What kind of business will be successful coming out of this recession?

And, how do we build it?

That is the big question for every entrepreneur who is either starting up now – or already on the journey.

So, what will happen… and what do we do about it?

The end of Jobs

Firstly, jobs – they aren’t making these any more. The statistics show this to be true – UK self-employment has grown strongly to over 1m in the past couple of years, whilst PCG – the trade association for freelancers – estimates that there are 1.4m freelancers in the UK (excluding casual trades such as construction or hotel workers).

Equally, the US jobs market has demonstrated that despite the economic bounce following the near catastrophic fall in 2008, there has been no over all increase in the number of jobs.

Similarly, anecdotal evidence points to the fact that the US is rapidly becoming a freelance economy too with a sharp rise in the number of people opting for a freelance lifestyle.

Okay, so from this, we can see that the end of jobs is near – the opportunities of the future will not be salaried positions but something different.

Work of the future – a video game

JP Rangaswami, BT’s Chief Scientist, forecast at a recent BVCA event in Manchester that work of the future will be more like a video game. In fact, he predicted that we would be actively ‘gaming’ or perhaps working on a number of video games (sorry, projects) at any one time.

What he is really saying is that all work will become project based. A project will have an end goal – such as reach the top level and defeat the evil genie – and that there will be a series of levels to work through and challenges to overcome at various stages.

The arrival at the final destination is not certain in time – so this is not a 3 month project – but a project to solve certain challenges and deliver a solutions or outcomes – so it could take a week or 6 months.

And, we might play/ work on a number of different games/ projects for a variety of different businesses at the same time.

So what does the entrepreneur do?

Firstly, if you are starting out – don’t fall into the old trap of hiring jobs. Instead, take everyone on on a freelance or contract basis.

Not doing this – because you feel that you can control employees or can protect your IP – is a critical mistake. It is an error which I made and it resulted in me closing a company that had grown to £4m turn over. The sharp changes in our market, rigid employment laws and hidden growth of entitlements end employee rights meant that we closed the company instead of re-investing it in.

It was better to clean and tidy up – and begin again. So, now, my business is entirely virtual and freelance. My strong recommendation is that you don’t repeat this error.

So, what does the entrepreneur do? The entrepreneur must become adapt at setting the objectives of each project and hiring in the right people.

Of course, hiring is an extremely difficult and dangerous (ie we get it badly wrong half the time and fail to get the best/right person 85% of the time).

Therefore, build your resource with freelance talent and outsourced resources. This will ensure that you can switch it on or off according to how the market responds to your product.

For instance, high quality marketing will also include feedback on how your product/ service is received – and that means that you may wish to stop the production line and begin to redevelop or rework the product.

With freelance marketing talent – you can start and stop – to fit your production – but with employees you can not.

Sudden growth / demand in your market might be followed by intense price competition – with freelance resource – you can respond – profitably – to this. With large fixed pay roll, it will cost around £100k to restructure your business each time your market shifts.

Do you want to set up future costs of £100k for restructuring? Obviously, not.

All of this is leading to what companies will look like in the future.

When I say ‘look like’ what I really mean is that as usual many companies will fail and what we will be left with are the successful businesses. These will be highly flexible businesses that have solved how to engage freelance talent and resouce.

The virtual businesses will be the agile businesses able to take advantage of opportunity with low cost of changing direction.

It means, of course, the end of firms as we know it. Instead, we will join project teams, be given certain objectives and set on our way.

The smart entrepreneur is preparing for this. Why? Well, watch what the big companies are doing – they are slowly laying off staff – first the IT department, then HR gets outsourced. Next up will be the marketing department.

The shift is already taking place, wise entrepreneurs recognise this shift and are positioning themselves to take advantage.

What are you doing with your business?

==================================
Do you want an efficient way to recruit the freelance talent to lead your business – without it costing you a fortune?
http://www.enterprisefreelancefair.co.uk/
==================================

Instead of just being a way to save costs, freelancers are discovering that they bring original ideas and solutions to their clients. But does it work? Can freelancers help avoid failure and stimulate innovation?

To find out, we are conducting a survey with an analysis of the results and some thoughts on how businesses, agencies and departments might go about resolving those challenges and find new ways to innovate and grow. Please complete our survey and in return we will email you the full results once analysed.

Can you do this?

Okay, we know the answer lies with outsourcing – but how much can you outsource and how do you do it safely?

