Adding Contractors Into the Mix

While I don’t have specific data to quantity this, I’ve never seen this many firms moving away from traditional staffing models to use a mix of contractors, instead. This is equally true across creative, dev shops, digital, and just the bigger marketing space in general.

Why The Change

Driving this is a combination of factors. From the worker side:

• They want more flexibility than they’re getting when tied down to a job.
• They like the emotional satisfaction of being an entrepreneur…even when their work conditions are nearly identical to a typical employee.
• Changes in the health insurance market have decoupled coverage from traditional employment, as it should. The US is the least first-world country in this regard.

From the employer side:

• Employment and labor laws are wildly different for employees versus contractors, and there are far fewer traps (assuming that you’re properly classifying someone as a contractor in the first place).
• When near- or off-shoring labor, a contractor relationship is so much easier.
• They don’t want to be paying people who aren’t working.

On this last point, you’re essentially arbitraging labor when you hire someone as an employee: “I’ll buy all your labor and then find clients to resell your work to at a profit.” But that entrepreneurial risk is severe, and having people sit around is absolutely the easiest way to watch your profit disappear.

Roles Better Suited to Contracting

If you embrace this, one of the first questions you’ll face is how to apply it to different positions on the team. This is a little counter-intuitive, too, so it’s worth addressing. If we use an NFL sports analogy, you can divide your team into skill players and role players. Skill players touch the ball and role players help with offense or defense.

In our world, the skill players are the developers, creatives, writers, SEM/SEO, UX/UI, etc. They do the work for which they received very specific training, often all the way back in higher ed. I would include accounting and compliance and legal in this category, too.

The role players are in sales and account management (offense) and project management (defense). Their education and the bulk of their training was in something else, but they fell into those roles because they had a real knack for them. The center on an offensive line is shorter, more agile, and smart as heck. A defensive end is taller and faster. These are characteristics that they are born with, first, and then are honed later.

Here's where all this is leading. If you are going to use a mix of employees and contractors:

• Role players are better suited to employee status.
• Skill players are more easily used as contractors.

This is true for several reasons:

• Predictable role players are more critical for strong client relationships because the client interacts with them far more than they would with skill players.
• Clients notice deficiencies with role players long before they notice deficiencies with skill players. Everybody has a valid opinion on whether or not their account is being handled well, but hardly any of your clients have the skills to judge the quality of the work to the same degree that you do.

Restating this last point, clients notice deficiencies in how they are treated long before they notice deficiencies in the quality of the work. In the airline world, Virgin America did more outsourcing (and had one of the highest “revenue per employee” performance measures at the time), but the airline’s chief executive said (in a WSJ article by Lauren Weber) that “we will outsource every job that we can that is not customer-facing.” It was the same principle.

Doing it Well

I am in favor of this movement, but it requires a different way of working to realize all the advantages:

• If a contractor is interfacing directly with a client, the signals a client sees should all point to “employee” in terms of how they talk, their email address, etc. Or you may not want them to interface with clients at all.
• Your onboarding process needs to be far more robust and specific to this scenario.
• Be careful about falling into the trap of just paying them on a regular, fixed basis, as if they are an employee, or you’ll be paying people to sit around, too. Some contractors want the advantages of being their own boss but also don’t want to live with the challenges of filling their docket. That’s their problem and not yours. Don’t shield them from the risk.
• Always be on the lookout for great contractors. Different networking methods are called for. It’s not the same as occasionally adding an employee.
• Where possible, shift the burden of underpricing and over-servicing to the contractor by seeking fixed bids on the work rather than just paying them hourly.
• Treat them exceptionally well. Help boost their careers. Don’t be selfish, but instead introduce them to other people who will give them work.
• If it makes sense, include them in culture building. Help them think of themselves as part of the team, to whatever extent that makes sense.

One last note. It’s common to hear that we’re practicing The Hollywood Model, but that’s not really true. That refers to bringing experts together for one specific project (a movie or TV series) and then disbanding. Our use of specific contractors is more around a function (used for quite a few clients) than a project (a single use). A director might have a favorite DP or a producer might have a favorite line producer, but that contractor is doing the same thing for far more employers. It’s a convenient way to refer to it, but there are differences.

Finally

I think this is great. It allows individuals to shape their own futures, and it represents a more “free market” approach without the nonsense of “economic capture.” It allows an individual to specialize, control their future, and hold employers accountable. If you approach this with an open mind, it can help your firm thrive, too.