A few years ago, I was doing consulting work for a well-known department store chain. They were doing well and were also looking to cut costs. One of the ideas was to contract out their delivery drivers. After some discussion about the numbers, I suggested that doing so would be a mistake. Their customers only interact with 2-3 people (retail sales, phone customer service, and the delivery team) from their stores. These touch points are what the customer remembers when deciding to shop with them again and/or talking about their experience with friends and family. Why would they want to lose the ability to manage that? They chose to keep the drivers.

I bring this up because there has been a lot of discussion lately about contractors vs. employees, especially in the sharing economy (see a general discussion here). Some employers are looking for ways to reduce labor costs and finding ways to classify people working for them as independent contractors is just one. However, by doing so they are setting the stage for less engaged people to be delivering their products and services. Telling the people working for you they are disposable sends a strong message.

Some start-ups are bucking the contractor approach and are viewing employees as the best people to deliver their products and services. As one business owner puts it, “The vision says that it’s really smart to make them employees, so we can get the best people to deliver the best service.”

The quote implies a few things:

  • While there are talented people out there who want to free-lance, the majority of job seekers want the benefits that go along with being an employee. I remember being in several call center staffing meetings and hearing managers rationalize their contractor status model with statements like, “Single moms will appreciate the flexibility of our part-time schedule.” That was, of course, a bunch of crap. Every single mother I know wants the paycheck and benefits that come with full time employment.
  • There’s a strong relationship between the quality of your talent and the quality of the service that’s delivered. Why? Because you can apply valid pre-employment test techniques in hiring employees to ensure you are hiring people with the knowledge, skills, and abilities for the job. Also, when a company treats people like they are part of the mission, rather than a commodity, they are more engaged. More engaged employees are more likely than contractors to feel as if they are part of the brand and they want to build and protect it.

There is very little always or never to the contractor vs. employee conversation. I’ve had Uber drivers who are retired and just like making a few extra bucks here and there and others who will drop the gig as soon as they find full time work. Of course, part of the brand is that you’re just catching a ride with a friend as opposed to hiring a professional driver, so the contractor model works well for both sides.

However, the best way to ensure that whoever delivers your product/service to the end user is committed and engaged is to hire them as employees. Why would you trust your brand to someone who is not as invested as you are?

For more information on using pre-employment tests to hire engaged employees, contact Warren Bobrow.