The Pandemic has accelerated how people work. It has also accelerated remote work and the way companies recruit their talent, full-time, contractors and 'freelancers'.
Welcome to The Growth Connection, a podcast to help us all look forward to this year with a growth mindset. We'll feature interviews with cmi's elite roster of experts in the areas of diversity, leadership, the future, mentorship, performance, teamwork and inspiration.
On today's episode...
Listen in as Mike Walsh and Tim Sanders expand on how to cut costs while growing an agile and hybrid work team.
Tim Sanders, Upwork's Vice President of Customer Insights, has deep experience in digital transformation, remote work management and agility-through-change. No one has collected more insights on how to manage 'work from home teams' than Tim and his associates at Upwork. An expert at meeting teams where they are at, Tim will customize your session providing action items that not only help, but also inspire.
Tim is the author of five books, including the New York Times bestseller, Love is the Killer App: How to Win Business and Influence Friends. His publications have over one million copies in print with bestseller status in India, South Korea, Italy, Brazil, and Denmark.
- Create an agile company with cost savings opportunities
- intentional collaboration used for problem solving produces more innovation
- A hybrid workplace requires equality for remote and full-time employees
- Remote workers have become essential post pandemic
Click below to listen!
Welcome to the growth connection, a podcast to help us all look forward to this year with a growth mindset. We'll feature interviews with cmi’s elite roster of experts in the areas of diversity, leadership, the future, mentorship, performance, teamwork, and inspiration. On today's show,
I'm talking with Tim Sanders, New York Times best-selling author of five books with over a million copies in print. He is also most recently the VP of customer insights at Upwork. Tim, it's great to see you on screen if not in person.
It's great to see you again, Mike.
I think last time we caught up we were having a steak in Vegas. So, this is a new world and date.
It is a new world completely. And we were having some rum, I believe.
That's right. So, you know, long before the pandemic, there was already an accelerating shift in the way people not only worked, but how they were using and recruiting talent. Companies were looking for more agile, adaptive, increasingly contingent approaches. So, during this pandemic, which of these trends do you think have been most accelerated and why?
I think that once organizations got very comfortable with remote work, and they did between March and probably June of this year, they became even more comfortable with what we call independent professionals, freelancers, and independent contractors. You know that the hang up for several years about contingent labor was that we wanted them to be onsite, because we believed that just like with our full-time team members, they needed to be on site to be productive. So, we could look over them make sure they were, you know, doing their work.
Now that remote work is in place, remote workers can be found on platforms like Upwork, and there are real cost saving opportunities. But I think what's really been interesting this year is that organizations saw a surge in opportunity or demand and realized how really broken the talent acquisition process really was. On the one hand, you had the front door of a full-time hire, and those open job requisitions could languish for weeks or months.
And on the other hand, you'd go to a managed service like a staffing agency, and they would dispatch a group of temporaries, looking for their next gig at a markup of 100 to 200%. And between the two, you got your onsite talent, but it was either very slow or very expensive. This year, I call it the year of the third door. And that third door are independent marketplaces like Upwork, where you can directly access talent, bring them on to work remotely, and literally solve the faster, better, cheaper problem, that conundrum, if you will, that we've been facing in business for decades. So that's a big change for companies experiencing a surge. Here's what I'm seeing at the end of 2020. At the end of 2020, leaders I talked to, and I talked to at least two dozen leaders a week in my job. They're telling me that their full-time team members are on the brink of burnout.
They've been working 6, 12, 18 more hours a week, many times over the weekend, unable to peel themselves away from work. They've had hiring freezes, in some case, furloughs and some case cutbacks, and they are burned to the brink. And, so, what they're looking at now is on-demand networks to relieve them, especially around non-core work. So, for example, there's no reason that a software developer you pay $150,000 a year for should be doing code documentation on top of all the rest of her work.
