How Freelancers Are Redefining ‘Talent’ for HR People

A “war for talent” is raging, particularly in the tech world. High-quality candidates in the tech field are increasingly hard to find. According to a survey by Indeed, 86% of organisations said they find it difficult to find and hire technical talent. And 83% said that the talent shortage has “hurt their businesses through lost revenue, slower product development and increased employee tension and burnout”.

But the talent shortage is just one part of the problem. The challenge for these recruiters is also that their organisations are less appealing to the best and brightest, a larger number of whom prefer to become entrepreneurs, freelancers or work for startups. The harder it is to appeal to them, the more they need them to become attractive.

Furthermore, most organisations need different talent today. They all want to “transform”, become “agile” and “digital”. So recruiters have to recruit for jobs that don’t yet exist. They have to recruit people who can think outside the box, be truly original, resilient, and self-reliant. And these people do not necessarily match the old definition of “best and brightest”. Where do you find such people? What are the signals to look out for?

Well, it turns out that a lot of these outside-the-box brains can be found among freelancers today. They want to learn new things, work on different projects, adapt fast, cultivate a growth mindset, be resilient and self-reliant. More and more of today’s best most talented reject the ‘bullshit’ 9-to-5 jobs of modern bureaucracies. They also value their personal growth more than the comfort of a regular paycheck.

So companies and recruiters are learning that they have no other choice but to work with the best freelancers. It doesn’t come easy because it questions the way they do things, their organisation, culture, management and values…

The war for talent is not going away any time soon

Most companies complain about how difficult it is to recruit the talent they need. But haven’t they always complained about it? After all isn’t this particular challenge a natural part of the recruiting game? Or is today’s challenge of a different nature altogether? Well, some HR specialists argue that it is increasingly difficult to hire good people. In spite of residual unemployment, they say, the war for talent is very real for most companies.

A few years ago, an excellent report conducted by the Boston Consulting Group examined in-depth the workforce supply-and-demands dynamics in 25 countries through 2030. The report highlighted the upcoming labour shortages (and surpluses) bound to affect future growth. Major shortfalls will affect most of these 25 countries. Most notably Germany will suffer a shortage of up to 10 million workers by 2030. The BCG calculated that Germany’s labour supply will shrink from roughly 43 million people today to 37 million in 2030. The exact size of the shortage will naturally depend on growth and productivity but whatever the scenario, there will be a massive shortage. Many more countries will suffer similar (or less severe) shortages.

In our digital economy, recruiting is already a daunting challenge. The shortage of engineering talent is felt by most companies in most countries. But this shortage does not only concern engineers. It also concerns all the professions that have already been transformed by digital, like marketing, communication, recruiting, etc. Furthermore, it is increasingly difficult to predict exactly what kind of people will be needed in five or ten years. Some of tomorrow’s jobs do not yet exist. What’s the point of recruiting plans if you can’t plan much more than a year ahead?

SMEs, corporations and services companies must compete for the same talent in a pool that just isn’t large enough. Recruiting requires an increasing amount of energy and creativity. Recruiters try and reach candidates even before they graduate. Sometimes they start reaching out in high school to encourage more young people, in particular girls, to choose engineering careers. Most countries simply do not train enough engineers.

However, the shortage of engineers is only one problem. A lot of corporations face another problem: they are just not attractive to young graduates anymore, who increasingly want to trade the 9-to-5 jobs offered by traditional firms for freelancing, entrepreneurship or startups. Many of the young engineers who could have been hired by computer services firms choose to sell their own services directly to companies. They are willing to trade the security of a salaried contract for the freedom to choose the missions they will take on.

As revealed by a survey carried out by Malt last year, 97% of all freelance developers say they chose to be self-employed. As they are in high demand, they’ve gotten used to imposing their conditions. They are used to demanding autonomy and flexibility. They were among the first to freely work remotely, use (and develop) the best collaborative tools for asynchronous collective work (Slack and Github). In many ways, they have been showing the way to all the other creative class workers.

Why it has never been more important to work with the best

Paradoxically enough, there are high inequalities among people who hold the jobs in highest demand—data scientists, software engineers, and the like—even among freelancers. Some have succeeded in developing a strong reputation and are much sought after. They can raise their prices. Others have not managed to build a reputation and sometimes struggle to make ends meet in a market that should have been favourable to them.

The thing is, even among freelancers, there are more and more winner-take-all markets. On the one hand some services become commodities because of platforms that offer cheap offshore services. On the other hand some stars reap the benefits of their network and reputation and can charge very expensive fees. As explained by Erik Brynjolfsson and Andrew McAfee in The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (2014), technology has “supercharged” the ability of some workers to leverage their talents via digitization, so relative performance can determine success. Writing a slightly faster code might be enough to dominate a market, whereas the 10th fastest code will be completely forgotten. “The biggest winners are the stars and the superstars”. Clients focus a lot more on relative performance: a small difference in skills (or luck) can produce disproportionate differences in revenues.

