Managing Performance, Rewards and Loyalty for Contract-Based Service Providers

QUICK BACKSTORY, ANYONE?

The world has always worked through contractors. Civilizations like Mesopotamia, Egypt, Greece, Israel, Persia and Rome all created enforceable agreements to support their market economies. The earliest examples of contract workers can be traced to the ancient Mesopotamian and Egyptian civilizations around 2250-550 B.C. Contracts during this time - which spanned functions like sales, purchases, rentals and labor - represented a significant step in the development of social and economic systems. The Code of Hammurabi (c. 1755–1750 BC) in Mesopotamia, to take an example, featured clauses regarding wages for ferrymen and shipbuilders.

In the medieval era, the practice of temporary labor kept evolving steadily through guilds, craftsmen and agricultural societies.

Cut forward to the 19^th century, and we see contract labor systems evolving in the wake of the abolition of slavery and the rise of cheap labor to meet the needs of expanding industries. Contracts during this period provided a legal framework for employers to secure workers without directly owning them. 

FAST FORWARD: THE ‘CONTRACTOR ECONOMY’ HAS COME A LONG WAY SINCE.

Project based, transient labor arrangements – typical of the gig economy but also applicable to independent contractors, consultants and other part time providers - have been gaining in popularity in recent times. A mammoth chunk of tasks like software and app development, R&D, market research, hiring and recruiting, payroll, healthcare services, accounting, project management, legal, customer support, virtual assistants and various creative services are increasingly being performed by ‘outsiders’. A Forbes report suggests that 42% of both large and mid-size organizations meet seasonal demands or project specific goals with the help of contingent workers.

Some of them are household names. Nike, for instance, doesn’t manufacture its own shoes – famously relying on a network of independent contractors instead. Apple outsources a sizeable portion of its iPhone production to contract manufacturers, such as the Taiwan based Foxconn. Google boasts a large contingent of contractors and temps that helps the search giant manage a wide load of projects and tasks from software development to data management to customer support. 

Gartner estimates that gig and contingent workers make up nearly a quarter of the global workforce. By 2025, 35-40% of the workforce is slated to be engaged on contract, contingent or gig basis. 

WHAT EXACTLY IS CONTRACT BASED WORK? A WORKING DEFINITION.

Britannica defines Contract Labor as ‘The labour of workers whose freedom is restricted by the terms of a contractual relation and by laws that make such arrangements permissible and enforceable.”

Contract workers, also known as independent contractors or contingent workers, are folks who rent out their expertise and skills on a project-by-project or short-term basis. They can be self-employed professionals, freelancers and side hustlers who work for multiple clients, handle their own taxworks and provide services defined by legal agreements.  

Independent contractors embody the true spirit of entrepreneurs and may run their own business or LLC. There are three major kinds: Independent contractors approach companies directly, agency contractors are employed via an agency and subcontractors plug into the larger supply chain ecosystem at appropriate points.   

Unlike regular employees, independent contractors and freelancers are not covered by benefits and protection. Unlike long term employment, contract work tends to be transient and time bound. It isn’t necessarily a ‘one and done’ thing though, as workers may cyclically engage, dis-engage and re-engage with the employer.

The operative difference between contract based and contingent workers on one hand, and employees on the other, is largely one of control and independence. Businesses have direct control over their salaried employees, but not their contractor workforce – the latter being technically ‘self employed’.   

ADVANTAGES OF A CONTRACTOR BASED WORKFORCE FOR BUSINESSES.

There are several reasons why companies are extending their interest beyond traditional employees and looking at transient workers - contractors, freelancers and gig professionals – as a key competitive edge, and get stuff done. Handled right, the fluid, on-demand characteristic of the association can yield a suite of unique and valuable benefits, like:

· The ability to build a balanced workforce mix that factors-in business unpredictabilities and diversity of market needs.

· The power to scale the workforce at short notice, thanks to a plug-and-play and pay-as-you-use model, by sidestepping the financials and fixed overheads associated with hiring employees.

· Bridging expertise and skills gaps within current teams, including specialized knowledge.

· The ability to ramp up capabilities, pitch to new clients and expand market share – a corollary of the previous appoint.