That's an example of our managers saying, “let's bring somebody in to offload that heavy lifting”. And I see that as a real trend for 2021, that bringing in on-demand talent that you pay for out of op x, versus having on the balance sheet will be a way of not only rewarding your full-time team members, but protecting them from burning out and protecting your enterprise from incredibly hard turnover. I am predicting we'll see turnover next year like we haven't seen since 2009.
I want to come back to this question of burnout and work design. But, you know, first off, one of the challenges has, in the past, been the question of complexity. Because, if you're a big organization, then it's got a huge intake of regular people that you need in whether it's seasonal or it’s surge-related. Dealing with the complexity of all of those people has been why people have gone to staffing agencies. What’s changed?
Well, the platforms have changed for on-demand talent, right, so let's talk about what you mean by that is that enterprises want to manage supply chain and human talent is part of supply chain. Right? So, typically, contingent talent has been managed for decades out of procurement. And, they have the luxury of these vendor management systems, these managed service provider agreements with staffing firms, where budget burn-downs and unified invoicing was automatic and that gave a lot of comfort to procurement whose number one role was spend management, and that became kind of a lock-in mechanism.
Regardless of the fact that staffing agencies markup is approximately 100%, meaning if they pay the talent $30, they charge you $60. But, for enterprises, that was fine, because the alternative was the Wild Wild West. And over the course of the last, I would say four or five years, platforms, Upwork the one I work for and is the one I know the best, have gotten much more sophisticated to mimic the back-end capabilities of these vendor management systems, especially around spin management budget burn-down.
But what they deliver, Mike, that the traditional solution couldn't, was direct access to the talent. In other words, once you kind of solve this governance issue of budget burn-downs and making sure the invoicing is on point, what is revealed now with these on-demand platforms is the ability for a project manager to directly access the actual person they want to work on their project, based on their portfolio, based on a variety of different filters like fluent in English, in my time zone, and worked on more than 30 Enterprise projects. This is as opposed to outsourcing it and ceding control to talent acquisition, supply chain management, a third-party agency or a staffing firm. That control factor, I think, has been the lever that's driven more and more adoption of these on-demand platforms, as their functionality catches up from a governance standpoint.
You know, one of the original theories of the firm was based on the idea that you have organizations because it reduces the contracting costs of going to the market every time transactional costs. Yeah, yeah. Right. This is the theory of the firm. The actual costs are a part of it and complexity is another which you have spoken to, but there's another dimension here, which is sort of the cost of intellectual property or breaches. So, if you've now got people that are working for your competitors, you know, how do you actually manage working on sensitive things?
At Upwork, we've had to take a hard look at that, right? Because, much like any other cloud innovation, reliability and security are the initial objections that keep a market on pause. For example, Amazon Web Services launched in 2006, the market really didn't embrace it till probably 2009 and 10, when it had to, because of the recession for these exact reasons. How can we keep it secure? So, the first thing we've learned is we need to put elements in place contractually that protect organizations from hiring a freelancer who's working with a direct competitor. So, that's part of the solution that we've employed. There's more vetting that you can do, there's certification.
Recently, we entered into a collaborative, exclusive partnership arrangement with Citrix to create a Citrix desktop solution that can provide a safety and reliability for a non-FTP worker brought into the tech stack. I was having a conversation with one of the leaders at one of the leading technology companies in the world, and they use a whole lot of upworkers. And they use them on what you would consider intellectual property projects at the company, including having access to customer data and the actual mechanics. And they talk about using abstractions.
So, they say, once you start working with on-demand talent, you also start building abstractions. So, they're just one step beyond the actual data or systems control, where they're actually delivering all this work for API integration, for open source and for QA. But, there's no vulnerability on the part of your systems. By the way, these are the same abstractions these organizations used as they adopted cloud technology 2009 through current day, so I think it's just that story over again, where either it's the platform provider, or doing a better job either contractually or through vetting, whether it's third parties like Citrix providing an intermediary, or just the sophistication of the enterprise learning to use on-demand talent at a more sophisticated level, like with using abstractions.
