.S. (520,000), Germany SUITE 417 (434,000) and France (279,000). Source: Special Report on Contingent Staffing: Contingency OAKLAND, CA 94611 Plan, Technical Staffing Solutions, October 27, 2010, (510) 654-8500 http://technicalstaffingsolutions.cc/blog/?p=24. INFO@BERSIN.COM 19 For more information, Changing the Way the World Works: The Strategic Free Agent in WWW.BERSIN.COM the New Economy, Bersin & Associates / Katherine Jones, September 2011. The Rise of the “In-Sourced” Employee Katherine Jones | Page 5 THIS MATERIAL IS LICENSED TO EXPERTUS FOR DISTRIBUTION ONLY. THIS MATERIAL IS LICENSED TO CLARITY CONSULTANTS FOR DISTRIBUTION ONLY. BERSIN & ASSOCIATES © 2011 BERSIN & ASSOCIATES © 2011

Research Bulletin | 2011 Research Bulletin | 2011 BERSIN & ASSOCIATES BERSIN & ASSOCIATES manage or assist a team, lead a project, or develop new intellectual property for the company. It is very similar to weighing a “build-buy” decision in manufacturing. Companies need to recognize that, by choosing insourcing, the organization is choosing to hire rather than having to develop talent. Planning for just-in-time professional staff paves the way for the economic decisions about sourcing of consultants, expected contract duration and the desired “rules of engagement.” The business advantages are several (see Figure 1).Figure 1: Business Advantages of Insourcing Professional Talent Goal Value • Just-in-time expertise and experience for projects Expert Consultants • Often higher-quality workers than the company could afford to hire • Better chance of getting the right skills for the job at hand • Avoids the overhead cost of a salaried hire • Avoids the risk of a bad hire Cost Containment • Alleviates the costly risk for laying off the employee • Neither benefits nor unemployment insurance are paid for these workers • The consultant is focused on the task to complete, not the internal politics or the need to get ahead in the organization Project Focus • Avoids time and cost overruns • Avoids underestimating the competition Customer / Client • Avoids risk of project failure Satisfaction • Alleviates the risk of missing customer expectations Greater Control Than • Allows greater ability to oversee and direct the activities of the insourced Outsourcing resource Source: Bersin & Associates, 2011.BERSIN & ASSOCIATES, LLC According to The CHAOS 2004 Study on Business Project 6114 LA SALLE AVENUE Outcomes, inexperience is a key cause of project failure. The SUITE 417 research shows that “projects gone bad” constitute close to 20 OAKLAND, CA 94611 percent, while fewer than one-third of all projects were deemed (510) 654-8500 to be true successes.20 INFO@BERSIN.COM WWW.BERSIN.COM 20 Source: CHAOS 2004 Resolution of Projects, The Standish Group International, Inc., 2006. The Rise of the “In-Sourced” Employee Katherine Jones | Page 6 THIS MATERIAL IS LICENSED TO EXPERTUS FOR DISTRIBUTION ONLY. THIS MATERIAL IS LICENSED TO CLARITY CONSULTANTS FOR DISTRIBUTION ONLY. BERSIN & ASSOCIATES © 2011 BERSIN & ASSOCIATES © 2011

Research Bulletin | 2011 Research Bulletin | 2011 BERSIN & ASSOCIATES BERSIN & ASSOCIATES Managing Strategic Insourcing Contract employees can be a critical addition to the workforce, and KEY POINT their hiring and management within the corporation is a human Freelancers, free capital management issue, not a procurement one. More and more companies now want to treat their contingent, consultant and contract agents, contractors, workers with the same talent management practices as their salaried consultants, employees. (Clorox, for example, one of the most widely known brands micropreneurs22 … in the market, operates with almost 40 percent of its workforce on a Whatever they are contracted basis.)21 termed, contract- Managing the contracts and the rules of employment for 1099 forms based insourced is often new to HR practitioners, and the functionality to support it is workers account necessary in all HRIS or talent management systems. for a large segment The requirement for the HRIS is twofold: of the U.S. • Coordinate the hiring, onboarding and performance management labor force. of contracted employees; and, • Help to prevent the potential for legal claims by maintaining and monitoring the type of work consultants perform, how they do their work, the type of support that is provided to them for performing their jobs and how the workers are supervised.22 Conclusion The bottom line is that free agents are an increasing presence in the U.S. workforce’s future. As professionals, their contribution to the workforce is strategic, enabling work to be done that could not otherwise be accomplished. The business drivers are compelling – including the ability to retain highly specialized skills for a short time, as well as the elimination of the cost and risk of a bad hire.23 21 For more information, SumTotal Systems: From Learning Management to Human CapitalBERSIN & ASSOCIATES, LLC Systems Provider, Bersin & Associates / Josh Bersin, July 7, 2011. Available to research 6114 LA SALLE AVENUE members at www.bersin.com/library. SUITE 417 22 A “micropreneur” is an entrepreneur who is willing to accept the risk of starting and OAKLAND, CA 94611 managing the type of business that remains small, supports the kind of work he / she wants (510) 654-8500 to do and provides a balanced lifestyle. INFO@BERSIN.COM 23 For more information, SumTotal Systems: From Learning Management to Human Capital WWW.BERSIN.COM Systems Provider, Bersin & Associates / Josh Bersin, July 7, 2011. The Rise of the “In-Sourced” Employee Katherine Jones | Page 7 THIS MATERIAL IS LICENSED TO EXPERTUS FOR DISTRIBUTION ONLY. THIS MATERIAL IS LICENSED TO CLARITY CONSULTANTS FOR DISTRIBUTION ONLY. BERSIN & ASSOCIATES © 2011 BERSIN & ASSOCIATES © 2011