· Boosting innovation with a fresh perspective and agile approach.

· Improving internal systems and processes with latest, on-ground insights which external workers are constantly exposed to.  

· Bridge flaws and gaps in strategic workforce planning – flexibly, decisively and frictionlessly.  

ELEPHANT IN THE ROOM

IS LOYALTY POSSIBLE IN A TIME BOUND ASSOCIATION?

External players like independent contractors, consultants and gig workers typically rally with organizations as temporary partners over finite time durations. Sometimes the engagement may be episodic, as they engage, de-engage and can re-engage. The question is, does the on-and-off nature of the relationship lend itself to true attachment? Loyalty, after all, isn’t the easiest of attitudes to generate even in full time employees. What chance, then, does a cyclic model have?

To arrive at the answer, we have to rethink our perception of loyalty in the context of a complex and evolving reality. By definition, loyalty for temporary contractors isn’t a timeline related concept.

Not everyone will be invested in a relationship in the same way, of course. Organizations and contractors each have different, and strong, reasons for signing a contract. The trick is to locate the not-always-evident common ground that influenced the union in the first place, and water it caringly till it flowers. Staying respectful of the other’s priorities and celebrating positive synergies can ensure that each party extracts the best out of the relationship, without leaving value on the table. Shared enthusiasm, goal alignment and leadership support can make the wheels turn. Sometimes spectacularly, as Nike, Apple and Google have shown. 

FORCES SHAPING THE RISE OF LOYALTY FOR CONTRACTORS AND TEMP WORKERS.

Loyalty and retention programs have traditionally focussed on full time employees. And while a stable, fixed-cost workforce may not be a thing of the past yet, deterrents like expense, under optimization and lack of agility are chipping away at the system’s once hallowed heels. As talent strategies shift gears, gaining and retaining allegiance from contract based and gig based workers is fast rising up the priority charts across boardrooms.

A McKinsey study declared that over a third of the workforce in the USA identifies as independent workers, while 92% of companies expect a spike in their contractor and freelance based labor force. A 260% hike in freelance hiring in North America is a sign for organizations to look beyond full timers.

New technologies and practices like hybrid work are opening up unprecedented opportunities of cost savings, flexibility, speed (no pre-training required for contractors) and access to a quality talent pool. A blended approach - with room for both contingent and permanent workers - offers organizations their best shot at capitalizing on the oncoming opportunities of the future.

BENEFITS OF A CONTRACTOR LOYALTY PROGRAM FOR MODERN DAY BUSINESSES.  

Designing a long term loyalty roadmap for contractors, consultants and part time workers can have a host of ramifications down the line -  across multiple aspects of business. Let’s check out the standout advantages.

1. A carefully filtered panel of loyal contractors and freelancers helps organizations build a resilient ‘manpower immunity system’. It functions as a backup supply chain of high quality and reliable talent during peak demand periods, seasonal fluctuations and special requirements.

2.  Viewed through a talent pipeline lens, a loyal contractor and temp worker bench also lifts the overall quality of the organization’s forecasting, strategy and planning.

3. A contractor loyalty program can be astutely intertwined with the organization’s retirement policy. This allows full time employees an easy transition to a contract-based engagement mode post-retirement, and makes sure that the business continues to reap the benefits of its most experienced assets.  

4. A well run contractor loyalty program allows strategic redistribution of critical organizational knowledge, addressing inefficiencies across.

5. According to the Manpower Group, 74% of employers are struggling to find the skilled talent they need. “When I talk with CEOs about what keeps them up at night, it’s talent,” says SHRM President and Chief Executive Officer Johnny C. Taylor, Jr., SHRM-SCP. A great contractor loyalty program offers business a viable shot at closing the talent gap and wining the talent war.

Contingent workers are ‘free range talent’ not beholden to working for only one organization. They will typically move on after the contract expires. In an era of talent crunch though, it is not uncommon for businesses to work with the same contractor or freelancer on an ongoing basis if there is a favorable fit. It is this elusive tribe that a contractor loyalty program can help businesses identify and activate.   