Here are our 7 key tips for successful entrepreneurs… 

1. IT support should be outside of your company in most cases. If you are concerned about access to IT support staff, hire a local company. If a problem occurs, you can always take your machine over to their office or meet them for a coffee.

 

2. 80% of your total marketing staff costs should be outside of your business. If your internal marketing team are ‘doing’ marketing rather than ‘co-ordinating’ then you probably have an opportunity to increase productivity

 

3. Human Resources and training are probably outside your company already, if not, then this is an obvious next step. HR is a highly sensitive area and the laws keep changing. So, you need a specialist who spends 5 days a week on this topic and can also turn up in your office at short notice (staff problems are always at short notice), hence, resource this skill locally.

 

4. Finance – you are more likely to in-source finance help – that is, ask a bookkeeper to come and help you prepare your monthly accounts in your office. You can arrange this yourself, or you may prefer a freelance Finance Director to do this for you. In some cases, the Finance Director will actually do the books for you – this makes sense if you have very few items or are setting up your accounts

 

5. If you are contracting with senior freelancers, don’t forget that many will also carry out more junior activities (such as a Finance Director will do bookkeeping) at a lower rate – so you don’t have to pay their full rate for everything.

 

6. Write your stop doing list. This is the list of things that you are no longer going to do because they no longer work, but you’ve kept on doing them hoping they might start working again. Some things just stop working – so accept it, stop trying it, and move on.

 

7. Find a way to meet more local freelance talent faster. Find a local event – such as http://www.enterprisefreelancefair.co.uk where you can meet 40 or so freelancers in a couple of hours. Event such as these will massively increase your flexibility and are a great way to find new, more productive, ways to innovate and grow your business.

 

Feel free to add your own tips below….

Ernst & Young's says Get Agile

I recently got sent a link to the report that Ernst & Young launched at Davos earlier this year and it has some important lessons and advice for successful entrepreneurs – you’ve got to become agile.

Davos, you may already know, is the economic summit attended by global CEOs and world economists to discuss the current major business and economic trends and therefore the issues facing their global businesses.

So, essentially, this is top quality stuff – but the question remains – what value or use is this for small and medium sized businesses (SMEs)?

The answer is that what affects our big brothers will impact on us, the successful entrepreneurs, too – only, traditionally, SMEs get to find out about it later. Often, a lot later….

So, interpreting the Ernst & Young report – what can we decipher? Quite simply – if you want to grow your successful business then you need to build agility into its DNA.

Steve Howe, Managing Partner, Americas — Ernst & Young said “leading organizations need to look at talent and the value of different perspectives in a new way to drive innovation, mitigate risk and support new ways to achieve success.”

Mr Howe is encouraging established western businesses to find new ways to drive innovation and mitigate risk. And, in his view, this requires a new way of looking at talent – or perhaps our staff and teams.

Okay, so, we are right back to the issue about people – it is what makes or breaks a successful business. And what the EY team are really saying is that we have to find new ways to engage that talent to bring new perspectives on our businesses and find ways to innovate with lower risk.

How do you do that then?

The most effective way to acheive this flexibility is to create and use flexible pools of local freelance talent.

Also in the report, Donald Sull, Professor of Management Practice at London Business School, expressess the idea that establshed/ western business have high absorbtion rates – that is they are able to weather shocks with a protected core market, diversified cash flow, a strong brand or long-term customer contracts.

However, the risk is that new companies growing up in the large emerging markets (India, China, Brazil for example) have a a much great agility which is what allows them to spot and exploit new opportunities.

He says “companies from developed countries, by and large, have the advantages of absorption — size, established brands, technology, diversification and so on,” however. “lacking these advantages, emerging-market firms typically rely on agility. To me the striking thing is how fast agility can trump absorption.”

So, what Professor Sull is saying is that the emerging market business will thrash the established market businesses – unless those businesses can become agile!

Let’s put it another way – your business will go bust if it doesn’t become agile.

Okay, so getting back to agility – how do you do it? Well, as we said in the beginning, draw in a different perspectives and innovate with lower risk. How do you to this? The only way to acheive this must be to open your business up to more people with a wider range of experiences, whilst reducing the risk.

The only way I can see to do this is to engage with an expanded pool of freelance or outsourced talent – who can get to know more about your business and who are given more opportunity to innovate for you.

I put this to Richard Burton, Brand Strategy and Development, Ernst & Young Global Marketing and he told me

“Finding a way to embrace and leverage flexible freelance talent seems like a very smart thing to do”

So, there you have it.

