The most recent listing of the largest companies in the world reveals a notable trend: A full quarter (or 5 of the top 20) of these firms specialize in providing “workforce solutions”—a buzzword that refers to the contracted provision of human resources and labor to external firms. That is, companies such as Randstand Holdings, Compass Group, and Accenture provide leases, by which the people they employ go perform work for some other company.

The business clients of these outsourcing companies appreciate the service provision, because it means they no longer need to be responsible for the needs of in-house employees. That means no more training costs, no need to determine benefit packages, and no awkward conversations involved in firing someone. Furthermore, the sourcing companies offer guarantees of employees’ skills, so the clients can move the challenging task of recruiting and qualifying personnel to another entity.

The types of workforces available through the sourcing firms are vast too. For example, Accenture provides back office or consulting support for 95 of the Fortune 100 firms. It provides workers who know how to collect mortgage debts to facilitate loan services; it offers medical professionals who can make house calls on behalf of insurance companies; and its contracted workers review massive quantities of data for Google. The Compass Group, which started out maintaining cafeterias for companies, now staffs its clients’ mailrooms, reception desks, warehouses, and catering services.

The continued growth of these outsourcing firms suggests that such trends will continue, such that companies will assign more and more tasks to external providers. The annual value of these contracts already has surpassed $37 billion. The expansion of cloud-based and big technology projects, for which employees’ physical locations simply do not matter, suggest that this value will continue to climb.

But beyond these impacts on companies and the economy overall, these shifts also have significant effects for workers, and not all of them are positive. The project-based nature of their work assignments leaves some employees feeling more like “chess pieces,” rather than valued members of an organization. In addition, the demands for efficiency and high qualifications may put wage pressures on workers, such that they wind up doing more but earning less. Finally, on a broader societal level, the specialization involved may limit interpersonal interactions. In a company that hires nearly all of its employees, the custodial and mailroom staff work for the same firm as the top managers. But if all janitorial duties are outsourced, this type of “occupational sorting” creates new barriers that may lead to an increased sense of inequality. Company management has no particular incentive to keep outsourced workers happy, because it can just replace them with the next contract.

Outsourcing thus is transforming the way client companies perform their tasks, the way the economy is structured, and the ways workers get paid. Considering the vast reach of the phenomenon, understanding what these effects will mean seems like a critical goal.

Discussion Questions:

1. Why are companies outsourcing more jobs?
2. What are the implications of the outsourcing trend for client companies, providers, and workers?

Source: Lauren Weber, “Some of the World’s Largest Employers No Longer Sell Things, They Rent Workers,” The Wall Street Journal, December 28, 2017