You know, we were talking about how this is going to change the way we design organizations. And, I think you mentioned the core periphery model from Melissa Valentine. And you know, I've always been interested in this idea that you end up with a very skilled, very capable core inside the organization. And then, you have surrounding you all kinds of different, much more agile, flexible talent. You see this at Amazon, actually. Amazon has a lot of employees, but they have millions of people that are essentially not part of the core enterprise.
Yes. And some of them work 30 hours a week. Some of them work 30 minutes a week. It's so interesting, because what I believe that Jeff Bezos and even earlier, Larry Page, and a lot of other leaders in the Silicon Valley have figured out is that talent should be paid for based on consumption, not retainer. I'm telling you, it's like cloud computing, where we used to retain computers, and pay for them wholly, and then put them either on our premise or on a co-located facility. There was an incredible inefficiency, but we did that for the security, the peace of mind that we thought we always had access to it.
But now, think about how we pay for computing power. We pay for it based on consumption. So, I think that's the flip. And by the way, what you were referring to is Melissa Valentine. I'm going to put this graphic up here. There's a great book that came out in 2019, Mike. It's called The Technology Fallacy. I had an opportunity to interview the authors. It was published by MIT Sloan press and what they basically said is that digital transformation doesn't come down to getting access to technology. That's a fallacy. Digital transformation has to do with solving all the talent gaps in all the thousands of projects that are required to truly become digitally mature.
And, they quoted Melissa Valentine's research with all the Silicon Valley firms, many we've mentioned. And she said that what makes them remarkably different is the way they think about resourcing projects and programs. So, as you can see from this graphic, on the left, you've got this traditional talent model, where 85-90% of all the people working on your company's problem are full time employees and you've got this thin layer of outsource contingent, usually not on digital platforms, but by legacy relationship. And on the right, look at that bigger planet. You've got a smaller core, and you've got a massive periphery of talent that's paid for based on consumption instead of some old school 40 hour a week model.
Two benefits come from this: 1.) benefit one, you have a bigger planet working on your problem. So, you've got a lot more minds cross-pollinating across many more specialties. And that gives you a competitive advantage. 2.) benefit two, your anchors are a lot smaller, because when you take a look at a profit and loss statement, the anchor of a P&I is talent. Good news stabilizes the shipping port, bad news, if it's too big, ship can't get out of Port when the storms coming. So, I think that's what's really captured the imagination of business leaders over the course of just the last few years, is to really learn to think outside the hire, reconsider the theories of the firm, and begin to, to really think about the theory of the network. Because when I think of an Amazon or Google, I think of them more as a network of supply chains and value chains, than a singular firm. I guess that's why they call it alphabet, right?
You know, I can certainly see the positives of a world where, almost like making a movie, you are kind of algorithmically matched to opportunities that are both the best fit for your talents or ones that stretch and grow and nurture you. But then, there are two questions like who is ultimately responsible for nurturing talent, if you're on the periphery, and you're not in the core? And the second, and probably the more alarming question, goes to the goes to the future of inequality and the kind of society we live in where, you know, you have a handful of people who are very highly paid with a lot of security and tenure, and you have a huge contingent workforce.
Good questions, let's handle the first one. And the first one who nurtures talent. When I see organizations that really embrace on-demand talent, and they think about the core periphery model, they begin to rethink talent acquisition, and for example, Flex Era. It's a company out of Chicago, a technology company - they've really embraced in on-demand talent. They don't have a VP of talent acquisition anymore. They have a VP of talent access and he looks over both full time and on-demand talent the same. They're the same class of citizens in his mind. In fact, in the technology fallacy, they warn that you can't treat on demand talent by contractors, freelancers, you can't treat them like second class citizens, because you won't get the knowledge sharing. You won’t get them on your virtual talent bench.