=====================
Looking for more tips on how successful entrepreneurs can grow their business? Check out our 7 Point Plan to Growing Your Business in 2010…

=====================

John Brazier, MD said “both parties have expressed the need for change with regards to IR35, and both parties value the flexible, skilled workforce PCG members provide.”

Where Might Your Business Goal Take You?

Guys – it is time to ditch the old ‘build a business and sell it for zillions’ goal!

Just as easy credit has passed into history so too have the dreams of becoming instant dot.com millionaires as a result of a few lucky breaks and some unknown buyer waving cheque books.

As most successful entrepreneurs know, it doesn’t really happen like that – unless you are incredibly lucky.

But, it is a common battle cry from entrepreneurs that they want to sell their business for £5m in 3 years time – or some similar sort of goal.

This type of goal seems to be partly a response to the need to ask for funding – which inevitably invites the question ‘why would I fund your company’ to which the prepared reply can be ‘because I’ll make you rich and here is how…’

So, now that the old credit flows have dried up and we are living a more chastened business life, what kind of business goals should a successful entrepreneur set him or herself?

This is a tough question.

Okay, it has taken me about 1 year to come up with an answer – and here it is

£1.5m / 10 / 3

Okay – it looks simple, it seems simple, but what on earth does it mean?

Well, it is a ratio.

It is a ratio that ensures that the business is strong, sustainable and adaptable – it has the flexibility to adapt to abrupt economic impacts or changes in customer behaviour.

To explain – the first number – £1.5m – in this case, is the annual revenue or turnover.

The last number – 3 – is the number of employed staff. Now, I include myself in this – and you should include yourself too. So, that leaves two more staff – one of whom will be your right hand man/ woman and probably a very able PA/ Marketer/ Credit Controller / Fixer – who can help hold everything together.

So, what is the middle number – 10? Well, that is the number of equivalent staff (including the 3 actual full-time employees). That is, the number of freelance or contractor staff based in your office or at home that regularly provide you with 5 full days work per week. Now, probably you’ll have 15 to 20 part-time or periodically hired contractors – but these are equivalent to 7 full-time posts – which make 10 in total.

Right – enough of the explanations. Why?

Simple, the goal is to build sustainable businesses with strong market positions, great products and a really efficient and effective way of delivering them.

If you have revenue of £1.5m and an equivalent full-time staff of 10 – then you have £150k per revenue per employee. So, unless you are paying exceptionally high wages – on average – then you have a strongly profitable company.

You also have the flexibility to grow the company to £3 or £4m – or if you lose a contract to temporarily reduce to 8 or 5 full-time equivalents.

With a broad and experienced freelance workforce, your business can respond to changes in the market place with minimum difficulty and equally, be ready to exploit any opportunity that presents itself.

You now have a fantastically strong company. And, one that will be very easy to sell – because you have minimum employment issues and it is highly portable – so the new owner can pick it up and merge it into an existing office.

Your business sale costs will be low – because the legal due diligence will be simple – and most importantly, your business sale has a much higher chance of going through.

Best of all, because you have a highly flexible business, it is unlikely that you’ll be the exhausted / flaked-out entrepreneur desperate to sell – so you can sit tight, happily, and choose your moment to sell.

The point is that no matter how your business grows or shrinks (as it will) your job remains the same – to keep the same ratio. So…

£4m / 20 / 6 is good too, as is
£1m / 6 / 2
£0.5m / 3 / 1
etc…

So, the new goal of successful entrepreneurs is no longer to sell for £zillions, but to build sustainable and strong businesses – and then let the dividends roll in while you wait for a preferred buyer. And so long as you keep focusing on this ratio – you’ll be fine.

The great thing about this ratio is that it tells us one other thing too – that is, you are on your own until you get to £500k turnover – and only then do you think about a second full-time employed member of staff.

In the meantime, get building your local freelance talent pool. Your are going to need them.

============= Advert ============================
You can learn how to grow your business in the 2010 post credit
crunch environment whilst building your local freelance talent resource
at the Enterprise & Freelance Fair. Event are taking place in Chester,
Warrington & North West, and West Midlands.
=================================================

ps. If you subscribe to the slightly tougher view that entrepreneurs should never employ anyone, then just put your ‘full time’ staff on long term freelance contracts. The effect is the same – continuity – need for a small office space – etc…. but the flexibility remains.