HOW TO DESIGN A CONTRACTOR LOYALTY PROGRAM FOR YOUR ORGANIZATION?   

Businesses today without an intentional approach to supplementing their full time talent with contract and project workers are behind even before the race has begun, and may struggle to compete in a tight labor market. A contractor loyalty program lets them level up.

For a contractor loy­al­ty pro­gram to deliver at a high performance threshold, it must deliver tangible val­ue for both sides, be easy to measure and manage, and integrate incentives and rewards at strategic points. If there’s a strong common sense of purpose and direction, the quality of the association is significantly raised.  

There is no one-size-fits-all formula for contractor loyalty programs, and every project is unique. The overarching purpose is to provide appropriate motivation to tick quality targets within reasonable costs and timelines.

Here are some pointers that can help your organization create a customized contractor loyalty program that keeps delivering on loop.   

OUTLINE BROAD OBJECTIVES.

First things first. Be clear about the overarching vision that informs your contractor loyalty program, and the milestones you want to cross with it. It could be anything from addressing organizational priorities, acting upon market feedback or improving sync between your existing contractor loyalty program and the business journey. Begin with a clearly defined top level goal.

Focus on wish lists next. Do you want your contractors and gig workers to become more efficient and productive? Do you want to expand your contractor base by enrolling new members? Do you want to solve for grievance, lack of engagement and high attrition? Spelling out the precise needles you want to move will help you design better KPIs and optimize for success. 

FIGURE OUT WHAT SUCCESS LOOKS LIKE.

Manifesting the milestones of your contractor loyalty program on paper increases clarity, creates an action-oriented approach and increases chances of success. Outlining success KPIs will give you a baseline for pre and post comparisons of your contractor loyalty program, a fundamental requirement for judging effectiveness and informing future strategic decisions. Some important success KPI’s for a contractor loyalty program are:

·   Contractor participation rate.

·   Contractor acquisition cost.

·   Contractor engagement.

·   ROI of contractor coaching & training.

·   Net Promoter Score.

·   Contractor retention / churn rate.

·   Referral rate.

·   Contractor lifetime value. 

ASSESS NEED.  

A study shows that 70% of contingent workers are contractors by choice, not because they cannot find full time employment. What’s driving that choice? Finding out is the first step towards designing a great contractor loyalty program.

Research, outreach, interviews, digital listening tools and analysis techniques can help you get a sense of the fundamental needs of your contractor and gig force. Add new layers of motivation to keep building around that core.

A study by Lindsey D. Cameron on HBR serves up the argument that despite its uncertainties and instabilities, there are at least two strong  impulses motivating people to take up contract based projects or gig type work. 

The first is the ability to make micro choices about when, where, and how they work, which brings a sense of agency, control and fulfilment. 

The second is gamified experiences – particularly relevant in the case of gig marketplaces and online aggregator platforms – which adds focus and adrenalin to the exercise.  

Independent contractors, consultants, freelancers and gig professionals can be a motley and heterogenous group that - depending on industry, skills and roles - sports a wide diversity of leanings, affiliations and considerations. 

Some common motivators for this group are:

·   Autonomy.

·   Earning potential.

·   Flexibility.

·   Opportunity for growth and advancement.

·   Versatile exposure to interesting projects

·   A launchpad towards become full-time employees.

·   Various others.

These impulses carry a very different flavor compared to those driving fixed-pay employees, must be addressed accordingly.   

KEEP FLEXIBLITY FRONT AND CENTRE.

The freedom to schedule their work universe their way, is a particularly powerful driver for contractors, temporary workers and freelancers. It is one of the main reasons many of them haven’t thrown their hat into the employee pool. Research confirms that contract based gig workers place a greater premium on flexibility as compared to full time employees. It lets them tailor their work-life equilibrium to suit their specific circumstance, acquire new skills, maintain relationships and ensure well-being in what can otherwise be a stressful mode of livelihood. Providing leeway and elasticity in your contractor loyalty program - by way of working hours, mode of work (at a stretch, shifts, with breaks, etc), nature of project, volume of workload or format and frequency of pay - will resonate strongly with this tribe.

ENSURE EVALUATION ACCURACY.

