Did you know that there are seven common types of employees you can hire for your business? Today I dive into the ways you can source people for your team and what mix of these choices are good for your company. I think this is very important because your team is what makes your company go. Without people that can profitably run your business for you, you don’t own a company, you own a job.
In this episode we discuss:
1. Seven common types of employees
2. Pro and cons of each
3. How to determine a good mix for your team
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How To Build A Profitable Team Mix
In our last episode, I talked with Ronda Robinson about recruiting and retaining a team. While we touched on in-office vs remote situations, we didn’t get a chance to discuss the types of team members you can recruit for your team.
Did you know that there are seven common types of employees you can hire for your business? Most of you are familiar with full-time and part-time. You can also have temporary and on-call employees. Some organizations can even have volunteer employees. I was actually one of those for the DOD as the Public Affairs Directory for the Employer Support of the Guard and Reserve, but that’s another story. Where was I? Oh yeah, and then there are contractors and independent contractors.
Now I am not here to bore with the differences between these classifications of employees. Rather I want to dive into the ways you can source people for your team and what mix of these choices are good for your company. I think this is very important because your team is what makes your company go. Without people that can profitably run your business for you, you don’t own a company, you own a job.
I lived this fact for 13 years of my life, so let me tell you, it stinks to own a job. It’s not why any of us go into business - at least not anyone I know - and we can’t truly build a successful business if we are constantly stuck working in it.
Now before I dive into this, I want to first say some of this might seem back. But, please, I ask you to bear with me - We have a wide variety of listeners and I don’t want to leave anyone in the dark. I promise to make this streamlined as always. So let’s do this.
Most of us are used to insourcing, which is just a fancy way to say hiring people off the street. These people work for you on a W-2 basis and you have responsibilities to their unemployment insurance along with federal and state withholdings. Pretty standard stuff. Insourcing is most common because it’s been around for longer than most any other type of sourcing. It also gives you the most amount of control on what and how your team performs. That was until recently with the explosion of remote working - but I will get to that in a minute.
Next there's outsourcing, which is when you hire someone from outside your company to another company who invoices you for the work. It’s also called subcontracting and a lot of new businesses start with it because it’s more practical in the early stages of business. You might not have the resources to hire even a part-time person, so outsourcing becomes the answer. But there are many ways you can outsource. Let me explain.
Traditionally you think of outsourcing like I just described, which usually means choosing a company that does the work for you. But then there are companies that don’t do the work at all and just hire out their talent to other businesses. This is called employee outsourcing or leasing. This is how I started hiring people for my first business. It’s a great way to get in-house talent without all of the insurance, withholding and other red tape traditional insourcing requires. You can also have leased employees work remotely. Which lets us source these types of employees anywhere in the world. This is called offshore outsourcing, or offshoring, which is a mixed bag altogether that I promise to get back to.
First let’s touch on a few other sourcing options like hiring professional service providers. They could be CPAs, bookkeepers, lawyers, and other professional consultants. These people are essential to every business, but it’s not necessary for most of us to have them on staff, so we hire them when we need them. Which brings me to the last outsourcing type I am going to mention and one of my favorite - Joint Ventures.
The phrase Joint Ventures used to be a very formal term reserved for big companies creating separate entities to work together. But in the SMB world, we can create joint ventures with as little as a hand shake because all it really means is that two business owners have decided to collaborate. You don’t have to share any resources or occupy the same space - just share the responsibility of taking care of the same clients. And just like professional service providers, you are working with train specialists on an as-needed basis.
So now that we have covered the different ways to source talent, let’s discuss the pros and cons of each and talk about how to best mix them for your business.
The first thing to consider is how your business is structured. I have owned both brick and mortar and virtual businesses. At one time I had 22 insourced employees with a cadre of subcontractors, freelancers, professional service providers and interns. We ran everything out of a 13 thousand square foot facility in downtown Anchorage Alaska. We had a great culture and a lot of systems in place, but it was also a lot to keep track of and eventually became something I didn’t want to manage any longer.
Now I have two companies with an entirely virtual team that are made up of W-2 employees, freelancers, contractors, offshore leased employees, my professional services team, and my joint ventures. I know it sounds like I just rattled off the same list of sources minus the offshoring and intern, but that’s my point. It doesn’t really matter if you are a brick and mortar or a virtual company - it’s good to have a healthy mix of sources. Of course, what that mix looks for you can be very different from mine.
So how do you figure out the best mix? That’s a great question and I am going to disappoint you with, it depends. It depends on what kind of service or product you provide and what kind of talent you need to provide them. But even with that very broad variable, we all have similar needs in various parts of our company.
For example, your core leadership is a very personal part of your business. They are where you put the lion’s share of your trust and count on them to follow through when you aren’t present. That is why I like to reserve these positions strictly for W-2 employees. They don’t have to be full-time, but being on quote payroll gives them a sense of stability and a deeper feeling of inclusion. And then there are legal considerations of how 1099 freelancers and independent contractors can operate, so make sure you check with state and federal.
Moving beyond core leadership starts giving you a lot more flexibility in my opinion but I still have preferences on how to source different kinds of responsibilities. For what I call tedious work like checking emails, redundant tasks, or what some call line work, you can find great offshore options that cost a fraction of domestic labor while providing living wages for people in emerging countries.
It is also my experience to be selective of what kinds of tasks to offshore. I personally serve the needs of the US and Canada. Therefore I prefer my client-facing staff to not only be fluent in English but have a strong understanding of our dialects, culture, and reasoning - yes you heard right, reasoning. See, different cultures come with different ways they reason through business. If your team isn’t able to efficiently reason through tough client situations or negotiate business properly with vendors, you could be exposed to a lot of issues. I am not saying you can’t offshore client-facing representatives, just make sure you hire and train those that will represent your company the way you want to be represented.
If you are in a creative field, you might find the same challenges. Art and culture are closely integrated and so your creatives should be well versed on how you approach your clients’ needs. Some creative companies have more technical parts of the process, so this isn’t always going to be a concern, but it’s important to realize that just because someone speaks the same language as you doesn’t mean that they understand your culture.
Now for technical, back-end tasks, I don’t really have a preference of sourcing except for when the working needs to be done and that communication timing coincides with the rest of the team. You might have processes that must be done in-house, so leased, contracted, or W-2 employees are going to be your best best. For virtual tasks, the sky’s the limit.
Where things get really interesting is when you start working with Joint Ventures. I have a few of them in place and am really enjoying them. In a few cases I am the one providing the core service and the other way around with others. I like joint ventures for expanding your service offerings without expanding your team’s footprint. For me and marketing, there are so many facets of the industry that it’s impractical to try and maintain an in-house team with all of the expertise required to deliver on all cylinders. So, joint ventures allow us to take advantage of other firm’s talent and expertise in an effort to provide a more holistic service for our clients.
One thing to remember about JVs though. It’s imperative that you partner with owners that hold your same values and share the same commitments to their clients’ success as you do yours. You also don’t want to over-commit to any one JV in your mix. Remember, people are awesome until they are not. I have had JVs fall apart in front of my face due to internal struggles in the other company. I had a lot riding on the business we were getting from them and was relying on them to provide services for my clients. Just like your client mix, your source mix needs to be diverse enough to not kill your business if one source disappears overnight.
In the end, how you source your business is very personal at the beginning and becomes more a function of fit and efficiency. I am not aware of any special formula to the perfect source mix. I do know that your mix will fluctuate over time, so don’t get too rigid with any one type of source unless your vision and mission are directly tied to it. It’s your business and your team is a reflection of that business. So create a team that you can be proud of, so you can build a business your team is proud to be a part of.