Fractional Work & Your Talent Strategy

Earlier this year, I launched a platform connecting companies with people analytics experts to do fractional work. Within six weeks, this grew from a band of 10 people into a marketplace of over 100 world-class experts in 14 countries. I was astounded by the growth. 

As our marketplace grew over the year, I became curious about whether the rise of fractional work is fundamentally changing how we need to engage with our workforce. Certainly, fractional work changes the nature of how workers collaborate and how work gets done. But as I engage more with our marketplace, I find that independent workers have different value propositions and needs.

We can't continue focusing on the employee experience—while largely ignoring the experience of the independent worker—and expect to get the most impact from our workforce. It requires a more holistic and inclusive approach. We must fundamentally adjust our talent strategy to create a sense of belonging for both groups while honoring their differences. 

These are insights I've learned over the past year about the demand for fractional work and how I see it transforming our workplace. 

Independent Worker Persona: Builders Who Want Flexibility, Agency

Candidly, I did not set out to create this company. When big companies began conducting more layoffs last year, I started connecting good people looking for work with meaningful opportunities. Like so many of you, I'm fortunate to have worked in this space for a while, I have a strong network and I felt like it was the right thing to do.

I expected that my colleagues would be looking for full-time roles, but I was surprised by what I heard. The answer was remarkably consistent: They didn't want to go back to corporate roles. These were all high-performing employees, exceptional at what they do, who wanted to build and have an impact. They wanted more flexibility in how and when they worked, and they wanted more agency in what they worked on.

I heard the same story seemingly on repeat: "I spend a minority of my time doing what I love and the rest in bureaucracy or processes that don't make a difference. I'm doing the same thing over and over again. I don't want to go back to that."

Maybe I shouldn't have been surprised. A recent study from McKinsey & Company found that 36 percent of employed workers who responded to its survey were independent workers (defined as contract, freelance, temporary or gig workers), which McKinsey extrapolated to the equivalent of 58 million Americans.¹ That's up from 27 percent of the population who identified as independent workers in 2016.

When asked why they chose independent work, 25 percent cited the autonomy and flexibility it offers. Another 25 percent said they do it because they enjoy the work (this was the top reason among high earners making over $150,000 annually).

Opportunity for Employers: Unprecedented Access to Skills On Demand

As I spoke with experts in people analytics (my discipline), I found a strong demand among them to work independently. But as I spoke with companies, I saw a similarly strong desire to engage independent workers. Again, perhaps I should not have been surprised. According to research from The Josh Bersin Company and The Future of Work Exchange, independent workers make up over 47 percent of the enterprise workforce, and analysts forecast that share to grow.²

The appeal of independent workers and the impact they bring to organizations is real. In today's fractional labor market, companies can access skills with a speed and immediacy that is unprecedented. This immediate access to a wide variety of skills, the agility to start and stop work on demand, and the lower average cost compared to full-time employees gives a meaningful competitive advantage to HR and business leaders.

However, despite a desire among experts to work independently and companies' need for independent workers (seemingly a perfect match!), I discovered there was a gap that prevented both from being successful. That is why I founded our company, to bridge this gap with a marketplace that brings together experts and companies.

As my company has grown and I spend more time talking to experts and clients, I have come to appreciate that independent workers can change a company's workplace dynamics. But most CHROs aren't adjusting their talent strategies in response. As companies introduce more fractional work, the expectations of and from workers (both independent and permanent) change. But few leaders are incorporating this into their talent strategy.

The Implications: 4 Key Questions for CHROs

If you haven't assessed how fractional work may be changing your talent strategy, I encourage CHROs to consider these four questions:

1. What is your independent worker strategy?

Research from The Josh Bersin Company shows that high-performing companies are four times more likely to prioritize a strategic focus on an alternative workforce. Yet only 16 percent of companies have a defined strategy.³ It's time to rethink your workforce strategy and how you measure it. 

What is the right balance of full-time employees to independent workers, how might this differ by business unit and function, and how would you change your workforce mix in different stages of your business cycle? For example, you can leverage your independent workforce to navigate rapid changes in demand, creating a more stable organization and minimizing the need to lay off permanent employees.