Pay equity – a prime expectation of contractors and freelancers – is intricately linked to work evaluation, making the latter key to the success of a contractor loyalty program.

Measuring the worth of work, any work, precisely and unbiasedly is easier said than done though. This is particularly true when it requires specialized expertise in a specific domain. Sometimes, an organization will simply not possess the kind of knowledge or skills required to judge the calibre of output generated by an external provider or partner (one reason why the latter has been inducted in the first case). Farming out to the lowest bidder is only recommended when there are systems in place for neutral and accurate evaluation. Indiscriminate cost cutting may lead to quality and compliance issues. Hourly pay brings its own set of challenges.

To ensure fair and effective compensation, a contractor loyalty program must have expert and unbiased frameworks for assessing and evaluating value delivered by external partners - both through a quality and a quantity lens.

Sketch an accurate picture of goals, involve the experience of domain experts to establish qualitative benchmarks, plug in strategic coaching, integrate feedback regularly and set clear performance expectations upfront.

Some KPI’s that can help calculate the worth of a contractor’s output are:

·   Productivity.

·   Quality.

·   Revenue / profit.

·   Speed.

·   Cost savings.

·   Satisfaction scores.

·   Other parameters that make sense to the business journey.

There are several digital platforms out there that enable collaborative frameworks to help calibrate both input and output in real time. When blended with the judgment of experts, they can enable a holistic evaluation of value generated. Gaps can be addressed, grievance can be minimized and compensation can be made both competitive and commensurate. 

CREATE AN EMPOWERED ENVIRONMENT.

Did you just invite your contractors and freelancers to bloom bougainvilleas in a waterless desert? Gig economy workers who operate by the hour need to maximize performance and show output to comply with the terms and expectations in their contract. They will have little patience for an inhospitable environment that cramps their style and chokes their efficiency - and are most likely to quit what they will interpret as an unfair playground with unreasonable targets. Effective contractor loyalty programs act as multipliers and compounders, not bottlenecks and speedbreakers. They enhance the effectiveness of contract based workers with strategic tools, support and guidance. 

Specifically, they…

·   Plan a warm and friendly orientation and onboarding session where independent contractors, freelancers and consultants can acquaint themselves with the company vision and culture, meet internal employees whom they’ll be engaging with going forward, and get a sense of the overall organizational code and climate.   

·   Equip contractors and external workers with mission critical tools, resources and training. This helps contract based giggers hit the ground running, handle intricate tasks with confidence, get better everyday and ultimately deliver excellence. Some interventions that work well in this regard are:

• Tutorials
• Workshops
• Simulation training
• Structured knowledge sharing
• Collaboration groups and platforms
• Peer mentoring
• Guidance from experienced practitioners

·   Comprehensively educate contractors,  consultants and gig armies about the product, service and industry. They better they know you, the better they can serve you.  

·   As you decide on engagement models and success metrices, involve them in the decision making process. The inclusive and participative gesture will induce trust, but that’s not all. By blending top-down and bottom-up approaches, it will also turn the fabric of your contractor loyalty program more textured, realistic and holistic.

·   It is critical to create an environment that provides contract based workers psychologically safety and emotional stimulation to approach work with joy and bring out their ‘A-game’. As a happy bonus, an upbeat environment will help build positive reputation for the organization amongst contractor communities, enhancing a solid pipeline of future giggers and contractors.  

·   Try and create a contractor journey map (not very different in spirit to the customer journey map) that traces the interaction curve - and all the touch points in it - between the organization and its contractor fleet. A contractor journey map serves as a handy visual reference to track engagement progress, spot shortcomings and realize    opportunities in real time. 

DON’T DELAY PAYOUTS.

Freelancers and contractors want to be paid quick. Real time payments, convenient payment formats and local currency options aren’t nice-to-have perks anymore, they're the baseline – particularly in regions like US, UK and Singapore.

Quick payouts with minimized paperwork and bureaucratic formalities can help build trust, attract more contract based providers and keep your independent contractor base loyal and thriving. It is particularly effective during the initial confidence building phase of the relationship.