So, you have to nurture them just like you do FTEs. But, that doesn't mean that they need to be fixed to your balance sheet. That doesn't mean that you have to arbitrarily retain them at 40 hours a week. So, here's the recommendation. If you're going to use on-demand talent, think about it from the standpoint of building a virtual talent bench. That's what a lot of big companies talk to me about now. We're building this virtual talent bench, we're actually willing to invest in them getting more upscaling training, because we think they have such great skills to bring to the table, we don't have to have 100% of their time in return, we just need them when we need them.
And they're building up that virtual talent bench, and developing loyalty by investing not only in paying them top dollar, because they can pay them top dollar and still save money on the total package. But second of all, giving them training resources. But let's turn to the second question. This is the more important one. And that is for the on-demand talents, what's their quality of income and quality of life like? Well, there's a few interesting things here.
We just published a recent report at Upwork called Freelancer for written in this massive study. 75% of the freelancers we interviewed say they're making as much are more money working independently than they did working full time, in some cases, two to three times more money. I want you to think about this from a sales standpoint, or I want you to think about it from your business as a consultant or a speaker, you get to write your own check. God forbid you work for some consulting firm like Deloitte that pinned you down to 180k a year plus benefits, when you could literally make 6x that much, if you found a way to turn it up. That's where independent professionals have as an opportunity. Upwards mission is to create economic opportunities so people have better lives. We're not like those price driven networks that try to create this race to the bottom so you can get a logo designed for $5.
So, I think it all depends on what platform you use. In fact, Upwards developed a product for enterprises, called a compliance product, where we classify that independent professional, and we classify whether they look like they should be treated as an employee, because of the amount of time they're working, how much access they have, to your systems, how much they're required to be at standing meetings, etc. And, we've created a third-party employer of record who not only payrolls, but also gives them benefits so they're working on-demand, but they have the same benefit as people working next to them. It's just that all the arrangements are separate from the enterprise, from the legal liability, where all the costs come into play.
My concern is that the people who are capable of making you know 6x what someone Deloitte would earn will always be okay. You know, they'll either be an incredibly in-demand employee, or there'll be someone who makes a fortune, you know, as an independent. But, for the 80% of people in the world who potentially have a more traditional relationship to work - those people need a kind of a safety net, to protect them and benefits. And it's not so much just for their individual sake, but for the kind of overall operations of society. What changes when we move to a complete on-demand talent model for those?
I don't think it's going to be complete - the freelancer form report showed that as much as it surged this year, it's one out of three. So, two out of three people still work full -time, one out of three works on-demand, but that one out of three makes a huge difference to enterprises that adopt it. So, I don't think it's ever going to be fully on-demand. But, this is a very interesting point. Is it a safety net? Or is it a tight wire? I mean, you put all your eggs in one basket, a company can lay you off, like the millions of people that have been laid off in 2020, due to COVID. You got nothing to fall back on but unemployment. The average Upwork independent professional works with three to five enterprises. A lot of them joined, as they used to work full time, got laid off, got surprised by a department reorg and had to start over again, going on unemployment, which is not even close to what you make as an employee.
After nine months of Cobra, you don't even have health insurance anymore. Now, they have three to five enterprise clients, where if one turns them off because of a budget cut, they have the other four to fill, and they can actually go answer more proposal opportunities on platforms and cover that. Surprisingly, Mike, a lot of people that joined in 2020 are never going back. In fact, 12% of the US workforce moved from full-time to freelance this year alone. 96% of them said they're never going back to putting all their eggs in one basket. So, I hear you, I really do. But, I just think there's an interesting, different way to look at it for that one out of three that works independently, especially those that are caregivers. Half of them that are caregivers said that's the number one reason they do it is that they get to spend time with those they take care of and couldn't do that in a full-time arrangement. So, I think there's two sides of it.
If you're starting out and then planning your career, what have you noticed from the most successful independent workers? What are the kinds of capabilities and skills and mindsets, they tend to, to embrace?
