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The Best Pros Won’t Work For You, But You Can Still Engage Them

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Stephane Kasriel

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Stephane Kasriel is CEO of Upwork (formerly Elance-oDesk).

Recruiting is one of the top jobs for any executive or entrepreneur. Talent is the lifeblood of your company; let it drain away, and you die.

Unfortunately, that lifeblood is in very short supply — and it’s about to get worse. Here’s why.

Three macroeconomic factors are converging to make hiring more challenging for companies: The strengthening economy; the increase in demand for technically skilled workers; and the rise of the freelance economy.

The first two of these factors are easy to understand, the third one a bit less so.

Expanding Economy

According to the U.S. Bureau of Labor Statistics, the unemployment rate dropped to 5.1 percent in September — its lowest level since April, 2008. The lower the unemployment rate and the healthier the economy, the more upward pressure there is on salaries — so it’s no surprise that median household incomes are up 5.2 percent year-over-year.

But low unemployment also means that talented employees have more options than ever. Any executive who has had to respond with a counteroffer to avoid having a key employee “poached” will understand this dynamic — and, if you’re like most companies, you’ve seen this happen with increasing frequency over the past few years as the economy has heated up.

The Move Toward Tech

Similarly, as our economy becomes driven more and more by technology, the skills needed to manage in the new world are more valuable. Software plays an increasingly significant role in fields that are not traditionally considered “tech,” such as real estate, transportation, food, retail and even construction. Therefore, people with software engineering and related skills find themselves with ever more options.

As a result, hiring those tech-savvy workers becomes more challenging. There are even talent agencies for programmers now, which hire out the best of the best on a model similar to the agency model used for Hollywood’s most bankable stars.

Both of these two macro trends are relatively well established and well understood. Economic pressures on the labor pool have been thoroughly studied for decades, and the notion that “software is eating the world” is practically a cliché by now.

The Rise Of Freelancing

But the third aspect, the rise of the freelance economy, is the most novel, and therefore the most difficult to deal with for most companies.

A recent study of 7,107 U.S. workers conducted by Edelman Berland and sponsored by Upwork and the Freelancers Union found that the number of U.S. workers who do some sort of freelancing has grown by 700,000 over the past year, and stands at 34 percent of the workforce. (See Freelancing in America: 2015 for the full report.) That means almost 54 million Americans are now freelancing. And this trend shows no sign of going away.

For some, this is moonlighting at an evening job, driving a car on weekends or putting together a mix of part-time traditional work with freelance work. But more than 40 percent of the country’s freelancers don’t have a traditional employer at all: They are entirely self-employed, and freelancing is their primary form of income.

Some are doing freelance work because they need the money and have no other options. But fully 60 percent of freelancers said they started doing independent work more by choice than necessity, and 50 percent say that you couldn’t pay them any amount of money to take a traditional job. Why? Because they have far greater flexibility, enjoy being their own boss and many of them actually make more money than they would working for an employer.

In fact, of those who left traditional jobs to work solo, 60 percent earn more now than they did in a regular job, and of those, 78 percent said it took a year or less to exceed their previous income.

For anyone considering joining the freelance economy, those are pretty good odds. But there are intangible benefits, as well.

Just ask Fred Talmadge, a freelance software and app developer based in Seattle. He said he’s had “profound changes” in his life since he started freelancing in 2011. “Professionally, I learn more every day by working on different types of projects of my choosing as a freelancer, and it keeps things fresh.” Plus, he can set his own schedule, which lets him take his daughter to school.

Or consider Angela Irizarry, an integrated marketing pro who started freelancing at the end of 2011. She has declined full-time job offers since then because she prefers her new life, and she’s earning “multiples more” than she would in a traditional job. “Freelancing is such an incredible journey for me, both personally and professionally. I get to work with some of the most talented individuals I’ve ever known, and have clients around the world,” Angela says.

Bad News, Good News

The shift toward freelancing is a boon for many workers, but a headache for businesses that desperately need talent. Those freelancers who enjoy being their own boss and who wont take a full-time job for any amount of money? They’re probably among the best at what they do.

In summary, there’s a triple whammy for businesses: The job market makes it challenging to attract good talent, technical talent is harder than ever to hire and a significant percentage of the most talented people will never take a traditional job with you or anyone else because they value their independence.

But for companies willing to take advantage of it, there is a potential upside to the freelance economy: If you can adapt, it opens up a vast new field of talent that’s eager and willing to do outstanding work for you.

Granted, I’m biased. Upwork has an interest in this market, because we have a network of more than 10 million freelancers who perform more than $1 billion worth of work annually on our platform. But Upwork is not the only representative of what is clearly a growing trend toward freelance work.

There are other, more specialized platforms: Content.ly for freelance writers; 99designs for designers; Fiverr for designers, artists and other creative professionals; GetACoder.com for programmers; and many more.

Rather than fight it or moan about the difficulty of hiring good talent, I suggest that executives and hiring managers embrace this trend. Learn where the best freelancers are for your needs. Create a plan for using more freelance contributors, then do test projects with multiple freelancers and find out which ones are the best fit for your needs before building longer-term relationships with the best.

Most importantly, adjust your organization’s structure so that you embrace independent professionals and treat them as valuable contributors, rather than expendable resources to be plugged in or swapped out as needed.

Indeed, there are signs that some businesses are starting to do this. In 2014, just 4 percent of companies who used contingent or temporary contract workers were using online talent marketplaces, according to a survey of 202 companies by Staffing Industry Analysts. In 2015, that number has shot up to 12 percent. This survey focused on large companies, with more than 1,000 employees. The percentage is probably even higher with smaller companies.

A September story in the Financial Times underscored that point, citing a PricewaterhouseCoopers prediction that the freelance economy will grow to $63 billion globally by 2020, up from about $10 billion in 2014.

In a tight labor market, the smartest professionals are realizing they have options beyond traditional employment, and are embracing the freedom and flexibility of the freelance life.

Smart companies will do the same, and follow the talent as it embraces the freelance economy.

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