The gig economy has become a hot workforce topic. However, despite the hype, the concept has numerous hidden management problems.
Recently, executives have been drawn to the concept because of its lower benefits costs, but also for the scalability that a gig workforce provides (with the ability to quickly add talent for growth and to release it in a downturn with few legal constraints). A gig workforce is a relatively modern employment concept when you look at the history of employment over the last 75 years. Hiring a large percentage of contingent or gig workers (instead of permanent employees) is an option that has never gained much traction. In addition to the well-publicized employee/contractor legal issues, on closer study, you’ll find that having a workforce containing a large percentage of gig workers is also fraught with dozens of serious management problems.
It may be worth noting that, in what may be the start to reversing the trend, a California delivery firm recently announced it was converting its gig workers to employee status. So, if you’re curious about the many management pitfalls of a gig workforce, here’s a checklist covering the problems that you need to plan for.
The Top 10 Problems Associated With Hiring a Large Percentage of Gig Workers
The management problems related to managing a gig workforce are listed below. The problems with the highest negative impacts appear first.
- The high turnover rate creates multiple problems — the single most impactful problem is the likely, three times higher, turnover rates associated with a gig workforce. The turnover is so high with gig workers for several reasons. First, their intention to stay may be limited because most gig work assignments are not their dream job. Or, because earning extra money is the worker’s chief motivator, many will simply leave the minute they reach their money goal or get a slightly higher money offer. The intention to stay is often further reduced because of the limited company commitment. Because, by only giving them a gig assignment, the company makes it clear that they desire no long-term commitment to the gig worker. Permanent employees steadily build their capabilities through long tenure. Short tenure means that gig workers don’t have the opportunity to build up their knowledge, experience, or skills over time. Damage also occurs because their short tenure won’t allow strong relationships to build with their managers, coworkers, or customers. And, the constant leaving, unfortunately, means that gig workers will limit your team’s capabilities for providing a consistent product or customer experience. The significantly higher turnover rate will require the team’s manager to continuously recruit, which will take up a great deal of their time. And, finally, this high turnover will mean that HR will need to spend a lot of time processing their departure paperwork.
- Collaboration and innovation will be limited — if your firm must have continuous innovation, the No. 2 most impactful problem will be increasing collaboration with a large percentage of gig workers. Continuous collaboration between coworkers directly leads to innovation. However, the temporary nature of their work will mean that there will be few times when all your gig and permanent teammates will be in the same space to collaborate. Even if you develop a mechanism to increase collaboration, their lack of engagement and long-term commitment make it highly unlikely that gig workers will devote much of their brain power and time toward developing innovations for your firm. Because they’re not technically employees, legally it will also be hard to take ownership of any innovations that gig workers do create.
- Low gig worker engagement will hurt productivity — a gig’s engagement and commitment level are likely to remain continuously low throughout their short tenure, knowing from the start that their intention to stay will be limited. Unfortunately, many may take a job where they don’t share your company’s values and they haven’t bought into your mission. And mixing highly committed permanent employees with barely engaged gig workers will certainly hamper your workflow. And, with their fixed pay rate, they have little individual incentive to produce much more than the minimum requirements.
- Expect problems with their work quality — in addition to low productivity levels, gig workers will likely produce low quality work. They get little training and they won’t stay long enough to build the skills and develop the commitment that is necessary to produce quality work. This combined with low engagement levels likely will result in weak customer service and high error rates. Gig workers in sales jobs will likely produce lower revenue. And because for many gig workers your job may be their second job, you may find that large numbers of them arrive at work exhausted or falling asleep, further lowering their already low work quality. Even though highly agile and adaptable workers are essential for quality work in this fast-changing world, the gig workers you hire are unlikely to be highly adaptive. Their lack of agility may cancel out the scalability benefits that were gained from hiring workers who are easier to release.
- Customer relationships are harder to build — a large gig workforce will be noticed by your steady customers, especially, when your gig workers have a great deal of customer contact with the possibility of return engagements. Their low engagement might mean that they will have no interest in building relationships. And their short tenure might make building and maintaining relationships with customers nearly impossible. For part-time gig workers, their short work hours will also make it hard to ensure that the same gig workers will be consistently available to their customers.
- The best gig workers may not be available at times when they are needed most — one of the obvious advantages of full-time employees is that they are continually available during normal work hours. However, many gig workers take a job because it offers the flexibility to work primarily when they want. So, their limited available hours make staffing during the key times or shifts when a manager really needs the work done more difficult. Even though you would want your top-performing gig workers to be on the job during critical time periods, unfortunately, they may have other responsibilities that limit their availability during those critical times. Finally, scheduling a large number of part-timers will always take up a lot of the managers time.
- Gig workers will slow the workflow — because many gig workers only work short hours, every time they leave their unfinished work, it must be handed off to another. And every work handoff takes time. In addition, it offers an opportunity for errors that can result from the inevitable confusion and miscommunication that surround each handoff. On long-term projects, the high turnover rate of gig workers might mean that they may not even be around when their portion of the work comes up. Offering short duration work hours that many gig workers prefer also means that you must also hire a larger number of gig workers.
- Recruiting gig workers is also problematic — because of their high turnover rate, there will literally be many more bodies to hire, train, and to generate paychecks for. And you can’t be successful unless you have a robust recruiting function to continually fill all your gig openings. If your gig work requires high levels of skills or experience, when recruiting, managers must realize that most of the prospects that meet your requirements won’t be willing to work in gig jobs with little job security. Because hiring managers and recruiters know that gig workers won’t become permanent, HR has been known to take shortcuts in sourcing, candidate assessment, and reference checking processes. If your gig hiring processes are not as rigorous as those used for permanent employee hiring, you will end up unintentionally hiring many weak performing gig workers and maybe even a few toxic ones. Finally, in this time of record low unemployment and competition for gig workers, the amount of pay that you need to offer in order to attract quality gig workers may rise to the point where their higher pay offsets any savings resulting from not paying them benefits.
- Gig workers make it harder to maintain teamwork — the very nature of part-time gig work means that you will have a large number of workers who will seldom work at the same time. And this lack of interaction between all teammates, as well as a high gig turnover rate, will make it difficult to build and maintain teamwork. In the cases where your permanent employees are allowed access to higher levels of data, meetings, and information, this often results in an “us versus them” dual status workforce where the two groups don’t mix well. Not only does the separation make building teamwork much more difficult, but it will also likely have negative effects on team morale, spirit, camaraderie, and cohesion.
- Gig workers are more difficult to manage — because they often work fewer hours, the number of gig workers required to cover your work will be large. And with many more workers on the team, individual accountability will be more difficult. In addition, because they have lower levels of commitment and engagement, the odds are that a large proportion of gig workers will be high maintenance and much more difficult to manage on a day-to-day basis. Also, because gig workers are seldom eligible for recognition, bonuses, stock, or promotions, there are fewer reasons for gig workers to continually improve themselves and their work. Finally, because of their short tenure with the firm, unlike regular employees, once a manager learns their key motivators, knowing how to motivate them won’t provide value for very long.
Next week on 7/8/19, ERE.net will publish the second part of this article. It highlights 10 additional corporate problems and the positive benefits when a company implements a gig workforce model.