How Leveraging the Gig Economy Keeps Innovation Flowing

Originally published on InnovationManagement.

The future of work involves embracing the gig economy, which includes freelancers, partners, and other vendors. Business leaders must scale with this in mind.

In the past, gig workers took on side jobs to earn extra money or pay off debts. Before COVID-19, only 1 in 10 gig workers relied on project work as a primary source of income. With the onset of the pandemic, there was a surge of people who viewed the changing state of the workforce as an opportunity to turn their side hustles into full-time jobs.

According to a study conducted by Freelancers Union and Upwork, the number of gig economy contract workers has grown to?57 million?in recent years; this accounts for 35% of the U.S. workforce. The future of work involves the gig economy. But despite the growing number of contract workers, freelancers, and consultants cropping up, business leaders aren’t developing future-looking strategies with the gig economy in mind.

Why Leverage the Gig Economy?

Hiring and onboarding a full-time employee is costly. According to the Society for Human Resource Management, hiring talent costs an?average of $4,129. When replacing someone, the cost per hire can skyrocket due to the value of the original employees’ time; direct replacement costs can reach?50% to 60%?of the employee’s salary. Leaders often spend more than they realize in overhead for payroll, benefits, office space, and more — not to mention the cost of the recruitment and search.

However,?where?people work is changing. More than?60% of employers?are considering a hybrid model, which means not every worker will need to be in the office. This provides the perfect landscape for utilizing gig workers.

Need another reason to consider leveraging the gig economy? No matter the size of a company, there’s now a level playing field. Big companies (which tend to lack flexibility) can become more agile by partnering with gig workers; small businesses (which typically lack funds) can access top talent at an affordable price. It’s just a matter of finding the right person and creating a contract that benefits both parties.

Scaling Operations With Gig Workers

The future of work predicts movement from strict hierarchies to networks, and leveraging the gig economy is a step toward that transition. Hierarchies depend on bureaucracy for decision-making, which costs time and money. On the other hand, networks with independent contractors are better suited to respond to the rapid pace of change in the business world.

Of course, there are other advantages to outsourcing. Leaders who capitalize on this opportunity will benefit from:

1. Time-Saving Expertise

When leaders use contract workers, they sign on experts who are focused on completing specific projects. They’re not adding tasks to full-time employees’ existing responsibilities, which can result in additional lost resources spent fixing oversights due to inattention.

Using gig workers also allows full-time employees to devote attention to innovation projects. Google still uses the “20% rule” (i.e., employees should spend at least 20% of their time exploring projects that have no immediate payoff but could lead to long-term gains), which has led to innovations like Google News and Gmail.

2. Reduced Overhead

Independent contractors tackle projects on a temporary or part-time basis. That means leaders can tap into their flexible schedules and expertise without making a long-term commitment — like hiring a full-time employee. While gig workers might carry a higher hourly price tag, they usually require fewer hours or benefits.

For instance, a company might sign a contract with an outsourced marketing director for 20 hours a week. If it were to hire a full-time employee, the company would need to fully onboard the individual and offer a competitive compensation package. This saved money from overhead could then be put toward innovation projects and budgets.

3. Education and Experience for Employees

According to Deloitte research, the expertise of consultants can also boost?full-time employees’ professional development. Contractors bring a deep knowledge of the industry — as well as ideas and best practices from their other clients — that is invaluable for businesses.

One study found that contract workers were?20 percentage points more likely?to have participated in education-based training over the past six months than full-time employees. Full-time employees can soak up contract workers’ approaches to problem-solving and learn new skills as they collaborate. In some cases, contractors might act as a catalyst for change or a muse that inspires innovation. This can encourage teams to pick up projects or support initiatives they might not have otherwise considered.

The gig economy continues to gain traction, underscoring the workforce’s transition from hierarchies to networks. Business leaders should capitalize on the opportunity to scale by leveraging the gig economy. Those organizations that seize the moment will benefit from the expertise of contract workers, reduce overhead costs, and help their full-time employees develop professionally. That’s a massive win for everyone involved.