They’re entrepreneurial, they want to own a business. They don't look at this as a part-time job until they get a full-time job, like a temp does at a staffing agency. So, they have an entrepreneurial mindset. They want to be a business owner. They have a natural tendency to upskill to become the masters of their craft. They are absolutely driven, juiced and motivated by real-time reviews that come in as they deliver work, not just one time a year or four times a year, if they're lucky. So, those are psychological aspects.
Of course, when we talk about on-demand worker, we're talking about knowledge work. So, we've got 8000 skill sets on the Upwork platform, but basically, you have to do it from behind a computer. All the onsite work, or non-knowledge work, really isn't something that we're talking about, you know, right now. But fundamentally, you know, 10,000, or more people applied to be on the Upward platform a day, and only a few percent get on. And, that's because we want to make sure they're a business owner. We want to make sure they exhibit entrepreneurial personality. Because the enterprise feels the benefit, in that they're much more competitive to get higher ratings in the next job, than they are to play politics or fit in.
And I think all of those become like the psychological attributes required to do this type of on-demand independent work for your entire career. I also find that sometimes you have to work a few years full-time to really understand the benefit and the joy of working independently.
Well, we were talking a little earlier about work design. And, you know, one of the interesting tensions at the moment is that, in a time of increasing automation, a big part of people's jobs is actually thinking about almost how to destroy their own jobs, to actually think about the underlying process of the activity, figuring out there's a smarter way of doing it. If you can define a task easily enough for it to be outsourced, it probably should be done by a machine to start with. So, how do you get people that are essentially outsourced workforce also thinking in that way?
It's interesting that a lot of the people hired on-demand are hired to program machine learning for the purpose of automation. So, I think that it's an interesting mindset around project management. When I talk to a lot of companies these days, that are very sophisticated at project management, the reason is because they have a high project velocity that gets to the desired result very, very quickly, usually ahead of schedule. And by the way, that's the secret to success in business, I've learned over the last year. What I noticed is they have a different process around projects and programs. So, they create a project or a program. They defined the goal of it from a deliverable standpoint. And, the first thing they do is taskify it. And they say, what are all the tasks that need to be completed to achieve that deliverable, to hit that goal? And then when they look at that task list, they go, what can we automate? And then that eliminates a certain group of tasks.
Then they go, what can we outsource, or Upwork, or whatever that verb is, depending on what they use? And that becomes the second question. And then the third question they ask is, what can we hire for? Or what do we already have on staff? And then the fourth question they ask is, you know, what body can we steal? That’s a professional service term. What favors can we ask from across the matrix to get help? And so those organizations progressively say, automation, first, outsourcing second, in-sourcing third, and then matrix collaboration fourth, and it gives them a really nice efficiency.
So, it's like, everywhere you are in that that pile, you have to think downwards, right? So, it's like, if you are on-demand, you should always be upskilling to something that requires some type of creative design work. Because the one thing, and you know artificial intelligence better than I ever will, but the one thing that we aren't going to get until we get to deep learning is that different empathy set of skills that are required for creative problem solving, around designing the automation to begin with. People ask me all the time, what kind of work should I be in a world that's quickly going to automation and I say you need to at least understand how to program the machines.
You need to understand how to design the living systems that are complementary, you need to be able to learn to support the new critical path. My favorite book of the year, Competing in the Age of AI, just had a chance to interview Karim Lakhani for that, and he said that all the great companies like an Amazon, that the entire customer critical paths are going to be AI and all the people that work at that company are in charge of designing that critical path, but not being on it.
You know, right up front, we were talking about the changes being wrought by the shift to remote work. You've been looking at collaboration for years. What are you noticing that people are doing best when they make this type of hybrid environments work?