There are several payment gateways, platforms and technologies today that allow on-time and hassle-free payments to contractors and freelancers. Some of them are direct deposits  (ACH transfers), wire transfers, money orders, bank transfers, freelancer platforms, credit cards, money orders, Apple Pay, Google Pay, Stripe, PayPal, Xoom and even cryptocurrency. Find out the payment mode and frequency that works for your external channels, and integrate it in your contractor loyal program. 

DIFFERENTIATE WITH CULTURE.

What does your contractor loyalty program offer that others don’t? With pay and other considerations roughly identical acrosss similar sectoral pools, the answer often lies in culture. 

While quality, compliance and cost will always be the predominant flavors in an association involving external value providers, it is possible to differentiate and elevate the equation by adding slices and slivers from the organizatoin’s emotional ecosystem. 

Ask what makes it unique, and create meaningful moments around them. 

For example, if your organization cherishes inclusivity, you can offer benefits that celebrate equity, contribution and worker rights. If your organizational DNA is fuelled by innovation, you may offer benefits that encourage curiosity, learning and collaboration. If environmental responsibility is what’s close to your company’s heart, you can offer benefits that support conservation, rein in pollution and combat climate change. 

If a certain aspect of your employee reward and recognition program has been working particularly well, it may be a good idea to try and adapt it to your contractor loyalty program and gig worker contracts as well. These gestures will not only help shrink the natural gap (of isolation and detachment) many ‘external’ workers feel, but also evoke a sense of belonging and loyalty. 

PRIORITIZE CX : CONTRACTOR EXPERIENCE.

A Gallup poll shows that engaged workers display an 18% lift in productivity and generate a 23% boost in profitability for a business. Supportive, individualized and delightful moments play a big role in the success of contractor loyalty programs.

Here are some steps you can consider to create an addictive experience for contractors:

·   Make the terms, conditions, eligibility criteria, processes, scope of work, timelines, earning potential and engagement mechanisms simple to understand. This keeps misinterpretation and discontent at bay.

·   Overly complicated or cumbersome steps can quickly disenchant members, so make the program easy to participate in.  

·   Use everyday language, visuals, stories, anecdotal examples, guides and case-studies to create clarity in communication, and increase ease of comprehension.

·   Simplify administrative workflows.

·   Reduce layers of formality and follow up.

·   Streamline and automate rituals and lower-order works.

·   Deploy a single point of contact to provide instant, empathetic and multi-channel support.  

·   Keep your radar on for signals and cues: Monitor emails, trace chatbot conversations, dip into contractor groups on social media, whatsapp and intranets, and ask contractor facing executives and managers about issues your contractors and consultants may be facing. Don’t stop there: Ensure prompt follow-up to iron out chinks and crevices.  

·   Take the effort to gain a beyond-the-obvious understanding of member pain points and  aspirations and personalize their journey arc accordingly.  

·   Parse and crunch poll, interview and pulse survey data with latest tools and tech like AI to cut through the noise and decode true intent.

·   Nest a VoC (Voice of Contractor) sub-program within your larger contractor loyalty program.

The Harvard Business Review cautions against what it calls the ‘second class citizen complex’ which some contractors and temporary workers may possess - sometimes without their realizing it. Wield your contractor loyalty program as an instrument to bridge the gap and give them the ‘insider treatment’. Suggest informal meets, invite them for lunches, and make them a part of your company events and occasions to foster a sense of belonging. Offer above-and-beyond solidarity and be there for them during struggle periods. Go omnichannel with a mobile first approach to make sure they can reach you whenever they need.  

INTEGRATE GAMIFICATION.

Use game like elements like points, challenges, second chances, tie-breakers, leaderboards, badges and trophies to embed fun within workflows and build a highly engaging environment that lifts morale, retention rates, and overall performance. Here’s how gamification facilitates self-leadership for gig workers and contractors.

TAKE NOTE OF COMPLIANCE.

Contractor loyalty programs often need to tread intricate and sensitive legal and regulatory terrains. The labyrinth of statuettes may vary widely by organization, region and industry, adding to the complexity. Compliance with data protection laws, consumer rights and promotional regulations are some of the stipulations that organizations hiring independent contractors must continuously address - in order to stay within the bounds of the law and enjoy the faith of its external provider channels.

