Dateline: Kuala Lumpur, Malaysia
A few months ago I made a tough HR decision: going forward, I am not going to hire any freelancers for Nomad Capitalist unless I absolutely have to.
I didn’t make this decision lightly. Freelancers have served me well over the years. When I was running a pool cleaning business in the US, the only reason I was able to outcompete my rivals was because I had hired a Bangladeshi man for $1 an hour to do some data entry and advertising work.
It was hard work and very labor-intensive, but he was very happy with the job and the pay. I was able to use geographic arbitrage opportunities to benefit my business.
But I have come to the conclusion that these types of strategies have diminishing returns. If you’re a seven- or eight-figure entrepreneur, it’s time to shift to a permanent core staff that you can trust and you know has your back in any situation.
Your time is valuable. It is among the few resources that you cannot get more of no matter how much money you throw at it. Thus, any successful entrepreneur eventually reaches a point when the value of one hour of their time far outweighs any financial arbitrage opportunities that they could experience.
From the perspective of a cost-benefit analysis, it’s simply not worth it to continue to do this.
Oftentimes, with these ultra-cheap workers, you’ll spend more time babysitting and managing them than you would stand to gain from their job.
It’s not a binary though, I wouldn’t be where I am today had I not known how to properly use freelancers effectively.
There are situations where I would advise hiring a freelancer, and there are bad points against it as well. So here’s a list of reasons to not hire freelancers, along with a list of reasons why you should.
Why You Shouldn’t Hire Freelance
Ask any of my employees what they think about me and I wouldn’t be surprised if most say that I’m demanding but fair. I believe in loyalty and elevating the people that helped raise you up.
I do my best in providing a structured environment that makes people feel appreciated, safe and informed about their responsibilities and privileges.
In return, I expect people to do the tasks that have been assigned to them on time and with the attention and quality they deserve.
The problem comes when I hire a freelancer and they don’t abide by the social contract that I’ve tried to instill in all my employees.
Lack of Accountability and Control
One of the factors that led us to decide that freelancers weren’t for us was when we were recently trying to optimize our business procedures.
We started running the numbers and trying to find patterns in things that caused friction in our day to day operations and we made a surprising discovery. After looking at the data, we found that freelancers have been responsible for three times more incidents that put us behind schedule than inhouse workers.
Even with the higher paid freelancers, there were often excuses why they couldn’t do the work on time or to their same level of professionalism – and they were always of the vague variant that sound completely made up, rarely did anyone actually offer specifics or evidence.
We even had people who accepted a freelance job from us and then just ghosted any attempt at communication. It’s as if they had been vaporized from the planet!
I believe this is because freelancers don’t have “skin in the game” when it comes to your success. After all, you are just another client of theirs – of which they might have another dozen.
Conversely, if someone works directly for you, then they have a vested interest in your wellbeing. Associates know that if they underperform, have an attitude problem, or just can’t meet deadlines, then they will eventually be fired.
And given that yours is the only paycheck coming in, they value it far more.
Besides that, as I mentioned earlier, I like creating a team. I understand that people primarily get a job for the money, but my goal is to convert you and make you as excited as I am about the subject.
That’s why we designed an onboarding process by which we help new people settle in. Usually, the first day at our offices is just going through our handbook, audios, and videos.
I’ve tried to do the same type of thing with freelancers, but most don’t bother.
There have been ways I try to instill more of a sense of duty in them, like having them sign a contract outlining the expectations, duties, and benefits that they receive for their service.
This works up to a certain extent, but freelancers are fair-weather workers. If you present them with any major hurdle or apply any pressure, they flee for the hills, which brings me to my next point.
Reduced Growth Opportunities
If you work for me, I want you to succeed, develop your abilities, and rise up to the challenges that come as we expand our business. I don’t want someone who comes in as an assistant to still be an assistant ten years down the line.
This just creates a bad mindset that allows people to get a bit too comfortable. Growth happens at the edge of your comfort zone when you truly don’t know whether you are able to rise up to the challenge.
The worst thing that can happen for me, as a business, is when my workers perform just well enough to not get fired but are overtly disinterested in evolving as the company changes.
This is freelancers in a nutshell.
When you hire freelancers, it tends to be with a role in mind, and once you have a handle on that you will want to grow and meet new challenges. But if you ask this of your freelancers, chances are that they’ll simply point to your original job description and they’ll simply say “that’s not in my remit”.
So, rather than have to deal with the freelance job, I’ve decided to create an HR hiring funnel and solve the problem in-house if we can.
In other words, if I was considering hiring a freelancer for five hours a week, I tap one of my full-time workers with a similar background on the shoulder and ask them to do the job instead.
In return, I give them the money that I would have otherwise used for the freelancer in the form of a raise.
