The screenwriters’ strike that began last May, and the actors’ strike that followed in July, highlighted an employment model that has given Hollywood a highly flexible workforce for decades: The vast majority of people on a set are not studio employees but independent contractors or employees of other firms. Take, for example, the people who worked on this year’s Oscar winner for best picture, Everything Everywhere All at Once. In addition to the 42 actors; the 49 artists, set dressers, and painters; and the hundreds more who provided art, music, transportation, writing and editing, costumes, casting, sound, and stunts, the rest of the crew came from six production companies, three special-effects firms, and 28 other organizations.
This model has begun to extend far beyond Hollywood. Our research shows, for example, that in early 2020, on average, employees made up only 62% of the teams responsible for transformation initiatives at 404 global technology, financial services, health care, and life sciences companies with at least $1 billion in revenue. The rest came from staffing or consulting firms or were independent contractors. By the fall of 2022, with nearly three years of the pandemic having put companies into transformation overdrive, those numbers were 55% employees and 45% non-employees.
Judging from a study of 1,005 companies we did in the spring of 2023, we predict that the average number of employees on corporate transformation teams will fall below 50% by 2030, for four reasons:
- By using outsiders, companies can acquire key skills on demand and escape hefty severance costs down the road.
- They can tap the pool of freelance talent that grows with every mass layoff and forced retirement.
- Many of these hires can work from home, which creates a global talent market.
- And companies can avoid employee burnout — a big issue today.
The Pandemic and Project Overload
Over the past three years, the Covid-19 pandemic has propelled mission-critical corporate transformations, such as reorienting supply chains suffering from acute component shortages, installing new financial systems to track revenue and expenses faster and more accurately, and restructuring business processes for data cleanliness. The resulting pressure on full-time employees — and sometimes the absence of key knowledge internally — forced companies to hire outsiders with valuable and hard-to-find skills. “E-commerce, digital data security, data privacy—those are all new for us,” the comptroller for the Asia-Pacific region of a U.S.-based luxury goods company told our researchers. “Local statutory requirements are getting more complex, as well as countries’ political issues. No one organization will know it all.” And large global companies that are running dozens of initiatives at once may have too few internal project leaders to go around.
Successfully staffing and running transformation initiatives with the right mix of insiders and outsiders requires what we call a “dynamic workforce model.” Unlike a static model, which assigns only employees to a critical project team or outsources the work altogether, the dynamic version puts insiders and outsiders on an equal footing. Our study found that the best executors of these initiatives, which were 15% of the 404 companies surveyed, were far more likely to use a dynamic workforce model than the worst executors (24% of the survey base). The best executors’ companies also substantially outperformed the worst executors financially, with an 63% average increase in market capitalization between 2017 and the fall of 2022, compared with an average 24% decline for the worst companies.
But this model also presents steep challenges, including creating a cohesive team culture, building trust among people who don’t know one another, and empowering leaders to keep things on track. Project sponsors and project leaders must address those challenges to succeed.
Creating a One-Culture Team
When a company fields its own team to run a big transformation initiative, or brings in a consulting firm to execute it, everyone on the team is well versed in the organization’s values and beliefs, the behaviors that are permissible, and who are the powerful internal “players.” But if the team includes outsiders, they are like tourists in a strange land. They can’t be expected to understand the full context of the initiative the way insiders do, no matter how well they’ve been briefed. A thorough onboarding — one that informs team members of both the project mechanics and the company culture as well as project steps, roles, deliverables, and tools — will convey the values, beliefs, and behaviors of the company.
The gene therapy firm Asklepios BioPharmaceutical Inc. (AskBio) gets this. Acquired by Bayer in 2020, AskBio has a number of promising therapeutics in development, including for Parkinson’s disease and congestive heart failure. “It’s super important to create a unified team culture,” said Guru Ramamurthy, chief financial offer at the 800-employee firm based in Research Triangle Park, N.C., and CFO of Bayer’s U.S. business. Tapping contractors and consultants has been an important component of rapidly scaling up its infrastructure and capabilities. “Maintaining momentum is critical to execution,” Ramamurthy says, especially since the Bayer buyout. But during a time of rapid growth and change, hiring employees to fill key team roles can be time-intensive and may prove unsuccessful. It can take about three months to discover that a new employee isn’t a good fit, and retraining a replacement can take from six to nine months. Meanwhile, demands and focus may change, altering role requirements. Supplementing with outside experts offers greater operational flexibility and agility.
Since the pandemic began, anywhere from 15% to 30% of AskBio’s project team members have been external, depending on the initiative. “A key area of success is how well we blend our employees with the experts we get from various vendors,” Ramamurthy says. He believes that contractors and consultants, particularly those who work remotely, must be treated as equally valued team members. AskBio provides them with access to information and company tools to enable communication across blended teams.
Once an AskBio initiative has been completed, external team members often ask about company job openings. When Ramamurthy hears this, he knows they didn’t feel like outsiders on their teams. “This is the kind of project experience you want to give every contributor,” he says.
Making the Work Personal, Not Transactional
On a team composed of employees from one company, the members have a chance to know one another personally — their lives outside the job, their passions, their families, their ups and down at work. But outsiders on a team don’t have that experience. And as more people are hired from outside a company, insiders may detach emotionally from the work, especially if they are involved in several critical initiatives. “It’s easy to see people just as numbers or resources,” a chemical company’s chief strategy officer explained.
Remote team members have an even harder time establishing strong personal relationships. A finance executive at a multibillion-dollar medical-products manufacturer told us how difficult it was to manage remote team members — especially when they aren’t employees, but even when they come from other business units. “We find trust, understanding, and engagement are sometimes missing with them,” he said.
Building trust among transformation team members is crucial to success. Consider, for example, a project manager who must promise anonymity to a team member who points out a mistake that needs correcting. “You have to empower people to speak up,” the finance executive said. And strong commitment to the well-being of a hard-to-replace team member may be necessary to pull that person through a bad patch in the life of a transformation initiative. The executive told us that his company’s project leaders are encouraged to make personal visits when relationships with team members appear strained.
An Asia-Pacific regional comptroller watched her Shanghai team members get caught in pandemic lockdowns after 2020. Several times she arranged grocery deliveries to their homes and access to mental and physical health resources. “You can’t expect the usual high performance under those conditions,” she told our researchers. Project leaders must use empathy in such cases to motivate teams. The company’s projects — of which she was juggling 19 — have been long, making it hard to keep team members motivated and focused. Awarding bonuses and other recognition for good work has helped, she said.
Empowering the Project Leader
Among the companies we studied, the best at executing critical transformations had better project leaders than the worst and were more likely to give those leaders the authority to decide what skills were needed on their team and who had them. Some 85% allowed those leaders to replace team members when necessary, whether from inside or outside, whereas only 70% of the worst gave project managers the same authority.
The medical-products company executive told us that empowering project managers increases the chances that they’ll stay with the organization. “Having strong project leaders gives an organization a large competitive advantage,” he said. “There are always projects to be done. If you don’t have a strong project capability, you cannot keep up with your peers.”
At a time when companies must move faster to stay competitive, bringing in outsiders for key roles in transformation initiatives has become a reality. But insiders and outsiders must be managed as one effective, cohesive, motivated, and collegial team. Movie producers and directors know how to do this. Companies in industries that are a long way from Hollywood must follow suit.