Three special questions every successful entrepreneur asks

Successful entrepreneurs are constantly asking three key questions –

1. ‘what isn’t working’
2. ‘why isn’t it working’ and
3. ‘can I do anything about it’?

These three questions are the most important questions in the entrepreneurs vocabluary and a lifetime can be spent on developing the skills and abilities to answer those as successfully as possible.

So, what might these questions mean in practice? Let’s have a look…

Well, you might say that the European labour market isn’t working. That is, unemployment levels are much higher than in Asian countries or the US and the long term unemployment rates are far higher too. Why isn’t employment working? Well, mainly due to taxes, costs and the bureacratic burden of employees.

But is there anything you can do about this? Well, taxes are political – so let’s not go there – but knowing how the structure of the labour market works means that companies would be attracted to simple and cost efficient ways to hire staff. So, the freelance and contractor sectors of employment are the growth areas. And, therefore, can you build a business to meet this increasing demand?

Another typical complaint – house prices – might lead to a different answer. That is, house prices in the UK are very high – relative to earnings - and therefore it is hard to sell your property and move to another. This has all sorts of macro-economic disadvantages, but leaving those aside, it has lead many entrepreneurs to believe that the solution lies in either a direct sale approach to house sales (ie. cut out the agent) or a digital online database (property portals).

Now, let’s ask why houses don’t sell easily in the UK? Well, high price is one reason, but is it the agent? Evidence todate of 10 years of would be websites dedicated to cutting out the no-win/ no-fee agent – and replacing with a fixed adverting charge have failed to make any inroads into the market.

In fact, as it becomes harder to sell property, so it seems that the commission motivated agent in the middle is critical to ensuring that the two parties agree and close the deal.

Equally, the rapid proliferation of property portals suggests that property sales are going online? But no… instead, property adverts are going online – but the quality of those adverts is poorer now than before. Why?

Well, the agents treat the property portals as an advertising cost and therefore, don’t want to display all their stock at once – only those properties most likely to generate sales leads.

Hence, the all comprehensive promise of property portals is falling apart and anyone wanting to buy a house now has to look at multiple websites to see what they might buy.

It seems that property and property sales are – once again – returning to the existing structure of buyers, sellers and media used to generate leads.

Hence, it seems that business plans dedicated to changing the way that we buy and sell our houses have failed.

Now, the quickest way to make houses easy to buy and sell would be to cut their price in half – and that could be achieved by a massive increase in the availability of cheap land. Ah, back to politics then.

So, as we all agree, there is something deeply inefficient about how property is transacted. But there isn’t an obvious way to change it – other than by radical politically lead reform. Which isn’t easy either. It is a bit like capitalism – it is the least worst system.

The risk is that many young entrepreneurs may spend too much time (and money) attempting to make perfect an imperfect system.  Sometimes we just have to accept that there is ‘nothing much we can do to help’. If so, then find out fast and move on.

You see, often the successful entrepreneur is portrayed as someone who never gives up – where as, in fact, he (or she) may simply be willing to give up faster – and therefore find something that works quicker.

If you perfect the use of our three special questions then you’ll get there faster, waste less money and time and achieve a greater result.

Let’s hope they are hiring these guys on a freelance or agency basis…

However, as Rags to Wreckages readers know, there is an easier way – use freelancers instead. What you can’t achieve with your vote, you can achieve with your feet. Change the way you do business!

Have we got our head in the sand over employment?

Tom Farmer, the entrepreneur who made his money with Quick Fit, a tyres and exhausts retailer and fitter, says that the bigger you are – the dumber you are.

In Mr Farmer’s view ‘the reason governments are dumb is because they are so big’.

So size is a real problem for both businesses and institutions.

Therefore, Tom Farmer is an advocate of the low employee business, which grows by outsourcing all the other services.

In a similar way, many entrepreneurs see their businesses become more vulnerable once they reach 50 staff than they were at 5. Why?

Simple, with a team of 5, you the entrepreneur, know exactly what is going on. Once your business reaches 50 you don’t know any of the detail and are entirely in the hands of your managers – who you may or may not be able to oversee and manage effectively.

The management issue you face with a team of 50 staff and perhaps 5 key managers is this ‘do I intervene and undermine my manager, or do I step back and let my manager get on with it?’.

It is also quite likely that whilst your managers had the skill to run a team of three or four people, they may no longer have the ability or experience to structure and lead a team of ten.

Tom Farmer says that when Quick Fit grew from 40 to 240 centres they discovered they didn’t have the management skills to run the larger business.