MAKE ACCOUNTING A STAKEHOLDER.

Rewards accruing to contractors and consultants as part of a contractor loyalty program are a financial liability on the company’s books. They must be continuously scrutinized and optimized in order to ensure financial compliance and health, and also for the purpose of informing company forecasting and planning. Specialized accounting practices such as actuarial assessments can help assess the impact of factors like nature, magnitude and frequency of reward redemptions on an organization’s accounting books. 

GO AGILE, STAY DYNAMIC.

With their many variables and multiple moving parts, contractor loyalty programs are far from static exercises. To maintain relevance, resonance and resilience, your contractor loyalty program must continuously gather and integrate feedback, adjust for performance analysis, adapt to latest practices and take cues from competitor tactics to identify areas of  improvement. 

CHOOSE A GREAT TECH PLATFORM.

Technology is the backbone of modern day loyalty programs. Modern software and systems can streamline operations, identify leaks and bottlenecks, enhance teamwork, facilitate communication, generate insight-rich reports and automate entire loops to bake-in new efficiencies into the system. 

BRING ON THE REWARDS.

The core of a contractor loyalty program is its rewards. An appealing contractor rewards plan – featuring tailored incentives and benefits – is a central element of an employer’s value proposition to independent contributors, channel contributors and gig professionals. Rewards make contractors feel supported and valued. They also address the unique challenges of the modern day ‘project economy’ such as lack of visibility and recognition, a transactional and non-personal association vibe, and the potential insecurities that come with it.

With the growth of the gig economy and the rise of remote working, traditional rewards systems are evolving too. Designing contractor rewards is an exercise in innovation, sensitivity and judgment. It must be cleverly balanced to be lucrative and meaningful for the receiver, while at the same time being cost-effective for the business and also staying aligned with the culture and journey.

Conventional concepts of employee rewards don’t fly with contractors, consultants and freelancers. The latter, after all, have unique priorities and practices. While most contractors have a set of common motivators – such as flexibility, support and quick pay – organizations cannot afford to get complacent and stop there, especially in a time of talent crunch. Smart employers are forever finding ways to get creative with their contractor incentives and contractor rewards strategy. A proactive approach is crucial to stay on top of trends, a step ahead of rivals and ensure a great crop of ‘turn-on-or-off-at-will’ contract based talent.

THUMB RULES FOR STRUCTURING REWARDS IN A CONTRACTOR LOYALTY PROGRAM. 

Practical and useful possessions? Relationships and feelings? Notions and symbols of prestige? Interviews, questionnaires and sentiment analyses can help you understand the kind of rewards your contractors might value the most.

Do they want cash and materialistic indulgences? Are they more keen on immersive moments and signature experiences? Is recognition and esteem - like trophies, citations and badges awarded in public – what they secretly crave? Will feedback, mentoring and aggressive growth pathways do the trick? Is it about the sweet spot between autonomy and stability? 

When you know what your contractor partners are after, it is that much easier to strike a chord with them, and make them feel genuinely appreciated, respected and rewarded.

Here's how to integrate rewards in your contractor loyalty program – the right way.

·   Align rewards with purpose, for the organization as well as the contractors. Incentives chosen should drive behaviour that ticks boxes that matter to both sides.   

·   Lay down clear rules for recognition and rewards eligibility. It could be compliance with quality yardsticks, innovative approach to work, completing projects within deadlines or budgets, ability to gel with company culture and systems, reviews and ratings from customers, or any other.

·   Ensure that eligibility criteria are fair and consistent for all contractors, consultants and freelancers of the organization.

·   Stay flexible so that you can easily make modifications and adjustments to the rules in case of unforeseen disruptions in scope, budget, or timeline.

·   Map incentives and rewards to contractor persona to amplify their significance and resonance.

·   Make sure success milestones are measurable, realistic and not dependent on factors that are beyond the control of your contractor and consultant teams – be it legal, weather, political or other contingencies.

·   Balance rewards with penalty to create an even terrain. Rewards can be bonus, early payments and recognition, while penalties can be late payments, liquidated damages or termination.

