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The New Business Model for a Changing Work Force Reality

By Andrea Fabbri
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For freelancers and independent contractors, working remotely is a way of life. Their relationship with the companies for whom they work is defined and understood. For those who have been forced into staying home and trying to work, finding the work-life balance has been a process. This is not only true for employees, but also the businesses that employ them.

Without the vision to see exactly how the economy will recover, businesses are re-imagining how their company work force will look when employees are allowed to return to their offices.

MBO Partners is a company providing innovative solutions to enterprise business and independent professionals. In this episode of Expert Opinion, we talk with the Founder and Executive Chairman, Gene Zaino, about the probable effects that COVID-19 will have on the future of business and the work force model.

 

Topics covered in this podcast episode include:

Working from home: the positive and negative (3:47)

What should your company be doing to prepare for the future (5:16)

Trends in the work force (6:32)

The new model (9:11)

Is it right for every company? (14:05)

 

Episode Transcript

Welcome to Expert Opinion, the BrandingBusiness forum where leaders share their views, insights and experiences from the world of B2B branding. And now, here’s your host.

Andrea Fabbri: Welcome everybody. This is Andrea Fabbri today with you, I am the Managing Director of BrandingBusiness in New York City. And today I’d like to welcome on the Expert Opinion podcast series, Gene Zaino, who is the President of MBO Partners. He’s in a company, they’re a nationally recognized expert in the contract workforce market. He launched MBO Partners with the vision of reinventing the way independent consultants and organizations work together. He’s a frequent speaker and has appeared in a variety of publications as a Subject Matter Expert as well as radio, TV shows, such as ABC News, Wall Street Journal and Forbes, Inc. Magazine, New York Times, CNN, and so on. So, I’m really, really honored today to have him on the Expert Opinion podcast. Welcome, Gene.

Gene Zaino: Andrea, thank you very much and it’s a pleasure to speak with you today. One minor just addition to what you just said is that I am no longer the president of the company. Actually, we brought on a great Chief Executive Officer who ran the global consulting business for PwC, but I am the Founder and Executive Chairman, so I want to make sure that we don’t minimize our CEO’s role.

Andrea Fabbri: All right, well, thanks for the clarification. All right Gene, the topic today is one that is top of mind of many, many, many people and many executives. I have grown up in the business world always hearing that it is absolutely important and essential to separate personal life from work. And I think that that wall has been completely dismantled in just a span of minutes or hours in the last, certainly in the last few weeks because of the health crisis that all of us in many, many, many countries around the world are enduring. And this crisis is forcing companies to shift overnight their workforce distribution, their workforce management, which suddenly was accustomed to be working in the same office all together and now they’re working from home.

I have attended meetings in the past few weeks where suddenly there were infants passing by, there were senior people passing by doing calls and so on. But that aside, which is very entertaining, this radical and immediate shift is very much likely to have long-term impact as companies deal also with the economic impact of this crisis. It’s also forcing companies to explore new ways to manage their workforce to build a culture.

And the new situation is certainly accelerating what probably was already happened. You and I have known each other for some time and I’d like to ask you the first question. As I said, things have been happening now and companies are dealing with the emergency overnight and they have to. But there were already forces in place that already were influencing how companies were thinking, well, maybe were starting to rethink their workforce model. Can you talk about those forces a little bit?

Gene Zaino: Absolutely, yeah. It’s a very interesting time, Andrea, as you’re saying and the workforce is certainly going through another transformation of understanding even further how to work remote. And there’s very interesting things, we just recently, we did a little bit of a survey because our company now is working 100% remote with about 150 people working from home for the last three weeks. And we wanted to know how are they doing? And it’s interesting many of them say, “Hey I finally turn on my camera and I got comfortable with it and I actually feel more connectivity with people, because it’s easier to communicate with them now and I am able to communicate with more people more frequently with the camera.”

Now, on the negative side, they’re seeing that the challenges are, certainly now during this pandemic, that they have children at home that they need to home-school and they need to deal with. And so they’re balancing their stress level between learning new ways of working and also being able to manage the parenting of their children is a big challenge. Anyway, I wanted to mention that because that’s kind of new news for me. As far as the forces that are already in place that I think this current situation has actually accelerated, is there’s been a growing need over the last 15, 20 years and certainly more so in the last five to 10 years of companies needing to be more agile.

Things are changing faster than they’ve ever had before. Companies need to be more adaptive, whether it’s global competition, whether it’s new business models, and most importantly it’s things like new technologies that they need to learn how to implement. And all of this leads to really a different kind of business model that companies that have been around for years are figuring out or trying to figure out how do they adapt. And most of this is having a much more flexible workforce.