In this way, we both win – they get to explore new avenues and expand their abilities through experimenting in a more controlled environment, and I don’t have to go through the headache of finding someone new (who may not last long in the first place), who would have to be introduced to the Nomad Capitalist way of doing things.
Most Jobs Are Best Done in the Office
Contrary to what tech gurus might have told you over the years, people won’t all be doing online work by 2030. COVID-19 has certainly put remote working on the agenda, but people and businesses need structure.
A sign of a new manager or business is that they often want to bend over backward to keep clients and workers happy. When I started managing my own company, there was someone I really wanted to hire and I was so eager that I basically told them that he could do his tasks remotely and take as long as he needed.
I now realize that this was a mistake. It threw a wrench into the works. I had no way of organizing myself because I didn’t know what was in the pipeline, how long it would take, etc.
Learn from my errors and know that you are the business owner, set the standard, and enforce the boundaries. Yes, keep your workforce happy, but if you’re too eager to please, your concessions will not be taken as generosity but weakness.
This is why, over the years, my goal in my business has been to reduce the number of moving parts. I used to be fine with my workers being in one timezone one day, and then in a completely different one the next.
But try organizing a weekly meeting with three shifting time zones and see how long that enthusiasm lasts.
That’s why I’ve consolidated my workers into groups that work for an established time period.
With freelancers, that freedom is lost and it becomes a matter of chasing them around to do the job that they were paid to do in the first place. Not only that, but some may disappear for days on end.
Overall, I’ve grown less enthusiastic about remote work and freelancing, in general.
Businesses need structure, standards, and protocols to succeed and the easiest and most efficient way to do this isn’t online, it’s in an office where the boss can control the environment where most of the work gets done.
Why You Should Hire Freelancers
Throughout this article, it may appear I’m a tad negative on the whole freelancer revolution happening in the last two decades. My enthusiasm for it has certainly soured.
But it doesn’t mean that there aren’t valid reasons for why you can, and should hire freelancers.
Entrepreneurship is not an area of knowledge that often deals in absolutes – sometimes one specific truth is useful and profitable for one entrepreneur, and the same insight when given to another businessman might harm their company.
What exists are patterns. You can find many successful companies with all manner of business models, but within this prosperous company club, there will be a higher occurrence of certain structures.
Among such lucrative “behavioral clusters” is that of looking for value instead of a bargain. Often, cheap things end up being expensive because of the effort and trouble they cause you to get them operational.
The freelancer ecosystem has shifted from a race to the bottom to one that tries to promote quality. So ignoring this all together is a tad silly – for much the same reason you wouldn’t cut off your left arm even if you use your right one far more and with greater efficiency.
So, here are the situations in which hiring a freelancer is suggested, and possibly even desirable.
Super Specialized Work
Often, when you’re building a business, there are certain situations that require very niche and specialized knowledge. For example, you might be creating a website widget that needs to be able to perform a certain task, but you’re not a technology company.
Beyond that one widget on your site, you don’t have any similar work. So, chances are that you don’t have anyone on staff with the skills necessary to perform that task.
In circumstances such as these, when you need to build a critical detail for your business but it’s a one-time situation, then, by all means, hire a freelancer.
I like to go for above-market wages in such roles, as I don’t want something cheap, I want something worthwhile. And professional specialists know their skills are in demand and valuable, so they might not even look at your offer if the rate is unappealing.
Then, if they were a good worker, I keep their contact details for whenever I have any similar projects.
A Temporary Gap in Capacity
Perhaps you’re a company that has a variable demand over the year, or events outside of your control are suddenly overextending your abilities.
Here, you have to make a choice. Do you hire freelancers as a stopgap, knowing that you may have to manage them more earnestly than your full-time workers? Or, do you simply accept that you cannot meet this demand spike and look into expanding your capacity in due time?
Both options are valid solutions, and the correct one depends massively on your goals, business model, and future prospects.
But it is undeniable that remote work, freelance jobs and the like can summon an army of workers that could at least help you bridge the gap. They might not be the perfect fit for your company, but at least you wouldn’t be leaving money on the table.
Growing Out of the Need to Hire Freelancers
I don’t get mad at a hammer for being unable to perform the task of a screwdriver. In the same way, I don’t get mad at freelancers as a whole when they don’t meet the standards of inhouse employees that are permanently sitting in the soup.
Successful entrepreneurs are pragmatists, they know that every tactic and tool at their disposition has its downsides.
In my day, I made extensive use of freelancer platforms to cheaply scale up my businesses and provide competitive advantages.
But I’ve grown past the need for those minor advantages. I now have the capital to have my own inhouse experts that understand my goals and needs better than anyone else.
So, I no longer have much use for freelancers.
I believe in my team, and with them, I will grow to beat ever greater challenges!