There’s been a growing trend in corporate America whereby positions that were historically held by full-time employees are now being sourced to more “flexible” temporary employees. They may be termed “contractors”, “consultants”, “independent contractors” or myriad other names, but the temp worker concept remains the same. The reasons businesses are increasingly going the temp workforce route are the following:
- Lower Compensation Costs
- No Healthcare, Benefits
- No Paid Vacation
- Easier to Terminate or “Release”
- … Everyone else is doing it…
Contractors Are Now Doing My Job!
I was pretty shocked when I heard our group was going to employ contractors to help with some of our peak workload we’re encountering. What I do is project management for transitioning biopharma products from one site to another. It could be internal plant sites, or often times, it’s from a site to a contract manufacturer. Not only do these projects take years from start to finish, but management of these projects requires years of relevant historical experience in manufacturing, executing deals, supplier management, etc., which I have. I used to think that I had a pretty unique skill set as a Chemical Engineer, MBA and various Procurement/Supply Chain certifications that made me uniquely qualified for this type of role. I was therefore pretty shocked when I first heard we were going to use contractors to fulfill what I believed to be such a critical, entrenched role in the company.
The reasons for going to contractors were valid in retrospect. Primarily, our projects were picking up much faster than our bandwidth and we simply didn’t have enough qualified candidates internally to fill open Project Manager roles. But what we found was that there were plenty of suitable candidates outside the company that had either been previously laid off (massive consolidation in the industry in recent years), were coming back from taking time off with the kids, or just looking for the flexibility contracting brings. I was initially skeptical that this model could work, but admittedly, it is. The contractors are doing fine, none of them have quit for a full-time position elsewhere and frankly, when the workload peak drops off, it will be less painful for the company to sever ties. They already know this is the endgame and contracts are only allowed to run something like 2 years anyway, so presumably, as that time approaches, they’ll be looking for roles elsewhere.
My Epiphany on the Future of the US Worker
Once our company started down this road with what I had viewed as a “core” function, I had a bit of an epiphany. What if all companies started to go the “virtual company” route and have very few employees that make core strategy decisions and outsource everything else? I started thinking about various jobs people fulfill and then questioning why they couldn’t be outsourced. Thinking about virtually everything we employ full-time now and what could be outsourced, it’s tough to find a reason why these couldn’t go the same route.
- Legal – Corporate lawyers make a pretty penny. So do external law firms. Who’s to say companies can’t just spend money on their peak work with external law firms instead of having a bunch of internal attorneys? Maybe there’s just a head counsel who dictates strategy and oversees external attorneys similar to how companies outsource manufacturing and other services.
- Manufacturing – Companies have been increasingly outsourcing manufacturing for decades so this is nothing new. I’d just expect it to continue. It doesn’t necessarily even have to be “off-shoring”, just outsourcing. It frees up capital and allows for workforce flexibility instead of being tied to hundreds or thousands of employees at each plant site.
- Procurement – In kind of ironic twist, the very people who negotiate deals to outsource manufacturing and services can be outsourced themselves. A old colleague of mine actually left a role in Procurement to go work for a firm that does just that. His company acts as a contract negotiating service for other firms that don’t want to employ full-time Procurement functions. They more than pay for themselves with the money they save in negotiating and it allows the company to avoid the commitment to full-time employees.
- R&D – I used to think of R&D as the “lifeblood” of our industry and was left scratching my head when I started to see layoffs there and outsourcing. What I’ve come to realize is that the industry is starting to rely more heavily on in-licensing and deals instead of organic drug discovery. Also, many employees in the R&D umbrella are performing functions that could be outsourced easily like testing, analytics, analysis, and other tasks that are becoming more commoditized than core these days.
- IT – IT is an area that’s seen a lot of outsourcing in recent years and I’d expect that to continue. While certain industries have particular nuances and regulations to adhere to, there are niche firms sprouting up to address those needs in everything from software for clinical trials to running Sharepoint sites.
- Sales Force – There are contract sales forces popping up all over the place which companies love because they can scale their force depending on the product cycle, new launches and costs are much lower.
- Supply Chain – Rather than using internal employees for everything from Planning to Logistics, I’m seeing companies start to outsource large parts of their supply chain groups to true “center of excellence” outfits like FedEx.
- Everything Else – This trend is so evident to many, that entire companies are being started up in niche categories. For instance, an old college buddy and I started up a computer-aided design company for outsourcing everything from Plumbing CAD to structural 3D modeling. We’re well aware of the notion that for many firms, it doesn’t make sense to carry full-time CAD drafters when the workload might be nothing 1 month and 4 full-time equivalents the next month.
What are your thoughts?
Is it realistic to assume your company will be the same size (or larger) in 10 years, 20 years, when they could simply start shifting to the temp workforce model for higher complexity roles?
Is your role bullet-proof? Really?