So what is the solution?

Your company both needs to grow by hiring talented managers and yet, at the same time, it doesn’t want to increase its size and become ‘big but dumb’.

So, adding growth by using outsiders, interim managers or freelancers is the solution. When new people come into the business they tend to have a fresh appraoch. Generally, good quality freelancers bring excitement with them for the new project and long term staff get invigorated by new influence.

Don’t forget that freelancers will recently have been working in other similar or comparable businesses or departments and therefore can share some of the good and bad things that they have experienced.

In this way, your business will become more efficient and more cost effective and you can avoid the loss of control by keeping your core team to less than 10 or 20 people – at least until your business has grown substantially.

And the measure is…

So, as with all things in business, we need to decide what we want to measure to ensure that we don’t become Big But Dumb. And the way to do this is to measure

….annual revenue per full time employee.

If, as your business grows, you generate more revenue per employee – then you are becoming smarter!

Whereas, on the other hand, if as you grow your annual revenue per employee declines, then you are becoming Big But Dumb.

The trouble is that when your margins slip in a Big But Dumb business, it is very hard to cut costs without also cutting profit margin and therefore your business quickly falls into trouble.

Whereas, if you build your business with a constantly increasing revenue per employee, then you will be able to react to market changes faster and smarter.

Therefore…

So, the conclusion, if you are still with me, is that you should only increase your full time headcount when your revenue justifies it. If your goal is to achieve £100k of revenue per full time employee, then until you have £100k of revenue you will remain an entirely freelance team. When you get to £1m you will have 10 employees and at this point, you might decide to raise the goal to £150k per employee. So no more hires until you reach £1.65m – the rest coming from expanded use of freelance, contract staff and agencies.

A goal of £150k revenue per employee will ensure your business is smart, fleet footed and able to react to the market and take advantage. And, of course, you will be heavily dependent on your ability to hire and contract with the best freelance talent in the market place.

Freelancing is a hit - even for business old boys?

The article points out that the hiring process for CEOs is ‘hopelessly inefficient’ yet ends with the old adage that

The most successful companies, such as Procter & Gamble and General Electric, are more than just ever-shifting nexuses of contracts. They are self-replicating organisms that possess distinctive cultures and unique habits—cultures and habits that are preserved and perfected by a loyal cadre of managers. You can certainly buy lots of wonderful managerial skills on the open market. But true corporate greatness is home-grown.

Now, this is an important point, but is this true?

I think firstly, it is important to distinguish between an entrepreneurial company and a huge global conglomerate or business. In the case of entrepreneurial companies, you will almost certainly want to hire on a contract basis.

Larger companies may also like to consider this – if we can deal with three key prejudices.

Firstly, a CEO directs a number of senior managers and is him or herself directed by a board of non-exec directors (or at least this is the best balanced solution).

In this scenario, it is already well established that the non-exec are part time, perhaps one day per week or one day per month. It is also agreed that they are more effective in their role if they hold a number of non-exec posts.

In addition, any decent CEO is going to appear on boards on a number of other companies. Hence, the idea of freelancing or contracting or part time work is well established and considered to have benefits.

Secondly, if the board and the directors of the business do their job well, then the CEO is not the be all and end all of the company. Therefore, continuity in this particular seat is an overblown concern.

Lastly, if a company hires a team of senior execs to launch a new product and that project comes to an end, then one of two things will happen. Either the management of the project will be considered a success or failure. In the later case, the contract will no doubt be completed. But in the case of a success, then the key players may be offered a new role in a different company within the conglomerate or a part time role to maintain continuity, or the manager may leave for a new project, but return to the original company in 12 or 24 months time.

Essentially, if contractors are treated a key members of the team, then the freelance legal structure underpinning the relationship should increase the likelihood of success and the ability to maintain continuity will depend on whether both the contractor and company are happy to do so.

Which is what everyone would want wouldn’t they?

Hire Me and There is a 15% Chance I'll be Right

We have a recruitment interview Breakdown – 86% of interviews fail to pick the right person for the job.

According to a Michigan State University study on predictors of performance,

Some 90 per cent of hiring decisions are made as the result of the interview, but interviewing is only 14 per cent accurate

During an interview candidates are naturally on their best behaviour, acting to impress. However, it’s their true behavioural patterns you should focus on.

