Contingent Workforce and the New Matrix Economy

In the twenty-first century, organisations face challenges of speed and technology in the
changing world. Technology also deskills some workers, displaces others (Hodson & Sullivan,
2008) and creates globalisation (McMorrow, 1999; Nesbit, 2005) and increases competition
in the world economy (Benner, 2002). In this new economy, more technology organisations
move toward a projectised organisation structure, outsource their work and are dependent
on external firms and workforce to complete tasks (Benner, 2002). Barley & Kunda (2006)
name this kind of new economy as matrix economy. The “image of a matrixed economy draws
inspiration from the ‘matrix’ form of organising that has diffused across most high-technology
industries. In a matrix structure, technical professionals are typically assigned to functional
areas and technical employees are assigned to one or more separately managed projects that
cut across functions for limited periods of time”(p. 58). In the matrixed economy, “firms play
the role of projects, and occupational communities or communities-of-practice [CoP] play the
role of functions” (p. 59). Functional managers use to recruit, train, evaluate and develop
professionals; develop codify and maintain the organisation’s body of expertise. In the matrix
economy, “the occupational needs of the itinerant professional learning and maintaining
professional expertise, finding clients, and ensuring long-term economic security are handled
by outside firms through a combination of individual initiative, professional associations,
occupational networks, and for-profit ventures”(p. 59).

The new employment relationship

The new economy is driven by organisational restructuring, downsizing and outsourcing

(Webster, 2005). It is characterised by flexible employment (Benner, 2002; Söderlund, 2011),
innovation and marginal employment (Hodson & Sullivan, 2008), dual employment strategy
– core and non-standard employment (Benner, 2002; Nesbit, 2005), and outsourcing
(McMorrow, 1999). These organisational strategies have one common element, which is
contingent employment. This is supported by what Peel & Inkson (2004) conclude that “the
growth in contingent employment arrangements has been one of the most significant human
resource trends in recent times (Belous, 1989; Marler et al., 2002)” (p. 542).

The Hatton (2011) study uses the phrase "contingent work”, coined by Freedman in the mid-
1980s, generally refers to any employment relationship that departs from the standard of full-
time, full year, fixed schedule, single employer work” (p. 11), but the history of temporary
work started much earlier “since the late 1940s when the first modern temp agencies were
founded” (p. 12). Contingent employment is defined a category of workforce that includes
those who do not have explicit or implicit contracts to stay with an organisation for an
indefinite period of time (Redpath et al., 2007). The contingent workforce may consist of
independent contractors, temporary workers, part-time workers, leased workers, self-
employed individuals, home-based workers, individuals brought in through employment
agencies, on-call or day labour, and workers on site whose services are provided by contract
firms (Barley & Kunda, 2004; Matusik & Hill, 1998). Recent trends show that new
organisations may adopt many forms of employment at the same time. According to Lepak et
al. (2003), an organisation may simultaneously have four types of employment:
(i) Knowledge-based employment (an internal employment arrangement; employees possess
specialised skills that are critical) (p. 682)
(ii) Job-based employment (employees are acquired from the labour market; skills are not
specific; they meet clear performance objectives for a well-defined range of tasks) (p. 683)
(iii) Contract work (external individuals are contracted to perform tasks with limited scope,
purpose and/or duration) (p. 683) and
(iv) Alliances/partnerships (independent/autonomous external parties that have established
ongoing partnership; applying specialised knowledge to perform tasks in some customised
capacity) (p. 683).

