The following is a contributed article from Jesse Levin, CEO of Brightfield. Opinions expressed are author's own.
Just weeks ago, employers found themselves in the tightest labor market in 50 years. Reports show the COVID-19 crisis obliterated 20.5 million jobs in April. But the pandemic's impact on the labor market has been unevenly distributed. Essential businesses like Walmart and CVS are desperately hiring workers to meet overwhelming demand, while a cross-section of organizations, from Walt Disney World to Tesla, announce layoffs and furloughs.
Once the economy recovers, many business leaders will be faced with the challenge of hiring into an incredibly uncertain environment. Many are already looking to the extended workforce made up of contractors or gig workers to fill critical gaps.
The urgency of balancing that risk with opportunity is creating a dynamic that often puts procurement officers and business leads at odds. Uncertainty means businesses might not want to make permanent investments. But in an era where contract workers can cost 30-100% more than a full-time employee, procurement officers are right to ask whether there's a less expensive solution.
CFOs and CIOs, meanwhile, find themselves between a rock and a hard place: frustrated with hiring managers who are focused on speed-to-productivity (and less concerned with cost), and procurement officers who are focused on cost (and maybe having less appreciation of the mix of tech and other skills required for a given role).
Tech employers, for example, must choose between overpaying for workers with the skills they need or hiring less expensive, less qualified workers. The need to move quickly only exacerbates the problem, forcing companies into trade-offs that tip the scales toward overpaying.
Artificial intelligence (AI) can help break the cost-quality compromise. While individual process owners often lack the data to consider all of the variables (the relative value and scarcity of skills, the speed required, the going rate for a similar contract), AI can help provide a more multi-dimensional perspective on the market for skills. That sort of insight can guide employers as they determine how to hire and pay their workforce.
But AI is only as good as the data it relies on. Five years ago, our labor markets analytics company assembled a consortium through which companies could share their rates of pay for contract workers. Having a place to get hard data gave CFOs an alternative to relying on anecdotal data for determining what’s an appropriate amount to pay contract workers.
One financial services firm was spending $120 million on temporary IT staff without a clear idea of market rates or internal strategy. By using AI to evaluate its information technology capacities and determine market rates for different types of temporary workers, the company identified changes that would save a projected $8.5 million annually.
Once unimaginable, AI now enables employers to circumvent the trade-offs that have historically made it difficult to determine the market clearing price for skilled talent — and nearly impossible for them to find workers with the right skills, at the right price, at the exact time they need them. As a result, a growing number of companies now allocate their dollars to fill high-skill or strategically important roles with a better sense of the market rates for those skills.
With more transparency around pricing for contingent workers, the labor market becomes more efficient. Companies know the value of specific skills in the open market, workers get paid what their skills are worth, and talent providers can more easily place workers into jobs.
This sort of real-time data is critical and an environment typified by rapidly changing variables, from company needs to labor market prices. It also helps you build dynamic systems to analyze and share the data with the relevant parties.
With the growth of AI, we have never been more equipped to build and improve those data systems, and therefore provide the inputs that are required for those systems to produce value. In this way, AI is breaking new ground, allowing companies to make intentional talent decisions within the midst of a crisis and tap into the growing ranks of contract workers that have the skills they need at the right time and price.