Studies of the recruitment interviews show that the typical outcomes are:

• 15% pick the right person
• 30% pick someone who can do the job
• 45% pick someone who fails

Okay, as an entrepreneur you need to make a choice. Either your new enterprise wants the best people and is committed to excellence in all that you do, in which case getting the right person into the right job is an absolute must or you are willing to get anyone so long as they can ‘start right away’.

Clearly, if you are committed to excellence, then you will accept that the traditional way of recruitment isn’t working, but most business don’t accept this. Why is it that intelligent and able managers are reluctant to accept this finding?

Well, at one level, they just need to get on with the job (that is saying, get me anyone who can do it, forget about excellence) and at another level they may say, well, there isn’t a better way.

Well, in truth, there is a better way. Two ways in fact.

Firstly, you can stick with the traditional recruitment process but improve your success rate with testing tools such as McQuaig. Now McQuaig, for instance, claim that using their testing will significantly increase your recruitment success rate to:

• 65% Right person (up from 15%)
• 20% Will do job
• 15% Fail

If your business is focused on excellence, you will want to embrace this or a similar methodology. However, even those of us who know we should use these tools, we often don’t. Why? Because we are in a hurry.

That same desire to ‘get the job done’  is getting in the way of you hiring the best talent.

Now, let’s be clear here, we are not talking about the ‘best talent’ in the way that you might wish to hire the highest scoring striker in Football’s UK Premier League or a top Quarterback for American Football, but we are talking about someone who is right for the job – and can do it with excellence.

To say that there is more than one person who can do a job with excellence is is not a compromise on excellence. All businesses need to rely on the fact that staff are replaceable – otherwise you don’t have a business but a talent agency or football team!

Therefore, for us to remain true to our business objective of excellence, we need to get the right person in the right job.

Now, 85% failure rate isn’t good enough, so we must use other recruitment tools, right?

Yes, and… there are ways to increase your recruitment success – or at least to reduce the costs of your recruitment failures.

Not only is recruitment expensive in terms of time, but it also costs 15 to 20% of annual salary which goes to the recruitment agency, 1 or 2 months of training or below par performance to allow the new member to get their feet under the table, management time and support during this period too.

In my experience, you can quickly identify those people who simply can’t do the job, but it takes much longer to know that you’ve got the right person in the right job.

Hence, even though you can remove the obvious people who don’t fit, you still face up to 30% of the total or two thirds of your remaining team who aren’t going to work out longer term.

And yes, you can reduce this by metrics, but you want to make the problem go away as much as possible because it is the biggest threat to your organisations ability to deliver excellence.

Therefore, one way to improve this metric is to hire people on contract and, the more people that you know, the greater ability you will have to draw from your existing and widening base of freelancers or contractors.

If you combine some form of interview and metrics with a fixed contract or freelance structure, then you have a much higher chance of hiring excellence.

And, as we discussed before, allowing those freelancers to move onto other projects is a good idea, as it allows them to come back to your future projects refreshed emotionally and with new ideas.

Are you wasting money? But more importantly, missing out on talent?

Dear successful entrepreneurs,

Here is my warning…

Just remember if you do employ traditionally (and ignore the freelance model), here is what you will be paying for sooner or later.

• paying for stationery to make your employees feel comfortable and valued
• paying for storage to store the excess stationery they order
• paying for staff to file bits of paper in the endless lever arch folders they felt they needed in order to do the job
• paying for someone to reduce the filing and throw away the useless information stored
• paying for an intranet to allow triplicate filling of digital copies of all items filed
• paying for server costs to allow maintenance of digital files
• paying for someone to go through all the digital files and delete them all

and then

• paying to provide email support when staff break their email accounts
• paying to stop your staff doing silly things, like downloading viruses or looking at pornography
• paying for human resource staff to listen to their whinges
• paying staff to smoke cigarettes
• paying managers to provide written staff objectives which staff can then safely ignore
• paying staff to have new ideas on how to do things better, which ultimately don´t work and then paying someone else to take down the new idea and get on with doing it the way it works best

and then

• paying for staff to have grievance procedures which can be brought against any managers whether legitimate or not – all payable out of company time and resources
• paying for senior management to sit listening to pointless complaints
• paying for someone else to wash up the mugs that staff use and don´t wash  up (do they do that at home?)
• paying for the tea and coffee
• paying for someone to clean up behind them
• paying for management to regularly walk around the office to ask staff to please throw away old paper, bits of sandwich left-overs and old newspapers and magazine

and then the obvious stuff

• paying for holidays
• paying for sick leave
• paying whether they do their job properly or not
• paying to hire staff (recruitment fees)
• paying to hire the temporary replacement when on maternity or paternity leave
• paying for someone to fill a key role during maternity
• paying to make weak staff members redundant because firing average performing staff is too long winded and every business opts for the more expensive but quicker route of redundancy
• paying for holiday rights accrued whilst on maternity leave (whilst also paying the person who fills the maternity role the same holiday rights)

and then

• paying for an internet connection to allow them to keep on surfing whilst in your office
• paying to post personal letters and provide their homes with a suitable supply of pens
• paying for mobile phones and laptops so staff can work from home on Fridays and have a nice long weekend