For the variety of contingent employment arrangements described above, they are in a
‘triangular’ (worker-agency-client) employment relationship (Benner, 2002; Gallagher, 2002;
Gonos, 1994) – a new employment relationship, not the traditional employer-employee one.
Three parties are involved – the itinerant expert worker, the intermediary agency, and the
employer client. Benner (2002) sees the rising of contingent employment has led to the new
feature of the labour market – “the existence of a wide range of organisations that act as
intermediaries between employers and workers” (p. 84). With the expansion of contingent
employment, there are a wide variety of other organisations acting as intermediaries in the
labour market other than agencies. Head-hunters, recruiters, contractor brokers, internet-
based intermediaries, unions, community organisations, and a wide range of public sector
and education based intermediary programmes are all examples of intermediaries. Agency or
temporary agency is the most visible and well-known type of labour market intermediary. In
reality, the number of agencies employing contingent workers for clients expanded
tremendously in the last decade; "the biggest employer in the US is no longer General Motors
but Manpower, a temporary agency employing some 600,000 people. There are 6,000
temporary companies in the US double the number of a decade ago” (Low, 2002, p. 131).

A literature survey on the survival on the new forms of economy has pointed to new directions
of organising in the new economy. The contingent employment trend has been described as
growing or widespread by various scholars and practitioners (Baker, 2012; Barley & Kunda,
2004, 2006; Belous, 1989; Benner, 2002; Gonos, 1994; Hatton, 2011; Low, 2002). Scholars
researching in this knowledge area (Barley & Kunda, 2004; Low, 2002; Webster, 2005) also
see that there is a significant level of contingent employment in computing but cannot collect
statistical data on this aspect of work in all countries.

Advantages of contingent employment

1. Organisations’ advantages
Organisations that create different forms of contingent employment may have various
rationales behind this approach. The ultimate goal is to survive in the dynamic and
competitive economy. From an organisation or employer perspective, contingent
employment brings in numerous benefits. Cost is the mostly mentioned incentive by scholars
and practitioners (Allan & Sienko, 1998; Barley & Kunda, 2004; Gregory, 2001; MacDougall &
Hurst, 2005; Matusik & Hill, 1998; Redpath et al., 2007). Employing contingent workers drives
down labour costs (Gregory, 2001; Matusik & Hill, 1998), cuts benefit and training
expenditures (Allan & Sienko, 1998; Barley & Kunda, 2004), reduces the price of laid off
employees (Barley & Kunda, 2004d; Matusik & Hill, 1998) and infrastructural costs of
employment (Barley & Kunda, 2004). Flexibility is another major incentive to organisations.
Hiring contingent workers is temporary, and this gives organisations the flexibility in
managing fluctuation of demand (Gallagher, 2002; Matusik & Hill, 1998), reducing or
expanding workforce (Matusik &Hill, 1998), avoid tackling the rigid hiring and filing rules of
permanent employees and minimising the impact on downsizing (Allan & Sienko, 1998). This
is benefit of numerical flexibility. The other benefit is functional flexibility. Organisations can
acquire the right mix of human capital according to their needs (Barley & Kunda, 2004d;
Gallagher, 2002). Lower cost and higher flexibility help organisations to respond quickly to
changing market conditions and better return on investment (Matusik & Hill, 1998; Redpath
et al., 2007). The third benefit of contingent employment is having the flow of knowledge
(Allan & Sienko, 1998; Barley & Kunda, 2004; Gregory, 2001; MacDougall & Hurst, 2005;
Matusik & Hill, 1998). With contingent workers joining and leaving organisations, they
disseminate what they know to the competitors and bring valuable knowledge and skills into
the firm (such as technical expertise that is difficult to develop in-house in a short period of
time) (Barley & Kunda, 2004). Furthermore, Matusik & Hill (1998) classify knowledge into
public and private knowledge. ‘Public knowledge’ consists of knowledge not unique to any
one organisation but resides in the external environment. It includes industry and
occupational best practices. ‘Private knowledge’ is unique to the firm and a source of
competitive advantage. Contingent employment helps organisations to focus the company
on core competences (Gregory, 2001).

