Companies typically grow their bottom line balance the same way most people do with your household budget – by increasing revenue or cutting costs. Increased revenue for a company often comes through higher sales volume.
On the cost-cutting side of the ledger, more companies today are cutting costs via contracted services or automation.
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The people who unload shipping containers at Wal-Mart Stores Inc. (NYSE:WMTC) warehouses are not Wal-Mart employees. They come from temporary staffing agencies. Another big company, Pfizer Inc. (NYSE:PFEC) uses contractors to perform most of its clinical drug trials.
Many people would be surprised to know that Alphabet Inc. (NASDAQ:GOOGC) has about the same number of outsourced workers or contractors as it does full-time employees. At least this is what knowledgeable sources report. Alphabet doesn’t discuss this sort of thing.
Disclosure Hard To Come By
Most companies, in fact, won’t disclose how many outside workers they employ. Large companies are believed to be outsourcing anywhere from 20% to 50% of their total workforce. Much depends on the type of company and the kinds of jobs that can be outsourced.
While exact numbers are not available, Bank of America Corp. (NYSE:BACF), Verizon Communications Inc. (NYSE:VZC), Procter & Gamble Co. (NYSE:PGC) and FedEx Corp. (NYSE:FDXA) pay thousands of contractors each. In some industries such as oil, gas or pharmaceuticals, outside workers outnumber employees 2 to 1.
Win Some Lose Some
Consulting firm Accenture PLC Stock not found CAN said last year that one of the 2,000 largest companies in the world will have “no full-time employees outside of the C-suite” within 10 years. Accenture, one of the world’s largest providers of outsourced labor, did not say who that company was.
Some companies have tried outsourcing with less than stellar success. Target Corp. (NYSE:TGTB) outsourced 70% of its information-technology jobs in 2015. Currently 70% of those jobs are now done by Target employees. Another company, United Technologies Corp. (NYSE:UTXC) subsidiary, Pratt & Whitney hired workers from United Parcel Service Inc. (NYSE:UPSC) to help sort parts. The move resulted in a 33% decline in engine deliveries by Pratt and a $500 million loss.
Hiring outside workers isn’t the only way for a company to save money. One of the top cost-cutting tools for business today is automation. In fact, it’s been widely reported that automation, not off-shoring, is the real reason American manufacturing jobs have been disappearing.
Workers are beginning to realize that training and education are their only hope when it comes to staying employed in this fast-changing highly technological world. Enter Massive open online courses (MOOCs) from Coursera and Udacity. These training programs even grant “nanodegrees” involving specialized training.
Whether through outsourcing or automation, for companies it’s all about controlling costs. Outsourcing and automation help companies keep full time staff to a minimum. Working for a company is becoming less common place while the so-called gig economy is becoming more normal.
As companies control costs better, workers have less job security and lower pay. Starting out in the mailroom and rising up to the C-Suite is almost impossible these days. Especially now that the mailroom is made up of contracted workers with no connection to the company they work for.