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Secrets of Human-Capital Management 【December 2015】

Should you replace employees with free agents?

By David Creelman

 

One of the big lessons from my book Lead the Work: Navigating a world beyond employment is that there are many, many times when it is much better to assign work to people who are not your own employees. Those people are sometimes the employees of other organizations (such as in outsourcers, alliances, or consulting firms) and sometimes are free agents (i.e. independent workers). ‘Non-employees’ often do work better, faster and cheaper than employees.


The core question for leaders is what work should be done by non-employees and what should be done by employees. It's a more disturbing question than you might imagine.


Where free agents rule
Let’s focus specifically on the choice between using free agents and hiring employees. There are three classic situations where free agents are clearly superior to employees:


• When the project is short-term, so you don’t need permanent staff.
• When free agents are much cheaper than employees (often the case when you can shift a task overseas).
• When you need highly specialized skills that are too hard to maintain within your employee base.


When these situations occur, using free agents should be top of mind.


Do employees ever rule?
The tougher question is “Where do you need to have employees?” The mundane answer is that if a task needs to be done every day then it might as well be done by an employee—for example a receptionist. Is that it? Is “receptionist” the archetypical job of an employee?


When you ask HR people about where you need employees they typically don't talk about receptionists, they talk about a core of committed long-term people entrusted with the company’s critical competencies.


That makes sense, but it raises the issue of how many employees are really like that. For example how many of your employees really are long-term? How many intend to be there for the next five years? Now compare that to free agents, how many of them hope to continue to have you as a client for five years? Do employees really have a much different long-term commitment to the organization than free agents? Okay, so maybe being long-term isn’t the main factor that drives the need for employees.


So perhaps the real advantage of employees is their level of commitment. Again the question is how many of your employees are highly committed? Is the average employee more committed than the average free agent? Research by IBM’s Dr. Rena Rasch, “Your best workers may not be your employees”, shows free agents are generally more engaged than employees—more engaged than even high potential employees. The need for a high level of commitment is not necessarily a valid reason to hire an employee rather than contract with a free agent.


If being long-term and committed is not necessarily a feature of employees rather than free agents than what is it that makes the employer-employee relationship special? Is it about protecting secrets? Well how many secrets do you already share with trusted outsiders like your exec comp consultants? How safe are secrets with an employee who may leave any day?


I warned you that assessing the advantages of employees over free agents was a disturbing question. It is true that we need some employees, but the case in favour of employees is harder to make than you might have imagined.


Drawing Conclusions
It's not that employees are never the right solution. It's just that our usual ideas of why we need employees rather than free agents don't stand up to scrutiny. There are very few places where you couldn't potentially replace an employee with one or more free agents. That doesn't always mean that it's the optimal solution, but at least it's a possible solution.


Given that free agents can be better qualified, better motivated, and better value than employees the question becomes whether you are considering that model as an option for each and every block of work. Are you making an informed decision as to the best source of talent or are you just doing what has always been done?


If HR ignores this issue then there will come a day when the CFO steps in and says they need to take charge. HR needs to be the expert on this issue and they need to start by learning about this new world beyond employment. If these issues intrigue you, LinkIn to me and we can discuss.


 

David Creelman is CEO of Creelman Research. He does research and consulting on analytics, the future of work and other cutting edge HR topics. Feel free to LinkIn to keep in touch. Mr. Creelman can be reached at

dcreelman@creelmanresearch.com

 

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