With contingent workers, the company’s knowledge-based employees (internal ones

possessing critical skills) (Lepak et al., 2003) can utilise firm-specific private knowledge to win
the keen market competition. Simultaneously, contingent workers bring in public knowledge
that creates a stimulus to internal employees. They cross fertilise and build new private
knowledge (MacDougall & Hurst, 2005). In addition, it can provide the access to network of
contingent knowledge workers and obtain the relational benefits and develop the knowledge
bank that integrates the public and private knowledge (MacDougall & Hurst, 2005). The fourth
benefit is acquiring skills for hiring organisations. Contingent workers are hired because they
possess expertise that the employers require. Some valuable performance-enhancing or
specialised knowledge and skills are thus imported (Gregory, 2001; MacDougall & Hurst,
2005; Matusik & Hill, 1998). They may be just-in-time expertise possess skills that permanent
staff lacks to play the roles as teacher (‘hired gun’) and gurus; they may just helping hands
‘warm bodies’ to get the work done for the numerical flexibility (Barley & Kunda, 2004;
Gallagher, 2002). The fifth benefit is resolving the constraint in budgets and headcount (Barley
& Kunda, 2004; Cassidy & Cassidy, 2010).

Headcount is one of the key measurements in most organisations. Organisations set

headcount ceiling to manage performance as full-time employees are counted as fixed cost.
However, contractors or contingent workers are hired as a variable cost. Moreover, a project
manager usually has little formal authority over permanent employees especially in a
balanced matrix organisation structure (PMI, 2008a Figure 2-9), but contingent workers
normally work solely for the project manager. This is an incentive for organisations to hire
contingent workers on projects (Barley & Kunda, 2004). The sixth benefit is screening (Allan
& Sienko, 1998; Barley & Kunda, 2004; Gregory, 2001). Certain employers utilise contingent
employment as part of their hiring strategy to get a chance to preview a worker's ability and
work habits before committing to hiring them in a regular position (Allan & Sienko, 1998;
Gregory, 2001). It is treated similarly to probation and eliminates disputes before hiring a
permanent employee (Barley & Kunda, 2004d). The seventh benefit of contingent
employment is filling unfilled positions and undesired work (Barley & Kunda, 2004d). Some
“permanent staff prefer not to do certain work such as working on legacy systems maintaining
software and hardware or developing reports for clients” (p. 48). The other situation is the
skills required are not available in house. Contingent employment is a resolution to have the
right skills to complete the undesirable work or fill unfilled positions.

2. Contingent worker’s advantages

The employer is not the only beneficiary of contingent employment, but also the contingent
workers benefit. They experience career and personal development by accumulating diverse
competencies through a variety of work and assignments and working in different
organisations, industries and projects (Barley & Kunda, 2004). Contingent work can also be
rewarding and enjoyable (Peel & Inkson, 2004). In addition, contingent employment provides
flexibility and autonomy to individuals. Contingent workers have boundary-less careers and
freedom of choice. They have higher autonomy and flexibility, higher mobility, and better
control over their own activity. They can adjust work commitment to fit their personal
circumstances. They also have the advantages over permanent employees in terms of
avoiding company politics and having less commitment to the organisation (Allan & Sienko,
1998; Barley & Kunda, 2004e; Peel & Inkson, 2004; Redpath et al., 2007). The opportunity of
having higher wages that are due to their specialised skills (Barley & Kunda, 2004e; Redpath
et al., 2007) is also attractive to contingent workers. Moreover, it is the opportunities for
contingent workers to experience working in large multinational company environments or
desired organisations (Barley & Kunda, 2004e) and add knowledge and value to their
curriculum vitae (CV) (Chaturvedi, 2010).