2. Which roles should be "gig-ified"?

Do you have positions in your organization that you need for a specific deliverable? Or are there skills that are critical for specific projects but not utilized throughout the entire year? These may be excellent candidates for independent work instead of permanent headcount.

Think about your teams. What percentage of your team do you need to execute the core business of your organization, and what portion is critical at different times? Could some of those roles be moved to independent workers? 

3. How does this change how you manage your FTEs?

Fractional work offers tremendous benefits to your organization through more immediate access to a wide array of on-demand skills at a lower total cost than a permanent employee. But the increased reliance on independent workers can also pose risks to your long-term talent strategy. As your workforce mix shifts, if more work is being done by independent workers, consider the implications for your organizational culture and how you retain institutional knowledge. 

If your strategy calls for more independent and fewer permanent workers, the responsibilities and impact of your permanent team magnify as more workers (and their knowledge) churn through the organization. I recommend taking immediate steps to strengthen these aspects of your organization:

• Institutional knowledge: You can retain institutional knowledge through a two-pronged approach of better project management hygiene and focused efforts on employee retention. Two effective ways to achieve better project management hygiene are improving your project documentation (i.e., ensuring that projects have a clear problem statement, desired outcome, project plan, and review and approval process, and that all milestones and changes are recorded) and leveraging shared project management tools (e.g., Asana, Moovila or Smartsheet). Regular and intentional lateral moves are among the most effective ways to retain and engage employees. A study by Nielsen shows that a lateral move increased an associate's chance of staying with a company by 48 percent.⁴
• Project oversight: Assign project and decision owners from your permanent team to ensure continuity and end-to-end responsibility for critical work.
• Team cohesion: As the percentage of your workforce made up of permanent employees decreases, the importance of effective collaboration among them intensifies. They must connect, establish strong team bonds and leverage collaborative time efficiently. Take an intentional approach to bring teams together in the office—to establish trust with each other, discover new insights or to influence decisions—but still allow flexibility to work remotely for heads-down tasks.⁵

4. How are you taking care of your independent workers?

As independent workers become a larger part of our workforce, we must also understand and serve their unique needs. We can't expect to have a transactional relationship with independent workers and still realize the full benefit of their contribution. 

How are you building a value proposition for your independent workers? For example, most companies exclude independent workers from their employee surveys and other listening programs. Wouldn't you want to understand the engagement and well-being of your entire workforce? Also, consider including your independent workers in your development and onboarding programs. These changes help foster a better sense of teams and belonging while enabling your fractional workforce to be more productive on the job.

But most importantly, we need to rethink how we provide benefits to this population. Access to affordable health care, health insurance and child care remain significant barriers to well-being among independent workers. McKinsey found that about half of permanent workers receive health insurance from their employers, while only 32 percent of independent workers do. As an HR community, we can bridge this gap and care for our entire workforce.

In conclusion, companies have woken up to the value of independent workers. The immediate access to skills, increased agility and lower labor cost they provide can deliver a distinct competitive advantage. But while independent workers are a growing share of the workforce, most leaders need an intentional strategy for leveraging fractional work to support their business goals and integrate independent workers into their organizations.

While employee experience seems to be top of mind for so many leaders, we rarely measure or manage the experience of our independent workers, nor do we account for how their work is affecting our permanent teams. We can't continue ignoring independent workers' experiences and their input. To realize the full benefit of their contributions, we must adjust our talent strategies to give our permanent employees the increased support they need while caring for the unique needs of our fractional workers. 

RJ Milnor is the founder and CEO of People Analytics Partners, a marketplace that connects companies with experts in people analytics and workplace tech for fractional assignments. He previously led the global people analytics and workforce planning functions at Uber, McKesson and Chevron.

SOURCES

1. Freelance, Side Hustles, and Gigs: Many More Americans Have Become Independent Workers, McKinsey & Company, 2022.
2. Artificial Intelligence Streamlines Contingent Workforce Management Decision-Making, The Future of Work Exchange, 2023. 
3. The Alternative Workforce: Not So Alternative Anymore, People + Strategy and Josh Bersin, 2019.
4. People Analytics Isn't as Hard as You Think—Nielsen Proves Why, LinkedIn Talent Blog, 2017.
5. The Adaptive Hybrid: Innovation with Virtual Work, Management and Business Review, 2022.