How Firms Can Prepare for the Freelance Economy

05/26/2016 03:44 pm ET Updated Dec 06, 2017

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That Sucking Sound Is Your Workforce Going 1099

A lot of companies ask me how they can prepare their firms to take on more freelance tech talent. Before I explain, let me provide a little background. Since 1993 I've been working in the freelance gig economy...literally. I started my career booking concerts, then transitioned to managing bands and five years ago expanded the definition of talent management to include the top 1% of tech freelancers. My company, 10x Management is at the forefront of the biggest shift in the workplace since Henry Ford instituted the assembly line.

Forbes predicts that by 2020 50% of the US workforce will be comprised of freelance workers. While a large portion of these workers will be non-strategic -- your Uber drivers, etc -- the real shift is with highly skilled, strategic thinkers. I've referred to them as Innovative Millennials, others have called them Agile Talent. However you want to refer to them, they're here to stay.

In the blink of an eye, thanks to the confluence of a major imbalance between the supply and demand for tech talent, the rise of cloud computing, and the ease of access to individual health insurance the numbers of developers that are opting to freelance has ballooned. We've observed this first hand with thousands of brilliant coders applying to be represented by us.

We've also seen it in the sheer number of companies that have popped up to provide services to freelancers. What started with the Freelancers Union in 2001 has grown into dozens and dozens of companies that support contingent workers. Companies like recent startup And Co who provide back office services to freelancers. The world is changing and changing fast.

With this rapid change underway, many enterprise and legacy economy companies have asked us how they can get ready to take on more freelance workers. Here's what I tell them:

1. Appoint someone in your organization to own the freelance space. They should learn about the different companies that work with freelancers and which one(s) might be best to engage with. They should learn best practices of how to effectively utilize freelancers, and help implement those strategies within their company.

2. Empower your product teams to understand the benefits of bringing in freelancers. There are many benefits, but the ones most often cited include: easy access to specific expertise, an increase in speed to market, and the introduction of new ideas and methodologies into a project.

3. Provide an environment that is conducive to freelancers. Many people shift to freelancing because they want the ability to work where they want, when they want. Yet many companies today still require work to be conducted on site. There are many reasons why working on site, especially for coders, is not ideal. By creating a flexible work environment you're likely to get access to the best and brightest minds, as opposed to limiting your options to only those that are either located in your market and/or are willing to work out of your office.

4. Adjust your accounts payable policies to ensure that your freelancers are paid in a timely manner. More often than not, freelancers are paid more slowly than W2 workers. Often WAY slower. Net 60 payment terms for someone providing mission critical, high level product work for your company is truly unacceptable. In many cases you're talking about an individual who is providing the service, not a large consulting firm that may be running hundreds if not thousands of other projects. Set payment terms not to exceed 14 days; sooner if possible. We all know you can pay faster. So, pay faster!

If your company builds technology, you rely on having access to the best technology talent. More and more of the best minds in tech are leaving the W2 world and moving to 1099 freelance/contractor status. This is not a trend; it's the new normal. The sooner you adapt and embrace it, the better off you'll be in the coming years when competing for tech talent becomes even more fierce.

Is the sky falling? Maybe. But the good news is that you can do something about it. You have been warned (smiley face).

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