It's very interesting. In the most recent Harvard Business Review, you know the Harvard Business Review, you're published in it all the time. There is a cover story here about the great, you know, work from anywhere future. And, what the researchers say is they're finding that done, done, done right from a work design standpoint, collaboration is working better. And I'm surprised. Okay, so when I wrote, “DEALSTORMING”, a book on sales collaboration, I remember one of my advice points is if everybody can't be in the room, reschedule the meeting. And, what we're finding out now is that that's not very nuanced. That's just not really the truth. And here's a couple of reasons why. Number one, you don't have to round everybody up at the same time to successfully collaborate. Unless they're all extroverts, and then they love it. So that's the first thing we're learning. Asynchronous collaboration is what I'm seeing happen a lot more in 2020. And you know what, it's so much more inclusive, it harnesses so much more power of many great minds.
But, the second thing I’m really seeing is that when we're all on zoom, like we are in collaborating. When we do collaborate in real-time, we're all on a level playing field more or less. Think about the hybrid workforces that we had in the past, and the ones I'm scared about that are coming in the future, who are four people that are in a conference room, and six people who are on zoom. Who has the upper hand in that situation? So, the one thing I am seeing from work from home, in a remote-first environment, is a more level playing field. The other end last little thing is I think we're learning to become more intentional about collaboration.
So, we approach collaboration now for the purpose of problem solving, as opposed to approaching collaboration as something we just do together as a team and conversation. And I think intentionality is the word of 2020. Because what the researchers around creativity say is that when you tell people we're going to collaborate to solve a problem, you trigger incubation between the invitation stage and the actual iteration stage, and it produces a lot more output. So, I think, done right, asynchronous collaboration on a level playing field can actually produce more innovation than what we've seen up till 2020. And that surprises me.
And I totally agree with you, when you've got half the room in physically there and the other half on screens, you get a weird power imbalance. But that hybrid environment is going to be exactly what we're going to have in the next couple of years. What protocols can you put in place to make that more of a level playing field?
So, there's two types of hybrid coming. Well, let's talk about the different work designs, okay? There's going to be remote first. That's what we have at Upwork. So, our first inclination is that you're going to work from anywhere and we will have some office spaces in the Silicon Valley for intentional collaboration where it's absolutely qualified. Then there's remote last, that's what most companies had up until 2020. That means we expect you to come to the office, but we'll make exceptions for certain people given certain unique situations. Now, there's this thing called hybrid, but hybrid breakdown breaks down into two disciplines; design in, opt-out.
So, some of the firms are saying we're going to design a certain type of week. You're here half the time you're not here half the time. Or we're going to design something where we say people that are in more collaborative disciplines need to be in the office together. Sometimes the sales organization says we're going to design it where the junior people that need to be next to each other for motivation have to come into the office, the more experienced people can work from anywhere. That's called design-in. That looks like the more popular one I'm seeing right now. But, there's no math to support it. So, it's all guesswork. I just smirk when I see somebody say, oh, we're going to do this hybrid model half in and half out, and I just say why? Tell me why it's half and half, why it's not 1/3, two thirds. Why it's not 2080. Because there needs to be math behind that, because it's going to present a recruiting challenge for top talent.
Because, top talent is going to gravitate to organizations that fit their work life design preference and what the research says is the highest functioning people in the workforce, hate commuting and they hate business travel. The lowest functioning people in the workforce love being in the office and don't mind commuting. There's real research for this. So, I worry a little bit about design-in. Opt-out simply says are there people that don't want to come into the office for healthy security reasons? That's a smaller piece of it, but I'm hearing that also. I think it's going to be very hard to figure out I really do. I think they'll get there, but what I worry is they've got to have protocols in place so that if there is a hybrid workforce, we don't make second class citizens out of those that continue to work from anywhere.
So, there's a book coming out in January, our common friend, David Burkus, is publishing. It's called “Leading from Anywhere”. And that is his number one takeaway from the research. If everyone is not going to be in the conference room, then no one should be in the conference room. Everyone should go to their desk and get on a common platform like zoom so we can have a level playing field. I think that's one work design solution, moving forward for the hybrid workforce that collaborate and work together as a team.
Tim, it's great to have you on the show. Thank you very much.
Transcribed by https://otter.ai