To Hire or Not to Hire, On Demand People — Event Summary

 

Parkview provides M&A Advisory Services and Pre-Transaction Reviews, a one-of-a-kind service that helps startups understand what they need to do to prepare for a successful exit. 

 


On-demand services have started popping up everywhere.  Some call it the sharing economy, where people have forsaken owning things for the fun of clicking and ordering whatever they wanted.

What about people and their services?

On-demand labor markets for chefs, lawyers, accountants, bankers, CMOs, CFOs, salespeople, programmers, copywriters, personal assistants, and almost any other task are popping up everywhere.

The NetForum NYC gathered on May 20th at WEA’s HQ, hosted by its President Matt Signore, to share perspectives on how this phenomenon has affected the operations of large and small companies.

I have heard many times over my career that “in the old days people used to spend their career at one company but now people spend a few years here then hop to another job.”  Breaking the alleged bond between the corporate parent and the employee family has been attributed to the offshoring of jobs that has arguably demonstrated the lack of loyalty of corporations to long-time employees.  Others attribute the new relationship to the employees’ lack of loyalty, their desire to “change scenery” regularly, lead a fulfilling life following their dreams, and not “get stuck in drudgery.”

 

How Much On-Demand Hiring is Really Going On?

Wanting to test how real the phenomenon was, I asked our group “how much of what you produce is delivered by “fixed” labor and how much by “on-demand” labor?”  We had a representation of people from startups to multinationals.  Interestingly, most people reported that the overwhelming majority of their “labor providers” (my words) were fixed labor and not on-demand.  Most used on-demand labor regularly but in small quantities.  This was true of the large and the small companies represented at our meeting.

Two exceptions were in the creative world where on-demand had made a noticeable dent.  Music is produced by talent that can float from project to project, even if the marketing and distribution of the product is done by fixed staff.  Journalism can be produced by on-demand journalists who are closer to the action, cover a broader territory, represent a multitude of perspectives and produce articles on flexible schedules — so long as a fixed staff ensures the the publication has a steady, predictable and high quality output.  An excellent article in the NYT discussed the Hollywood model of production and I think we validated some of its conclusions in our discussion.

So, unless our group was completely not representative of the world at large, I came to the conclusion that the demise of the corporation as a way to organize labor and capital to productive use was still way off.

On-Demand Labor Brings its Own Challenges

Next, I had intended to ask “why are you doing it” (using on-demand) but it became more why are you not doing it.  Many reasons were mentioned:

  • Productivity.  The extra cost of managing people who don’t have the same baseline subject matter know-how is a drag on productivity.  Labor quality is uneven and hard to predict or control.
  • Reliability.  On-demand does not guarantee availability.  You don’t know if people will be available and if they are the people you want.
  • Innovation.  There is a noticeable increase in innovation when people are in permanent contact and focused on a common subject matter.  When teams are made up of ad hoc, short term teams, that does not happen.
  • Proprietary IP and Value Creation.  It is hard to value companies that don’t have their own employees, creating IP that remains in the company.  A company that is staffed 100% on-demand even with a great process to manage such a structure is relatively alien to investors or acquirers.

Who is the Driver for On-Demand?

Continuing with my prepared questions, I asked “who is driving the on-demand process,” companies or employees, and how are companies reacting?

This is where we started seeing how below the surface, changes are taking shape.  The combination of a shortage of certain skill sets together with generational attitude shifts is creating challenges.  I have heard it in other NetForum meetings, people do expect more from their jobs and their employers.

There is also that desire to change the scenery.  If companies can’t count on their good people sticking around, who will be there 5 years from now to run the business? Not at the very top necessarily but right below it.

We mentioned the famed GE practice of rotating people among divisions to give them a well rounded view of all that GE does so they would be able to manage anything that came their way.  Newer companies are promoting people quickly or proactively moving them laterally to keep them interested and reduce churn.  In a sense, both are tactics to retain and groom people on which a business can be built.

Societal issues are lurking.

If the economy does move to an on-demand labor model, education and training will be serious concerns.

Will corporations sponsor schools to produce the talent they need? Will government provide job training?

We closed the meeting with a wake up call from some of our members.  We are facing critical societal choices about how labor markets will provide the employment, training, and job security that will enable people to lead healthy, happy and productive lives.  We are living in a period of disruption — making bad policy decisions now could lead to societal dislocations instead of to a tranquil future.

Thanks to the NetForum members who attended for their insights and contributions.


Laurent Ohana

Leave a Reply

Your email address will not be published. Required fields are marked *