And in the past, companies have an HR department and those HR people are focused on their employees and benefits and care and feeding of those employees, and that’s very important and that’s not going away. But the only other way they would use flexibility with a non-full-time workforce would be to go out to vendor communities and consulting firms and staffing firms, and that’s handled generally through the procurement or financial section of the business. And those people are really good at buying things but they’re not good at, necessarily their skill set is not necessarily dealing with people like your HR department.

What we’re seeing is that there’s been a trend of programs being set up just to deal with this new segment of the workforce, which we named the independent workforce. And these are professionals that have chosen to go off on their own. They’re generally high-talent people, they’re generally nine years or more in experience. They have a strong expertise and they have chosen to take control of their own career and work across several different companies, companies that they like to work for, companies that they probably have known and they’ve worked with in the past, but now they have a diversified income stream.

And then from the company point of view, they actually prefer to have a larger group of people that they could tap into when they need them, but not have to pay them when they’re not needed, which gives them a broader sense of skill set. They have a wider reach, but yet a better cost structure because they’re just using people when they need them, and it’s kind of a win, win, win and we’re seeing that as a huge trend. And further to that, it’s actually easier now for people to do that, Andrea, because it’s really… to start a one-person business, it’s much easier today. There’s a whole industry to support these types of freelancers.

There’s the Google Cloud, this cloud is Google, there’s Square, there’s Intuit, even MBO has its own support structure for independent consultants. And as the baby boomers have kind of reached a point where they don’t want to retire, they want to stay relevant, they can’t afford to retire, they are very knowledgeable, they have a lot of experience. Well, they tend to work this way and maybe do a little bit of a project and then take some time to themselves, work on other ways.

And really, instead of using their retirement capital that they’ve invested over the years, they’re using their network capital by leveraging the relationships with people that trust them to do work on a project basis. Those are trends that have been happening over the last 10 or 15 years that this has only accelerated this change, because people now are getting more comfortable working from home. And companies are realizing they need to diversify their workforce further and this is a way to do that and reduce risk.

Andrea Fabbri: Right. So, in that scenario, the workforce in the future is, some are going to be employee and some are going to be independent. In other words, there is going to be a very different model emerging for the company as a whole to manage the “workforce.”

Gene Zaino: Yeah, I see it as a third channel, Andrea, very much what you just said. You will always have your full-time core people that have institutional knowledge about your business. You will always need to go out to expert vendors and suppliers that are businesses that could deliver solutions to your business, but you will have a third channel. And this third channel is building a relationship with independent freelance consultants that you will curate and have relationships with that you could send work to when you need it and when they are able to do it.

And it’s a relationship that is positive on both ways because the individuals want to have a client base of companies that they can work with. It’s maybe, five, six, seven companies; they don’t want a new client every time. And as a business, you don’t want to have to go look for someone new every time that you don’t know, that doesn’t understand the business of your business. You want to build and curate a community of talent that you will have a relationship with and have a process that I call, to become a client of choice for them. Just like you want to be an employer of choice for your full-time people, you want to become a client of choice for this high-talent, freelance community of independent workers that have chosen to go off on their own. And generally, they’re high-talent people, because for them to be able to afford and to be successful on their own, they are delivering a pretty valuable and in-demand skill.

Andrea Fabbri: Yeah, that’s very interesting. This independent channel emerging makes me go ask you… makes me want to ask a question. And that is, traditionally companies have always protected very much the knowledge and the capital, the intellectual capital that they own through their employees, right? Leading them to pay sometimes even high salaries for those people that they really wanted to. Is this new channel changing that or reducing the proprietorship of knowledge that a company has and potentially weakening that or is it reinforcing it?

Gene Zaino: Very good question. First of all, I believe there will always be the need for your talent that you’re going to have as full-time employees that are very valuable to you, and that won’t change. However, in terms of scaling that and perhaps having the concern of intellectual property leaving your organization, because they’re not “your employee” as opposed to them being “an independent worker” that you’re paying as business-to-business to their little, one-person company. Technically from a legal point of view, I’m not a lawyer, but I could tell you that employees actually have more rights to keep themselves protected and from being sued from a former employer than do an independent contractor that’s a true commercial business-to-business relationship.

You actually can create an intellectual property agreement with real teeth in it and penalties that could be much more enforceable from a business-to-business relationship between your business and your independent contractor business than you can with an employee who has employee rights that are governed by both federal and state laws. For instance, non-competes are not very enforceable in many states, and however, if with an independent contractor where you’re building a commercial relationship, they’re actually far more enforceable.

Andrea Fabbri: Yeah, that’s interesting. I can clearly see the advantages of this model. I think about the parallel of what you’re describing with Airbnb, where people with multiple properties are leasing out their properties. And so, if I have multiple skills, I’m “making” my skills available to a variety of potential clients and the client’s benefit, given what you said earlier, agility, flexibility costs, but also the client benefits probably more stability. But is this model applicable for everybody? Here we are, there are a lot of people that are faced with job insecurity, a lot of clients they are now dealing with this situation of work from home. Is this a model that is applicable to all businesses or there are some businesses that are a better fit for this model?