Research Bulletin | 2011 Research Bulletin | 2011 BERSIN & ASSOCIATES BERSIN & ASSOCIATES Often, organizations no longer only seek a full-time, permanent hire A N A LY S I S and the job seekers themselves frequently want to be employed on their own terms. Instead, they are increasingly taking a holistic view of To remain talent management, broadening their approach to getting the skills competitive, and experience needed. To remain competitive, companies are well- companies are well- served by a move to enterprisewide workforce planning – planning served by a move that includes all categories of talent and is integrated with the to enterprisewide overall business model. It is this move to a concept of total workforce management that will underlie the talent advantage required by the workforce planning businesses of tomorrow. – including all categories of talent.BERSIN & ASSOCIATES, LLC 6114 LA SALLE AVENUE SUITE 417 OAKLAND, CA 94611 (510) 654-8500 INFO@BERSIN.COM WWW.BERSIN.COM The Rise of the “In-Sourced” Employee Katherine Jones | Page 8 THIS MATERIAL IS LICENSED TO EXPERTUS FOR DISTRIBUTION ONLY. THIS MATERIAL IS LICENSED TO CLARITY CONSULTANTS FOR DISTRIBUTION ONLY. BERSIN & ASSOCIATES © 2011 BERSIN & ASSOCIATES © 2011

Research Bulletin | 2011 Research Bulletin | 2011 BERSIN & ASSOCIATES BERSIN & ASSOCIATES The Bersin & Associates Membership Program This document is part of the Bersin & Associates Research Library. Our research is provided exclusively to organizational members of the Bersin & Associates Research Program. Member organizations have access to the largest library of learning and talent management related research available. In addition, members also receive a variety of products and services to enable talent-related transformation within their organizations, including: • Research – Access to an extensive selection of research reports, such as methodologies, process models and frameworks, and comprehensive industry studies and case studies; • Benchmarking – These services cover a wide spectrum of HR and L&D metrics, customized by industry and company size; • Tools – Comprehensive tools for HR and L&D professionals, including tools for benchmarking, vendor and system selection, program design, program implementation, change management and measurement; • Analyst Support – Via telephone or email, our advisory services are supported by expert industry analysts who conduct our research; • Strategic Advisory Services – Expert support for custom-tailored projects; • Member Roundtables® – A place where you can connect with other peers and industry leaders to discuss and learn about the latest industry trends and best practices; and, • IMPACT® Conference: The Business Of Talent – Attendance atBERSIN & ASSOCIATES, LLC special sessions of our annual, best-practices IMPACT® conference. 6114 LA SALLE AVENUE • Workshops – Bersin & Associates analysts and advisors conduct SUITE 417 onsite workshops on a wide range of topics to educate, inform and OAKLAND, CA 94611 (510) 654-8500 inspire HR and L&D professionals and leaders. INFO@BERSIN.COM For more information about our membership program, please visit us WWW.BERSIN.COM at www.bersin.com/membership. The Rise of the “In-Sourced” Employee Katherine Jones | Page 9 THIS MATERIAL IS LICENSED TO EXPERTUS FOR DISTRIBUTION ONLY. THIS MATERIAL IS LICENSED TO CLARITY CONSULTANTS FOR DISTRIBUTION ONLY. BERSIN & ASSOCIATES © 2011 BERSIN & ASSOCIATES © 2011

Bersin research bulletin sep2011

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