Okay, you think I’m being a little extreme? I promise you, I have seen all of these in the business I created and it was a problem of employed staff and never an issue with freelancers and contractors.

I do accept that if you have contractors in your office, which you will almost certainly want to do, that you will have to pay for their office space too and provide tea and coffee etc. You may even pay them slightly more such that there is no real National Insurance or employers tax saving (it might just get paid to the freelancer to allow him to cover these costs himself).

However, in my recent business which ceased training in Aug 09, I did not encounter abuse of these or any of the other issues with freelance and contracting staff; only with the traditionally employed.

The point here is not that using freelancers and contractors is primarily about a tax saving – although it may a secondary benefit – it is that you have a different grown up relationship with fellow business people who share your desire to make the project work.

And, you have the minimum of distraction from achieving the goals of the project because you do not have the bureacratic and overbearing risk of employment law hanging over every decision you make like the sword of Damocles.

Do you know the story of Damocles? It is worth knowing and no, you don’t want to be Damocles.

Instead, if you are an entrepreneur build a business which stays true to its founder – entrepreneurial. Build a business that is exciting and focused on achievement of goals and objectives and the fun and enjoyment that comes with that.

Find the best freelance and contractors you can. Pay them well, pay them fairly and a bit more. Share bonuses with them if you have financial success. Create an atmosphere of business partners working together to achieve win/win results.

You will have more fun, your team will have more fun, you’ll all perform better and you’ll all get better results. And yes, you will save money too – but this isn’t about saving money – it is about creating the right atmosphere in which success is most likely to flourish.

Be brave and do it and don’t compromise. After all, you do call yourself an entrepreneur don’t you?

Dr James Bellini

“The glue that holds the company together is trust” said Dr James Bellini, a forecaster of employment trends, and therefore not employment.

This statement stands in direct conflict with some of the comments expressed in response to my article ‘Entrepreneurs – never employ anyone’.

The reason that staff traditionally sought employment and employers believed that employment was important to ‘attract the right person’ is because that way of doing things has been deeply embedded in our society and well understood – it used to be the trusted way.

However, this doesn’t mean that a new contract for work can’t be established. The 1m official self-employed or freelance people now recorded by the UK employment Statistics is a clear sign that things are already changing.

The standard employment way of doing things also comes at great cost. Dr Bellini, director of the Talent Foundation,  made an extraordinary claim. He stated that only ’4% of staff are located where they want to be’. A full 96% of staff would rather work in a different geographical location – perhaps closer to home, perhaps in another town or city.

Perhaps this explains the length of commuter frowns and stress of rush hour traffic? We are always in the wrong place desperately trying to get back to where we want to be.

So much better then to be a freelancer? And here, please note, the benefit is for the freelancer themselves not just the company that is hiring or contracting with them.

In Dr Bellini’s vision of the future ‘the company of the future will have next to no assets – having outsourced the technology and office’ and it will rely in substantial part if not entirely on trusted freelanced or contracted workforce.

The issue that is left now for freelancers – is personal branding. That is, being able to explain to potential companies that might hire the freelancers skills or time what the freelancer can do as well as give them confidence that they can do the job well and deliver on time.

As students of branding know, the essence of a strong brand is trust.

Ah yes, and that was exactly what Dr Bellini said in the first place ‘the glue that holds a company together is trust’.

So, perhaps we can see the future of freelancing as a series of strong trust based personal and agency brands working with other partners in a larger organisation.

The future of freelancing then, is the future of brands – and for a freelancer to build trust in his personal brand he will need to develop and deliver trust. To do this, he will need to deliver his projects on time to budget and keep his client happy.

The freelancer in this world can not walk out on a job. He can not call in sick to take time off and go and watch a football match. He can not drop the project and take another – without seriously impairing his brand and affecting his ability to secure future contracts.