·   Ensure rewards are commensurate with ability, contribution and achievement.

·   High performing contractors are often worth more than what reflects on their invoice, so create provisions to reward them more. Recognize them publicly at company events. Provide marketing and promo support by mentioning them on your website and digital assets. Be generous with testimonials, referrals and learning opportunities. Throw in an extra layer of  autonomy and flexibility. Surprise them with random gestures and gifts. And you’ll have built a loyal asset for life.  

·   The best rewards are neither cash nor things. They are empathy, respect and relationships. Once in a while, tell your loyal contractors that you ‘get’ what they’re trying to achieve, are aware of the challenges they battle everyday, and that you truly cherish what they bring to the table. Few things will bind them closer.  

·   The magic of a reward drops sharply if it arrives late and cold. Send them out ASAP : Recognition delayed, after all, is recognition denied.

·   Don’t wait for big milestones to happen. Recognize your contractors and gig workers via meaningful little gestures and actions, every day.

·   Not just top down : Make sure recognition travels bottom up as well. Few pats on the back are as satisfying as one which comes from a peer.

·   Actively seek the opinions of your contractors, consultants and freelancers while designing rewards and compensation related agreements and protocols. Contractors work with other organizations also, and most will be happy to share on-ground knowledge of best practises, provisions and opportunities that could be beneficial to both them and the organization - financially, compliance wise and in other ways.

·   The act of rewarding contract and project based professionals should not be an isolated exercise: Combine it with your organization’s larger R&R framework to make it feel like a natural extension of the company’s values and culture.

·   Keep evaluating and upgrading your contractor incentives and contractor rewards via analysis and feedback to keep things fresh and relevant.

REWARD YOUR CONTRACTORS RIGHT WITH XOXODAY.

Bake loyalty deep into the fabric of your external relationships with innovative and thoughtful reward choices from XOXODAY. Xoxoday’s AI driven, enterprise grade and scalable platform can help design a multi-component and purpose-built Total Rewards Package that’s mapped to the unique needs of your most valuable contractors and gig workers, featuring:

·   Direct benefits.

·   Indirect benefits.

·   Intangibles like exotic experiences, learning and growth, charity opportunities, hobby pursuits and much more. 

·   Perks like discounts, healthcare plans, streaming subscriptions, special event passes and much more.

·   Swag like merchandize, trophies and much more.   

·   Got something else on your mind? Chance are, it’s on XOXODAY! 

TIME TO GO LIVE!

It’s time to bring your contractor loyalty program to life. Here’s the last minute checklist.  

·   Filter contractor profiles basis their credentials, portfolio, past work, reviews and testimonials to arrive at a bunch who you feel are suitable to start with.

·   You can further sub-divide the list into most eligible, least eligible and a mid-class, to map output with capability more granularly.

·   Next, figure out how you want to structure the mode of engagement: By hour, by project, by outcome or by any other parameter.

·   Decide the contractor incentive model that best allows you to rally enthusiastic participation from all members and generate a sense of progress and achievement. There are various models to pick from: Points, tiers, bonus, commissions, allowances, profit sharing and so on.  

·   Design consistent touchpoint experiences that reinforce the brand vibe at every step.

·   Recheck whether essentials are in place: KPIs, monitoring mechanisms, alerts and nudge algorithms, reporting systems, feedback channels, and so on.

Finally, make sure your contractor loyalty program is agile, scalable and dynamic enough to accommodate changes on-the-go. 

CAVEATS AND CONSIDERATIONS.

Take note of these oft-ignored points to increase probabilities of success.

Contractor loyalty programs are complex initiatives that deliver strategic value well beyond immediate gains. To realize their true potential, businesses need a comprehensive approach. We shed light on some angles and considerations that tend to stay in the shadows.  

GET THE FUNDAMENTALS RIGHT.    

Independent contractors, freelancers, consultants and other short term workers in the US don’t fall under W-2 category (here’s the difference between W-2 and 1099), meaning they don’t enjoy employee-like benefits and perks. To compensate, the better ones may mark up their charges to justify their talent and expertise. Contractor loyalty program leaders must weigh arguments on both sides to answer the big question: Can the extra expense of an hourly engagement with a specialist contractor be justified vis-à-vis the fixed costs of an equivalent employee whose skills are critical only for certain periods of the month? Any gaps in logic may stick in the craw of the organization going forward.

