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Freelance is the Future

Freelance is the Future

Is freelance our future? Businesses are constantly striving to adapt to changes. With the constant and often rapid changes in this day and age, it needs to keep itself lean in order to quickly react to market trends, new technology, and consumer behavior. Strict labor regulations make companies think twice about hiring people permanently, for fear of being saddled with high operating costs when going through challenging times. Many companies opt for outsourcing, but that is not without problems. Dissimilar cultures, lack of understanding and effective communication, and not meeting expectations have been cited as some of the downsides of outsourcing. There is a distinct lack of standardization in the freelancing market.

I worked in banking in Jakarta, Singapore, Ho Chi Minh, Bangkok, London, and New York for 16 years before I went into edu tech. During my corporate career, I went through the South East Asia economic crisis in 1998, SARS in 2000, 9/11 in 2001, and Lehman Brothers in 2008. With every crisis, businesses were required to rethink the number of their employees and whether that number was fiscally appropriate. This rationalization was usually temporary and rehiring started again once the economy improved.

The situation has changed in the last 8 years.

Since the Industrial Revolution 4.0 started in 2011, several types of permanent jobs are gradually becoming obsolete. Machines and computers are taking over roles such as accounting, administrative, call centers, and manufacturing jobs. While the number of jobseekers remains steady, the amount of available jobs has been reduced, which affects workers’ pay. Labor share of income is in a downward trend (see graph). This trend means supply and demand has reached a saturation point.

US labor share of nonfarm business sector, total compensation share of gross value added (McKinsey & Company)

Hyper-competition + constantly changing markets = Uncertainty

When Apple launched its Apple II, or when Jeff Bezos started Amazon, or when Jack Ma started Alibaba, they all had the luxury of time, although it may not have seemed so at the time. They did not have the constant fear of a well funded competitor swooping in and launching similar products before they were ready to release their product to mass market.

In this era of globalization, any market in almost any country is open to anyone. This is great as it means more opportunities, but it also means global competitors too. We are talking about competitors with stronger capital and a network who could simply copy an idea, produce it, and market it rapidly. There are a number of cases where struggling start-ups with great products had to fold because someone else found a way to mass produce them cheaper. They ran out of money before reaching the critical scale.

Governments in all countries have regulations in place to protect workers. There is minimum wage, taxes, and health and benefits to pay in addition to typically keeping a term limit for contract employees. While these are all necessary to ensure workers’ welfare, they also mean a greater long term commitment for businesses. Despite needing the headcount for the amount of workload, companies are hesitant to hire permanent workers as there is this persistent fear about keeping up with payments amid growing economic pressures.

In this world of hyper competition and ever-changing environment, business owners favor a more flexible organizational structure to quickly adapt to changes and therefore need more flexible workers, as well. This is the reasoning behind the increasingly growing number of outsourcing, both in institutions and individuals. For the past five years, we have been steadily converting to a gig economy, frequently known as freelancing.

World of freelance: the good and the bad

There is no shortage of websites catering to businesses who are looking for freelancers: freelancer.com, upwork.com, total.com, 99designs.com, peopleperhour.com to name just a few. The variation of services are staggering too, from one off projects such as logo and website design, tax and accounting services, all the way to highly sensitive and complex work such as PhD research, e-commerce, company valuations, and artificial intelligence research. Prices depend on the complexity and skill required for the work, from $5 to upwards of $250 per hour. The variety is staggering and they are very readily accessible for employers who need to ask themselves, “What are the pros and cons of hiring freelancers?”.

The Good

Flexibility
This is the number one reason for companies when hiring freelancers. Businesses can add and shed workforce according to the current needs without long term financial commitments or complex HR processes.

Speed
Hiring a permanent employee is a rather long process involving several stages of interviews, background checks, and orientation. You are, after all, admitting someone into a family. Not so with freelancers who are only working on a project basis. It is as simple as going online and doing a search, being guided by available past work and user reviews.

Global reach
Companies are no longer restricted to the local workforce. With the availability of international freelancing websites, you can hire someone from virtually anywhere in the world. 10-20 years ago, companies had to hire expatriates if they could not find anyone with the right skills to perform a specific role within their nation’s borders. Now they are available at a click of a mouse.

The Bad

Data Security
Google “third party data breach” and you will get 106 million results. Information security is vital and this is the number one reason why companies are reluctant to hire someone via the internet to handle sensitive internal data. Integrity and track record play an important role in the process of hiring freelancers. Businesses need to feel secure that their data is being handled safely and carefully.