Disadvantages of contingent employment

1. Organisations’ disadvantages
Contingent employment, of course, has its drawbacks that organisations need to recognise.
Organisations obtain public knowledge from contingent workers. In the same token, there is
chance of leaking private knowledge to the public domain or competitors. Private knowledge
leakage may lead to imitation by competitors and may involve losing its differential or cost
advantage (Matusik & Hill, 1998). Secondly, cost is major incentive in hiring contingent
workers. However, organisations may pay a highly hourly rate or more money to contingent
workers because they do not pay for their benefits (Matusik & Hill, 1998); they also pay a
premium to acquire the right expertise (Redpath et al., 2007). Thirdly, the attitude and work
quality of contingent workers may be a hidden cost of contingent employment. Contingent
workers may be less devoted to the company and to productivity. There is also a potential
production and management efficiency issue (Focus, 2006; Gregory, 2001; Labovitz, 2005;
Matusik & Hill, 1998). Performance of contingent workers may decline as their termination
day approaches. Loss of skills, knowledge and experience (T. Hall et al., 2008); loss in
continuity and quality; and difficulty in implementing process improvement are common
issues. Last but not least, the management of contingent workers is problematic. The on-and-
off nature of contingent workforce makes the hiring and retention work difficult. Hiring
managers may not be human resource personnel and do not have the knowledge about hiring
contingent workers and managing their responsibilities (Focus, 2006). How to blend the
contingent workers with the core workers to avoid avert mistrust, poor working relationships,
or conflict is a specific management issue caused by the contingent employment (Allan &
Sienko, 1998; Labovitz, 2005). Organisations may need to handle the negative effects on
regular employees (Labovitz, 2005).

2. Contingent workers’ disadvantages

From an employee perspective, there are numerous disadvantages as a contingent worker.
The first concern is the lack of career development. Organisations do not look after the
careers of contingent workers (Peel & Inkson, 2004), give opportunities to them to get the
experience or pay for training necessary to progress to the next level of proficiency.
Moreover, they are normally contracted to work on the same job. There are fewer
opportunities to develop management skills compared to permanent employees. Career
plateau is a common phenomenon (Peel & Inkson, 2004; Redpath et al., 2007).

Contingent employment is a fit-for-now, not a good long-term career fit. Contingent work is
not a preferred working condition to many contingent workers (Redpath et al., 2007). The
second disadvantage is the absence of training and development provided by organisations.
Contingent workers are hired for their specialised skills and knowledge. Employers do not
have training or development funding nor any longer-view investment in these workers. This
leads to the absence of formal training opportunities. On the other side, contingent workers
are required to maintain and enhance their skills to secure the employment (Peel & Inkson,
2004; Redpath et al., 2007). This brings the third disadvantage: job insecurity and instability.
Contingent work by nature links to risk of unemployment, job insecurity and employment
uncertainty (Allan & Sienko, 1998; Gregory, 2001; Peel & Inkson, 2004; Redpath et al., 2007;
Webster, 2005). Contingent workers have little control over the length of their contracts
(Redpath et al., 2007). They always have to deliver high performance to ensure future
employability and fear of job insecurity (Redpath et al., 2007). They may keep changing jobs
and workplaces (Peel & Inkson, 2004). Contingent workers may find this costly and tiring. They
may be unable to balance work and family or personal lives because they must move to follow
job opportunities. Some are frustrated without any paid vacations and have little time off
(Redpath et al., 2007). Contingent employment also makes it difficult for these workers to
control their financial planning such as obtaining long-term financial commitments or
securing access to credit (Gregory, 2001; Redpath et al., 2007). Life is less predictable, with
lower stability, and more changes (Peel & Inkson, 2004). The fourth disadvantage is the lack
of sense of inclusion. Contingent workers may feel their status is a secondary one of being
not as important as regular employees (Gregory, 2001). They often are excluded from
organisational events, and they are not considered part of the employer family (Allan &
Sienko, 1998; Peel & Inkson, 2004).

Lastly, contingent workers may believe they have a lower pay level, less benefits and less
desirable working conditions compared to permanent employees (Gregory, 2001; Hipple &
Stewart, 1996). Contingent workers’ pay level may or may not be lower than regular
permanent workers. It depends on factors such as educational attainment, occupation,
employment tenure or work schedules (Bidwell & Briscoe, 2009; Hipple & Stewart, 1996).
However, they perceive to have lower pay level may be because they receive much lower
benefits. Scholars commonly agree that contingent workers receive fewer benefits such as
health benefits, retirement, vacation or training and development (Bidwell & Briscoe, 2009;
Hipple & Stewart, 1996; Jaarsveld, 2004) compared to regular permanent workers. It is an
area that has driven the establishment of alliances of contingent workers to bargain for better
working conditions and benefits (Jaarsveld, 2004).