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When is it better to hire permanent staff than contingent?

The global workforce is changing. Up to a third of workers in Western Europe are not employed on a full- or part-time basis, but instead are contractors, freelancers, temps, agency workers, outside vendors working on projects, or other types of contingent workers. And contingent or non-employee workers are expected to rise to 45 percent.

This massive shift from traditional permanent employment to greater use of contingent labor presents significant management challenges to organizations. Management and supply of contingent workforce talent and services has also undergone huge changes and is expected to undergo more significant changes in the next few years.

Even though the global workforce is moving towards a contingent/consultant/freelance/project-based conception of the employee-employer relationship, the fact is that permanent employees (or “direct hire” as it’s now fashionable to say) will always be crucial in building and sustaining Supply Chain business success. One way to think about it is that permanent hires and contingent roles are complementary. They are two weapons in a company’s arsenal, with different and unique strengths and times for deployment. Each type of hire is certainly good for different situations and one or the other opportunity will attract a different kind of talent to consider.

Permanent employment (direct hire) is as old as time. When is PERMANENT better to hire than CONTINGENT:

Long-term people development

Contingent workers in Supply Chain, Procurement and Strategic Sourcing for example can provide ‘boots-on-the-ground’ expertise with minimal training. Usually with high-level laser focused expertise, they bring the subject matter expertise to a team for a shorter time. And they might bring existing relationships with vendors or suppliers (which are ideal for smaller start-ups).

Permanent employees provide continuity to an organization’s culture and goals

Contingent hires can come in and get buy-in for rapid change by acting as an outside consultant with none of those political ties, especially useful for functions in Strategic Sourcing, Contracts & Vendor Management and such (as we’ve written about here). However, Permanent employees provide long-term continuity to an organization. A Permanent employee becomes a real part of the team and the organization’s identity.

Permanent leaders are ideal for coach/mentorship relationships

High-skilled contingent workers operate at arm’s length from the company that hires them and are mostly employed through a third party. While many Contingent workers are often seasoned and able to give the benefit of guidance to other employees, that isn’t what they are there for. It’s vital for any organization to bring in fresh talent from the outside into a portion of those more senior roles in a Direct Hire capacity so as to not only bring fresh ideas to the team but to also offer the long-term mentorship and talent development that more junior and developing Permanent employees need.

The passive talent pool for the permanent hire is always bigger

Even though Contingent Staffing is on the move and is growing rapidly because of organizational needs and because more skilled workers are drawn to the contract lifestyle, it’s a basic fact that the talent market for the permanent hire will be larger for the foreseeable future. Supply Chain is one those areas of staffing that is in high demand and where the supply is always going to be lagging behind. Baby Boomers retiring in the next 7 to 13 years and companies demanding more talent. That means that companies and their recruiters need to think of the best way to meet these talent requirements.

Combination of contingent and permanent staffing

What we foresee is that the most strategically-oriented organizations will learn to use a combination of Contingent and Permanent staffing going forward in this space. This will allow organizations to remain agile, but still have the continuity required for long-term success while staying globally competitive making their products and getting them to market.

As a final point, it’s worth mentioning that there’s a third model of staffing, which is “Contract to Direct Hire.” We’re seeing a number of organizations elect to bring on contractors with the express purpose of moving them into a Permanent role at some future point.

So when it comes to Contingent and Direct Hire, it’s often not an or/or situation. They can be both flexible and powerful when used together.