3 Gig Economy Pitfalls

by Julie Avellino, Consulting Partner

When the term “gig economy” was coined in 2009 it was in reference to the large number of people freelancing to make ends meet during the financial crisis.  A decade later, the gig economy is here to stay. It has changed the way people work and the way small business owners run their organizations.

To the small business owner, the gig economy may seem like a godsend. Access to talent that may previously have been too expensive or unavailable is now just a few clicks away. Some small businesses use freelancers to avoid hiring additional staff while others build their businesses using independent contractors as white-label extension of their own brands.

Regardless of how a business uses freelancers, small businesses can be especially vulnerable to a few pitfalls of the gig economy.

Lack of continuity

One of the greatest assets for a small business is its reputation. Reputation is built by the consistent delivery of outstanding work that meets or exceeds client expectations. Every day, small businesses feel the effects of positive or negative reviews on social media, which is why now more than ever it’s important to consider continuity of quality when deciding to use a freelancer. Small businesses should ask themselves the following questions to help determine if a freelancer is the right choice for a job:

1) Will we need this resource again throughout the next 2 quarters?
2) Is the freelancer we are considering significantly cheaper than their competition? (In other words: if we couldn’t get this same person again for a similar job, would it dramatically affect our costs and services?)
3) Would we be able to hire an in-house employee on a part-time basis who could do this task as well as other tasks we need to accomplish in the next 6-12 months?

If you answered yes to any of the questions above, you may want to take a deeper look at whether hiring a freelancer will help or hinder your business in the long run. Ideally, freelancers should be used for one-off projects or in areas where internal expertise is not necessary long-term, such as implementing an ERP or installing and coding new machines for production.

Lack of a strong culture

One of the greatest strengths of a small business is its culture. While it might seem cost effective to outsource several projects or skills to freelancers, having ad hoc staff can have a dramatic impact on corporate culture, which may ultimately impact the experience of valued employees. The vibe clients get when they walk through your doors, the creative energy in the break room and the communication dynamic in meetings all help support the growth of a small business. Relying heavily on freelancers who are not available to participate in team calls, project planning and ideation can have a significant impact on the overall culture of the company. Small businesses should take this into consideration when deciding whether it’s time hire an employee or bring in another freelancer.

False sense of financial health

When small businesses rely on freelancers for routine tasks or project work rather than hiring full-time employees, the typical costs of doing business are avoided. This may seem like a benefit to the business. However, over time as small businesses grow into larger organizations, this will create a false sense of financial health. Eventually, full-time positions  will need to be filled, which will result in an increase in overhead due to higher salaries and benefits programs, increased office space and a formal human resources department. While planning for growth, small businesses should make sure their financial projections take into account that real growth will require sustainable hiring practices that include the cost of full-time employees and employee development and training programs.

Think strategically when leveraging freelancers. The ease of the Gig economy can make it too easy for businesses to fail to plan for real growth, deliver inconsistent services and miss out on the benefits of a powerful culture of committed employees.

If your business is facing a critical growth phase and you think you can benefit from thoughtful guidance and planning, contact us.

Leave a Reply

Your email address will not be published. Required fields are marked *