The Freelance Economy Still Runs on Word of Mouth

12-Dec-2014

I like this.

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We may well be entering a new age of work, in which tasks can be sliced into bite-sized chunks and allotted online to freelancers all over the planet. But we’re not quite there yet, according to a new survey conducted for MBO Partners, which provides back-office services to independent workers — which it dubs “solopreneurs.” Independent workers still get the vast majority of their assignments through the old-fashioned channel of word of mouth, and this is even more pronounced for the most successful among them:

Word of mouth chart

When independent workers listed their top three sources of assignments, social media was mentioned by 18%, and online talent marketplaces for 10%. For those making more than $100,000 a year — 56% of whom are 50 or older — the numbers were 1% for social media and 6% for online marketplaces.

Overall, there are now an estimated 17.9 million “solopreneurs” — people working at least 15 hours a week outside of traditional jobs — and another 12.1 million “side-giggers” who do regular independent work but for less than 15 hours a week, according to the fourth annual “State of Independence in America” report from MBO Partners. The number of solopreneurs making more than $100,000 from their independent work was estimated to be 2.7 million.

The 17.9 million estimate, derived from an online poll of 2,017 people, is up from 17.7 million last year and 15.9 million in 2011, the first year of the survey. That 12.5% rise since 2011 contrasts with a 1.1% growth in the overall U.S. labor force over that period. But this year’s combined total of 30 million solopreneurs and side-giggers (this was the first time the survey included the second group) is a lot smaller than the total of 53 million freelancers announced just last month by the Freelancers Union and Elance-oDesk.

That difference is all about definitions, says Steve King, partner at Emergent Research, which designed the MBO Partners survey and has also done work with the Freelancers Union. I talked to King about that, and the enduring power of word of mouth for independent workers. What follows are edited excerpts of our conversation.

What are the things that make this number different from the Freelancers Union/Elance-oDesk number?

The big difference is that we’re focused on people that do this regularly, so we screen out anybody who says they don’t work as an independent worker in an average workweek. When you look at the Freelancers Union, their focus is to try to understand everybody who does anything that’s non-traditional. You could show up in their numbers if you fixed your neighbor’s computer for money, once in a year.

They’re both important questions, and I like what the Freelancers Union did. Their study, probably even more than our study, will spark quite a bit of debate about second jobs. They said 23.6 million people have multiple jobs, and the Bureau of Labor Statistics puts it at 6.7 million. That’s a big difference, and our work supports the Freelancers Union more than the BLS in this case. We’ve found that when you ask people if they have a second job, they tell you no. But when we ask them in interviews, “Do you have any other sources of income? Do you do anything else?” people who have told us they don’t have a second job will then tell us they have a second job. It’s the psychology of what is a job. And the BLS, on their multiple income questions in the household survey, they use the word “job” a lot.

In terms of the trajectory, the independent-worker, “solopreneur” category is growing faster than the overall labor force, but it’s not growing quite as fast as was expected back in the 2011 survey, where the projection was that it would be 20 million by now. Is that just mainly because the economy’s been so anemic?

The job market’s gotten stronger, and that has a tendency to take people out of independent work. I was actually thinking this year, given how unusually strong the job market’s been relative to past years, that we might see a decline in those numbers, and we didn’t. To me that’s an indication of the structural shift that’s going on, even in the face of a strong job recovery. It’s still growing, and it’s still growing at a pace faster than the overall workforce.

The thing that struck me — and I guess it shouldn’t be surprising, but it’s kind of interesting — is how dominant word of mouth is as a means of getting work.

We do a lot of surveys of different freelance groups, independent worker groups, and word of mouth just consistently comes out in that range. It doesn’t matter who we talk to. The network is incredibly important to independent workers. It just is overwhelmingly how they find work.

 The electronic stuff, the Elance-oDesks, TaskRabbits, they’re growing very rapidly. They didn’t really blip much back in 2011, and they’re still not showing up high, but they’re clearly growing fast. We do see work moving more and more online, but it’s going to be a long time before that overtakes your personal network that you’ve built. And you’ve built that now not just face to face — a lot of that is now virtual — but it’s still word of mouth in the end.

We did a study earlier this year looking at a different definition of what we call successful freelancers, they were people that had been doing it for at least eight years and made at least $80,000 a year. They came in right about where the $100,000-plus group did in this survey in terms of word of mouth. What really hit me when we did that one, we asked them to rank the attributes that they felt were important to being successful as an independent worker. They ranked your professional skills and expertise first, your personal attributes — which mostly had to do with diligence and dealing with insecurity and so forth — as the second most important attribute, and third they ranked networking. They ranked sales and marketing sixth. When we interviewed people, what they told us was, “Well, networking is sales now. It used to be different, but …”

Even when you’re talking about moving to these online systems like Elance-oDesk, your reputation becomes so important, and your reputation is a function of your network. And I have to add when I started in tech, networks weren’t that important. If you had a good idea, you could get a hearing, and you could get funded, and you could build a business. Quite honestly today if you don’t have access to a network that gets you introduced, you can be brilliant and get nowhere.

Why would that be more so?

It’s just gotten so much bigger. There’s so much going on, and at this point there are key gatekeepers and key people that you need to get to. The industry used to be a lot smaller, and you could meet people at shows, or you could just cold call them and they’d answer the phone, and that stuff just doesn’t happen anymore.

You came into this from the tech industry?

Yeah, I was with Lotus Development for a long time, mostly overseas. Then I left them and went to work for Macromedia — FlashDreamweaver — I was their chief marketing officer for a few years in the late ‘90s, and then after that I started this firm. Initially I was doing tech advising and angel investing, but I got asked by Intuit to start studying small businesses and independent workers, and that kind of crowded out all of our other work.

I bet you got that gig by word of mouth.

I did get it by word of mouth.

 


Justin Fox is Executive Editor, New York, of the Harvard Business Review Group and author of The Myth of the Rational Market. Follow him on Twitter @foxjust.

 https://hbr.org/2014/10/the-freelance-economy-still-runs-on-word-of-mouth/

 


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