Therefore, the freelancer is motivated to keep the client happy in a way that the employee is not.

No wonder that business strategists forecast that companies and successful entrepreneurs will be able to build better and stronger corporate brands on the back of a strong, experienced and highly trust worthy freelance resource.

What a huge business advantage this will be for the entrepreneur or business manager willing to encourage the freelance model in his or her work force. And, for the freelancers, what a great place to work.

Click here to listen to Dr Bellini’s interview with the PCG.

==============================================================================

This series on the future of freelancing was inspired by the PCG’s National Freelancing Day held on 23rd of November 2009. You can find out more about the PCG here.

If you want to receive updates of future articles in the Freelancing – the Future Looks Like This series - then please join our newsletter and also get the first chapter of Rags to Wreckages free.

==============================================================================

Will Hiring Freelancers Lead to Success or Failure?

…that you have to hire the best. … and hiring the best means you have to offer the full time employment – the best package – a full time employment contract and for CEO’s golden handshakes to welcome them and golden parachutes should they fail, share options if they don’t etc.

And therefore, you might think, if I don’t offer a full employment contract why would they ever leave their current employment to join my organisation?

Let me be blunt about this. This is rubbish. People will join your organisation mainly for the opportunity and excitement you offer – much less for the terms of a contract.

Here are six reasons why freelancers are better than employees;

Firstly, freelancing and contracting is more fun and the freelancer earns more money. The freelancer gains by being treated as an equal – they are in business too – albeit for themselves and the relationship between you and the freelancer is a much more grown up one. No longer do freelancers expect you to provide for them – as a parent might to a child – instead, it is a relationship of equals. This benefits the person hiring the freelancer just as it benefits the freelancer him or herself.

Second, freelancing and contracting allows your team to work on projects in natural bursts. It is more like going to college, you work hard or very hard for 10 or 12 weeks to reach a goal or set objectives in that term or timester. Then you take a break. I haven’t seen any studies, but I believe you could argue that it is more natural for us to work like this than to be expected to work week in and week out. Thinking about this a bit more, our ancestors used to work according to the seasons and this required short bursts of activity – sowing and harvesting being the busiest times.

Thirdly, in the UK and European countries the first 6 months of a new job are pretty tenuous anyway as they just offer 1 weeks notice. When taking on a contractor you can offer 1 month notice for the first 6 months. This is a great deal for the contractor as they actually have far greater certainty (ie a month) than if they have a full time employment contract. The point about the contractual structure is that you don’t offer one month notice for ever and you don’t allow it be silently become two months or three months or six months as they spend more time in your organisation. This will make a considerable difference if some relocation is required.

Fourthly, freelancers who leave your organisation can and do come back – if they enjoyed their work with you – and often come back more motivated and with a fresh set of ideas. This is great for both the freelancer and for your business.

Fifthly, not all brilliant candidates will fit your company culture. Think of football. How many times does a great manager turn down the offer of a great player because the great player wouldn’t fit into the team? It happens all the time. You are looking to fill roles in your company, that doesn’t mean you want the best player, you want the best fit.

Sixthly, men (or women) are as their times are. This is a line from Shakespear when a young soldier complains when he is told to carry out a contract killing. His Sargent replies that he should go and do it for  ’men are as their times are’. Often your ‘good’ people in a high growth company will become your ‘bad’ people in a sudden slow down. This isn’t because they have changed, only your company circumstances have changed and their motivations within the company and those circumstances may have changed out of all recognition.

A freelance or contractual structure allows you to let them go quickly and without fuss. The cleanness of the parting of the waves is actually a lot less controversial than you might think and allows you to rebuild the relationship with them later on, should conditions improve.

At the end of the day, you are looking for the best fit for the role you have now.  If you markets and products change, the role may well change. If you switch from high growth to low growth or a sharp decline, most of your people won’t fit any more no matter how good they were in the first place.

Lastly, if you have decided on an entrepreneurial structure then you need the best fit with that – enterprising people. And I can guarantee you they will not be standard employees looking for the apparent security of a standard employment contact, as that is the last thing either you or they want.

The new way to work, for nearly all white collar work, is freelance.

In recent years, freelancers have established their own trade body – the Professional Contractors Group.

And now they are celebrating National Freelancers Day on 23rd November 2009. This day will bring together freelancers and innovative business leaders to discuss and explain business on a freelance model. The point here is that it works for everyone – the investors, the entrepreneurs and the freelancers.