Network effects, which are ever more common in our digital economy, tend to amplify the winner-take-all phenomenon. On all “superstar” markets, a small number of individualshog almost all the market. “The difference between number one and number two has never been bigger”, Brynjolfsson and McAfee believe. For workers, in particular freelancers, network and reputation have never mattered more than they do today.

“Hearing a succession of mediocre singers does not add up to a single outstanding performance. Talent is not a commodity you can buy in bulk and combine to reach the needed levels. There’s a premium to being the best. (…) Even if the talent advantage of the best is small compared to the next rung down on the talent ladder, the superstars still win the bulk of the market. (…) An increasing of individuals are now competing with the rock stars of their sectors.” (Cal Newport, Deep Work, 2016)

Likewise, for companies, developing the best service or product is a matter of survival. In our increasingly digital economy, network effects are more powerful. The quality of the user experience you offer will determine your ability to build a strong relationship with your users and collect their data. Companies that fail to do that at serious risk of losing ground. The product or service they sell will become mere commodities. They will be at the mercy of the digital giants, like hotel chains are now at the mercy of Booking, Expedia or Airbnb. If you don’t want to be commoditized, you need the best talent.

Who are the best and where are they?

Prestige and quality were long associated to the institution or the company that hired you. This race started at school. How selective a university us remains a powerful signal for recruiters. “For the seventh consecutive year, a record low percentage of applicants received offers of admission to Harvard College. A total of 5.8 percent of 35,023 applicants were admitted to the Class of 2017”. Likewise Stanford also likes to advertise its selectivity, to better compete with Harvard. It is as if the quality of the university depended primarily on how selective it is, more than on the quality of its education programme.

This race would typically continue on with the firms (organisations) that would recruit the graduates. Those that would recruit from the most selective universities and those that would have the most selective recruitment process would offer maximum prestige. These institutions would offer subsequent recruiters a strong signal about the “quality” of the candidate. For a long time this was the primary model of prestige management consulting firms (Boston Consulting Group, McKinsey & Company, Bain & Company).

Even some companies with a more recent history have adopted the same model. Google has long prided itself on being more selective than any other company, as explained by Laszlo Bock, Google’s former Head of People, in his book  Work Rules: Insights From Inside Google That Will Change the Way You Live and Lead. Bock shows that selectivity is a strong component of Google’s employer brand. In a way, Google offers its recruits a prestige rent. “Google gets around 3 million applications a year now, and hires 7,000. That means only one in 428 applicants end up with a job, making it far more selective than institutions like Harvard, Yale, and Stanford.”

Sadly for these institutions (universities and companies), that model is no longer sustainable. If many applications have to be sorted out only to be rejected, there’s a chance the institution won’t devote enough resources to each of them. Hence it must suffer costly bottleneck effects, which ultimately destroy value as the process gets slower and more bureaucratic.

With a higher selection rate, the process also gets more complex and involves many stakeholders: at each step, margins of error and conservative biases increase the risk of missing up on the greatest candidates and hiring only those who look like great candidates under specific constraints.

Because they have to be always hiring and remain obsessed with the admissions rate, recruiters end up serving their own goal (being selective) instead of serving those of the institution (hiring as many great candidates as the business needs): because of this malthusian bias, the recruiting machine and the recruiting needs are no longer aligned.

Also, there’s a high probability that an institution that rejects people en masse will ultimately inspire bad feelings to an increasing number of high potential individuals: once these people gain success and influence elsewhere, the fact they once were rejected by the institution can create an image problem.

Naturally selectivity as a signal for prestige won’t disappear overnight. But it will decline rapidly. Many prestige institutions find it much harder to recruit like before: They aren’t as attractive to younger generations. Most of all, there are new alternative models to signal quality and prestige: the size of your network, your online reputation, your ability to influence others, the recommendations from your former employees, your professional accomplishments that you can make visible online (via a blog, for example).

Last but not least, in a world where innovation has become a cardinal virtue, agility and resilience are ever more critical. Your ability to connect individuals (to be inclusive) matters more than your ability to exclude people to generate prestige (to be exclusive). As Reid Hoffman (LinkedIn founder) and Ben Casnocha write in The Startup of You, “you remake yourself as you grow and as the world changes. Your identity doesn’t get found. It emerges.”

Increasingly, the most talented individuals are learning to grow their resilience. More of them now prefer to be self-employed rather than to join an exclusive organisation. The trend is already very visible in the tech and digital world: with the development of open source software, and platforms like Github, developers grow their reputation among their peers. They don’t need an employer to build a reputation.

Today other talented workers outside the tech world also want to become freelancers and grow more resilient. If they want to continue to work with the best people, companies will have to change the way they view talent and HR. To reinvent themselves, they will need the help of those who have reinvented themselves in their professional lives.

This article first appeared on malt.com, the platform that matches freelancers with companies.