Gene Zaino: Our experience, and we’ve done a lot of research in this area, is that it’s very applicable to businesses that have project-oriented work. Think of the old days of, not even the old days but traditionally you would think of the entertainment or the movie industry, right? Their people would go to a set, they would pull together local people, whether they’re extras or they’re camera people, that’s traditionally always been a contract workforce. In a business today where you have lots of projects, certainly the professional services business or consulting business or research and development, but today many businesses have the need for a project, whether it’s new technology you’re implementing, or a new marketing plan you’re implementing, or new workforce transformation or internal change management, there’s usually needs for projects.

The more you have a need for project-oriented work, the more this type of specialized workforce that you could tap into when you need it as opposed to trying to retrain existing people. One of the benefits of independent workers is that they tend to focus on what they know how to do best. And when you are doing something that you know how to do best and you do it over and over again, the old rule of doing something 10,000 times you’re an expert at it, they tend to do that work really well and they could do it very efficiently and for a better cost and actually make more money because certainly if they could even set it up as a fixed price.

If you could imagine having a portfolio of specialists that’s at your beck and call when you need them, that’s just the incredible power of a network and that’s really where today’s new business models are moving. If you look at all the new successful business models, whether they’re Amazon or any of the… Netflix. And if you think about them, they have a ton of content or a ton of specialization that people consume as they need it, and that’s the new business model. And it’s a modern business model and a modern business model needs a modern workforce. And having this very channel of independent workers and specialists is really an important component for the modern workforce in modern business models.

Andrea Fabbri: Yeah. And particularly in a time of crisis where you need to be looking for new opportunities to create value and new opportunities to reorganize how your company is structured. But the last question that I have for you is, is this emerging model potentially challenging the whole notion of building a brand culture? In your own direct experience, has this been a challenge? And what has been the way in which companies have still created, although leveraging this independent workforce, still created a sense of attachment and brand for these independent workers, which when they’re working for a client, they have to represent the brand so they can’t just be lone rangers?

Gene Zaino: I totally agree. That is the problem, Andrea. And I think companies are trying to struggle with that and figure that out. The example I like to use is, kind of been around for a long time, that is not a good thing to do. But because there’s lots of laws around worker classification, which we’re not going to get into on this call, but there’s a big issue. Is this person an independent contractor or is this person really your employee? And if they convert to being your employee from a legal point of view, even though you’re paying them as an independent contractor, do you have liability and penalties and benefits to give to them retroactively?

What companies do is they kind of give them a red badge as opposed to a green badge, right? And if you go into a big company and you go to their lunch room you could always identify the independent contractors because they’re not allowed to sit with the employees, they have to sit on the other side of the room and they have a different color badge, which is just kind of crazy. What’s happening is companies are trying to figure out, how do I do this, and again, curating a group of people that you know or that you could build relationships with and really need to fit the culture of your business.

And there are things you can do to help them. There are things you could do to provide them infrastructure or other tools and even seminars on ways that you want them to operate. You’ve got to be careful that you don’t cross the line of them being perceived as employees by the local states and government agencies that would be anxious to want to reclassify them as an employee so they can get their payroll taxes and things of that nature. That is a fine line to balance.

But the issue of culture is something that is working in some companies, that you can see where it’s actually becoming an extension of their full-time workforce and they’re working well together. But it does take a lot of effort and that’s why it needs to not be handled just by the people that buy stuff, like that buy vendors or products. And the HR people are really focused on the full-time employees, so it needs to have a separate level of focus certainly in large companies where they could actually become that client of choice and also build that curated community.

Andrea Fabbri: Yep. And so, it needs to be managed, this is not something that you can leave and hope for the best.

Gene Zaino: I mean, just to quickly give an example, sorry, Andrea. But just doing a one good example is, Amazon, I’m sure you’ve seen the Amazon drivers, they come with the Amazon truck and they’ve been able to balance that pretty carefully to have these independent contractors still kind of fit into their world. Anyway, that was just the last point.

Andrea Fabbri: Yeah, that’s true. I was aware of them as I was preparing for this conversation. Well, it seems to me that they say out of crisis there are always new opportunities that emerge. Certainly, has been true in my life, I’m sure it will be true for this crisis. I wonder if the workplace is becoming more humane and we’re moving away from the platitudes that you always see on the walls and posters, so collaborative and inventiveness. Actually, we’re getting to something that is more real. What form and shape it will take we will see, I’m sure that you’ll be a leader in that space, you and your company. I thank you very much for your time, for your insights today and look forward to speaking with you in the future. Thank you, Gene.

Gene Zaino:  Thank you very much, Andrea.