Why some CEOs aren’t buying the freelance economy hype

The story is everywhere! By 2020, almost 40 percent US workforce will be self-employed or freelance workers. In fact, recent reports suggest that 35 percent of the workforce is already self-employed or doing a remote job.

The freelance economy took on a life of its own with the rise of on-demand companies like Airbnb, Uber, and Postmates. These services allow people to work when and where they want and earn an income without ever becoming an employee of the company they work for. They are 1099 independent contractors.

Alongside those on-demand services, a litany of platforms like Upwork, Freelancer, and PeoplePerHour have facilitated stable workflow for freelancers. These platforms acted as a bridge to connect freelancers with projects in areas like graphic design, web development, and research.

But despite the hype of this freelance economy, some CEOs are actually returning to traditional employment arrangements.

Having a full-time employee is culturally valuable

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According to Lauren Dixon, Associate Editor at Talent Economy,

Freelancers can help business leaders cut labor costs and remain agile on certain projects. But in many instances, having a full-time employee is more valuable culturally.

And company culture is just the tip of the iceberg. From the branding to equitable labor treatment, more CEOs are reconsidering their use of independent workers.

Helps to be more in tune with customer needs

Scot Wingo, the founder and CEO of Spiffy, says that the decision for his company boiled down to the quality of the product they wanted to deliver. 

We knew that for people to invite us to their homes and offices to take care of their vehicles, that the quality of our service and the reliability of our team members was going to be of paramount importance. So even though many other companies in the on-demand space pay freelancers to deliver their service, we wanted to be more in tune with our customers and their needs.

That sentiment is growing, even in the heart of Silicon Valley where on-demand companies started and massively grew the freelance market. Last year funding for on-demand companies dropped by 50 percent. Even the heavyweights like Uber and Taskrabbit have experienced significant challenges with managing their independent workforces.

Interestingly, it is the heated competition within the on-demand space that is forcing the conversation on this issue. The CEOs and investors alike are taking a hard look at what they can do to achieve a competitive advantage. However, that calculation comes down to the central pillar of the company mission: to deliver a good quality product.

Freelancers are great for certain types of work

Despite the many benefits that do come with using a freelance workforce – namely the flexibility, affordability, and scalability – Some CEOs also believe that it’s good to have a mix of both depending on the type of work you need.

Jeremy L. Knauff, CEO of Spartan Media says,

We hire both freelancers and full-time employees because there’s a specific role for each. Freelancers are great for certain types of work because they give business owners the ability to scale up on demand without long-term costs. On the other hand, they are often far a less effective when working on projects that require deep knowledge about a particular industry or client.

However, a lot of agencies that have experienced the latter mistakenly interpret it to mean that freelancers are unreliable. That simply isn’t the case.

The key is to growth is understanding which types of projects are best left to your full-time employees who already understand the nuances of a particular client, and which projects can be effectively outsourced to freelancers.”

You must have a skin in the game

Bruce Kaufman, the President, and CEO of Human Circuit says that,

As a CEO I don’t feel the Freelance Economy is a benefit to a business that has a solid vision and mission. A company culture and ultimately the success of the company requires commitment. You must have skin in the game. Freelancers are never fully immersed. The next job is always waiting. Furthermore, I want commitment at all levels and for the duration. Full-time employees are not just the foundation; they are the structure and the roof. Freelancers are just the window treatments.

Conclusion

There is no doubt that freelancing economy has changed the work dynamics in ways no one could have predicted. Businesses now have unparalleled access to independent, highly-skilled candidates from around the world.

However, there is and will still be plenty of work for the freelance economy, and not every company will make the exact same calculation. But there is a growing trend to reconsider the employment type, and CEOs should pay attention.