DEMOCRATIZE OPPORTUNITY FOR EXTERNAL CONTRIBUTORS.

While Pareto’s principle suggests that 20% of your contractors will deliver 80% of your best work, an intuitive contract loyalty program doesn’t commit the error of ignoring the lower echelons or the ‘Mid-Performing 60s’. Rather, it opens up the field for more players to participate. Not just rockstars, but laggards too, are given the opportunity to showcase their capabilities and do their best work. Needless to say, both the organization and the contractor wins.

LEAD WITH CLARITY.

Remember that both parties - organization and contractor – risk loss by committing too much  time and resources to the other, particularly against an uneven return. For a contractor loyalty program to deliver, therefore, expectations should be realistic and laid out right at the outset. The company should clarify the amount of effort that is normally required for the task (so that the contractor can prepare accordingly), the compensation budgeted for the role, and whether opportunities for long term association exists. Contractors, on their part, should reciprocate by being honest about their capabilities, bandwidth and confidence in achieving future targets. 

KEEP IT FAIR FOR EMPLOYEES, TOO!

As it goes all out to woo external talent, is your contractor loyalty program guilty of step-fatherly attitude towards your internal assets? It is important to parallely safeguard the interests of loyal employees who will ultimately carry the culture of the business.

Find out: Is your contractor gaming the clock at the expense of an employee who will, as a consequence, earn less despite putting in honest time? Are your external workers ‘sandbagging’ to fake productivity and gives employees a bad rap? Are giggers unscrupulously justifying longer hours?

Here is a commonly overlooked fault-line in most contractor reward programs. It is also a surefire recipe for creating bad blood that may well cause your best employees to eventually quit. As your contractor loyalty program endeavors to make your temporary workers happy, do ensure transparency, balance and satisfaction for employees too.

DON’T FORGET TO REWARD ‘CHANGE AGENTS’.

As with all transformation, domain experts, passionate practitioners and early adopters are acting as influencers and change agents as the economy pivots to accommodate more and more external workers. These change agents – be it your CTO or HR head - understand both systemic issues and the potential spoils of a successful transition, and can decisively sway the success needle. This is particularly true if the organization is new to the contractor and outsourcing model. Identify, incentivize and nurture the change agents in your organization.

IS IT WORKING AT A HIGH LEVEL?

Is your contractor loyalty program optimized for the long run? Is it creating a high value future network of talent assets? Most contractor loyalty programs will deliver on immediate mandates, but stop short of ticking high level boxes.

An EY article suggests that analyzing the impact of a contractor loyalty program must go beyond numbers and try to win in areas like mindset  and attitude.

To generate incremental value over the long term therefore, your contractor loyalty program must, additionally, look to:

·   Inspire and set the standard for the industry.

·   Convert contractor communities and temporary workers into passionate brand advocates and evangelists.

·   Be regarded as an appreciative and ethical client who truly cares and looks after its external manpower assets.

·   Consistently attract top external performers to build a robust competitive edge over rivals.

There are calculations to get this right, such as cross sectional and longitudinal analyses, pre and post comparisons, difference-in-difference analyses, as well as A / B tests of control groups. 

CONSIDER LOSS AVERSION BIAS WHILE DESIGNING INCENTIVES.

It is a common misconception that incentives are always positive in nature. Economists have studied contractor incentives through two broad prisms: Bonus contracts and Penalty contracts. While common perception indicated that bonuses would be more popular, penalty contracts ended up generating better results in several cases. This is because loss aversion bias drove contractors to avoid loss than to earn more.

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Xoxoday solves for complex contractor incentive, contractor rewards and contractor loyalty programs with innovative engagement models, enterprise grade reliability and anytime scalability to empower and motivate contract based professionals and temporary contributors. Strategic nudges, real time coaching and regular milestone celebrations ensure a close-knit environment that’s delightfully personalized, aligned with organizational values and relentlessly drives outcomes.