Quality assurance
Despite hiring from a well known website, freelancers are hired based on their CVs, or resumes, and reviews from previous employers only. Unlike working with permanent employees, who are familiar with the team’s work ethics and quality standards, freelancers do not come with these specific certifications. There are often issues like miscommunication, falling behind schedules, and results that are not meeting expectations. Personally, I have experienced the ultimate disappearing act, whereby a freelancer simply went incommunicado in the middle of a project. We had to quickly find a replacement, putting the project behind schedule for several weeks, and then dealt with the added cost. These are the kind of issues that put companies off from hiring freelancers.

Like it or not, businesses have no choice but to adapt their organizational structures to include freelancer to stay lean and flexible, especially during economic crises. We need to take advantage of the positives of this gig economy and minimize the negatives. To do so, we need more training for the freelancer, standardization, and certification to align employers’ expectations and workers’ professionalism.

Training, Standardization, and Certification

Certain standardization and certifications are already in place in several developed countries, but most countries do not have them. It is not so much an issue with technical skills, but rather an issue of work ethics, project management skills, client management, and communication skills that leave a lot to be desired. Among the number of common problems are: different perceptions of final results, lack of transparency during the work processes, difference in quality standards, and lack of communication regarding schedules and timelines that lead to delays or even failures to reach the end goals. This may not be a problem for professionals with years of experience under their belts who switched to freelancing, but the new younger freelancer have never had the kind of professional experience needed to be successful. We need a system where freelancer can learn professionalism and understand business expectations.

Bantu Kerja (Learn to Work)

Bantu Kerja (www.bantukerja.com)

Matata EDU recently released the website bantukerja.com. Bantu Kerja is designed for young people who are new to the workforce to learn to be professional freelancers. Bantu Kerja partners with educators, companies, and professional individuals to teach novice workers essential soft skills as well as technical skills needed to deliver high quality results. The soft skills include project management, planning and keeping to timelines, and communicating with clients to achieve mutual understanding about expectations.

At the end of the projects, freelancers will deliver real products or services as specified by the professional partners. They will also receive ratings and reviews from the professionals they work with, which will be shared publicly. For those who meet the criteria, Bantu Kerja will issue certificates and recommendations affirming they are qualified freelancers. Therefore, potential employers can be confident that the prospective freelancers has had this work experience and understands the requirements for a professional relationship.

Bantu Kerja trial at Madrasah at Jember, Indonesia

What is in it for the professional partners? Think of Bantu Kerja as an online internship program. For some countries, businesses are required to hire interns and Bantu Kerja is the most efficient and economical way to satisfy this requirement. It does not require dedicated workstations and other allowances. Even if you are not required to have an internship program, Bantu Kerja helps companies identify and educate potential freelancers to the company’s specifications. It taps into a pool of potential workforce needed for businesses succession plans.

At the time of writing, Bantu Kerja is only available in Indonesia.

The world as we know it is changing. We must accept that.

University education does not guarantee a secure job

University education does not guarantee a secure job. We have seen many university graduates and people with masters degrees in entry level jobs for years. Some even resort to driving for ride sharing apps to pay for their student loans. The number of people needing jobs keeps increasing while labor intensive work such as manufacturing, mining, and farming is rapidly declining with the constant advancement of technology. Work is no longer a 9 to 5 office job. The reality is this situation is here to stay. We need to accept this and adapt to this.

Freelancer, self employment, and independent work are the future of employment. Despite needing more workforce to cope with an increasing amount of work, businesses are very hesitant to add more employees due to volatility in the economic and political environments. This is understandable as they want to ensure the ability to cope with operating costs during difficult times. Freelancer are obviously preferable, but there is a persistent concern that they will not be able to meet the company’s quality standard. Therefore, standardization is key. A good training program, with credible certification makes it convincing for potential employers to tap into and hire from this pool of talents while maintaining low operational cost. It is a win win situation for both sides.

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Enrico Pitono

CEO of Matata Corporation UK Limited, a social tech company based in UK with strong presence in Indonesia under PT Matata Studio Indonesia and PT Matata Edu Inovasi. Matata's purpose is to transform lives with affordable technology through Edu Tech and E-Commerce for micro businesses. Previously worked in banking for 16 years with with focus in treasury, capital markets, risk management and global business development. Experienced in debt capital market and regional senior management role with coverage of Asia, Europe and US centres.

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