The Role Of Freelancers In The 21st Century British Economy

Description
The Role Of Freelancers In The 21st Century British Economy

THE ROLE OF FREELANCERS IN
THE 21ST CENTURY BRITISH
ECONOMY
Professor Andrew Burke
DIRECTOR OF THE BETTANY CENTRE
FOR ENTREPRENEURSHIP AT CRANFIELD
SCHOOL OF MANAGEMENT
REPORT
He is widely published in top ranked international journals including the Harvard Business Review, Journal of
Management Studies, Regional Studies, International Journal of Industrial Organisation, the Oxford Bulletin of
Economics and Statistics, and Small Business Economics. His work has been presented at the EU Commission,
World Trade Organisation, HM Treasury, UK Houses of Commons and Lords as well as through media such as
BBC Breakfast Television and the Working Lunch.
Andrew is founding editor of the International Review of Entrepreneurship and was a guest editor of the International
Journal of Industrial Organisation. He is on the editorial boards of the International Journal of Business Innovation
and Research and the International Journal of Research, Innovation and Commercialization.
He has acted as a consultant for organisations such as the European Commission, Businesslink UK, GESAC (EU),
Forbairt (IDA), Hudson Contract, Schlumberger, Selex-Galileo, May Gurney, Bank of Ireland International Banking,
the Irish Music Rights Organisation, and PCG (Professional Contractors Group). He also has a portfolio of new
venture investments.
Acknowledgements: The author would like to thank PCG, the voice of
freelancing, for commissioning the research. He is also grateful for very
useful comments and suggestions provided by Simon McVicker, Suneeta Johal
and George Anastasi. The author is responsible for any remaining errors and
omissions. The study would not have been possible without the generosity of
the time provided by all of the executives who agreed to be interviewed for the
research. Therefore a big thank you is extended to: David Bullimore, Czarina
Charles, Lee Clarke, Nigel Cowmeadow, Martyn Curley, Kealan Doyle, Gideon
Hyde, Tony Lahert, Martin Leach, Philip de Lisle, Philip McCarthy-Clarke,
Rick O’Neill, Bill Parsons, Kevin Perrett, Martin Pope, Simon Rothwell,
Richard Salvage, Alex van Someren, Dan Taylor and two executives who
preferred to remain anonymous. A special thanks is also owed to
Tim Bradburn, John Brazier, Emma Brierley, Jim Cassidy, Michele Gray,
Gideon Hyde and David Pinchard for some useful introductions to
people in their networks.
About the Author
Professor Andrew Burke holds the Bettany Chair and is the
founding Director of the Bettany Centre for Entrepreneurship.
He is also a member of the Board of Cran?eld Ventures Limited -
the University’s tech transfer unit. Previously, he was the Director
of Graduate Programmes and a member of the Executive at
Cran?eld School of Management.
Contents
EXECUTIVE SUMMARY 5
SECTION 1 INTRODUCTION 13
SECTION 2 CASE STUDY ANALYSIS 17
SECTION 3 CORPORATE VENTURING: PROVIDING AND ENABLING INNOVATION 61
SECTION 4 ENTREPRENEURSHIP: NEW VENTURE CREATION, SURVIVAL AND GROWTH 65
SECTION 5 EFFICIENCY: PUSHING PERFORMANCE TO ITS LIMITS 69
SECTION 6 FREELANCERS CREATING AND SUSTAINING EMPLOYMENT 73
SECTION 7 DEFINING FREELANCERS AS UNIQUE ECONOMIC AGENTS 75
SECTION 8 CONCLUSION 79
The Role of Freelancers in the 21st Century British Economy 3
Executive Summary
Freelancers play a pivotal role in
Britain’s 21st century innovation-driven
economy:
They are sources of and conduits for innovation in both corporations and SMEs
They liberate businesses from the limits of their internal resource base and enable the use of exceptional
talent that would otherwise not be economically feasible to hire on employee contracts
They enable de-risking of some of the uncertainties of the market so that ?rms can reduce the risk
of growing
They reduce the amount of ?nance required for innovation and business start-ups
They promote ef?ciency-driven economic performance
They reduce barriers to market entry and reduce minimum ef?cient scale
They enable businesses to maximise performance across peaks and troughs in demand
They create jobs by increasing the level of innovation and ef?ciency in the economy and helping new
projects succeed
They enable businesses to manage, in fact reduce, entrepreneurial risk and so promote innovation and
enterprise
Freelancers usually generate these bene?ts through a working partnership with employees. This symbiotic
relationship between employees and freelancers has unfortunately been overshadowed by perceptions of their
competitive interaction.
Despite these important economic functions, freelancers are still largely under-analysed and unheralded economic
agents in the modern British economy. The main reason for this is that their new pivotal role has only really come to
the fore with the emergence of the innovation-driven economy over the last three decades.
The Role of Freelancers in the 21st Century British Economy 5
In this setting businesses bene?t from being:
Freelancers enable businesses to do all these things and hence have become a key driver for economic performance in
the economy. There is a need to identify the de?ning and unique features which distinguish them as unique economic
agents in their own right.
Innovative Able to manage entrepreneurial risk
Capable of prospering despite greater
market uncertainty
Flexible and agile
This report is motivated by the view that the economy has changed suf?ciently to warrant a re-appraisal of the roles of
freelancers. In this report we analyse the use of freelancers in 23 ?rms comprising a mix of corporations and SMEs of
varying ages from recent start-ups to more mature organisations. These businesses are drawn from some of the major
industries driving the British economy including manufacturing, information and communications, ?nancial services,
and professional, scienti?c and technical activities. We examine the roles and functions that freelancers serve in these
industries and assess how effective they are in adding value.
We ?nd that freelancers serve a different function to employees in terms of their role in the innovation-driven economy.
In terms of corporations and large ?rms we ?nd that freelancers ful?l managerial and technical roles at every stage of
the innovation development process from:
Innovation creation
Commercialisation of innovation
Integration of innovation into the core of the organisation
The Freelance
Innovation Value Chain
The Role of Freelancers in the 21st Century British Economy 6
These effects increase the scale and effectiveness of innovation undertaken by British business. They are summarised
in the Freelance Innovation Value Chain below. The bottom panel shows that the projects undertaken by freelancers
involve three stages of innovation development. The top panel shows the value-added provided by the various roles
of freelancers across each of these three stages. The front arrow of the diagram illustrates that the combined impact
of these roles across all three stages enhances business performance – increasing pro?ts and creating jobs.
Throughout all the stages of innovation development freelancers add value by:
Lowering the cost and risk of innovation
Enhancing the ?exibility and agility of businesses
Providing entrepreneurial management expertise not available in-house and without distracting executives
from core business
Making large organisations more capable of transformation
Enabling the use of specialised human capital not available in-house and without distracting employees
from core business
Enhancing Managerial Expertise
Enabling Specialisation of Labour
Increasing Flexibility
Enhancing Agility
Enabling Risk Management
Enabling Transformation of the Organisation
F
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Creation
&
Invention
Commercialisation
of
Innovation
Integration
of
Innovation
The Role of Freelancers in the 21st Century British Economy 7
Freelancers also promote innovation-driven economic performance through entrepreneurship. We observe freelancers
being used at every stage of a new venture’s development from start-up, to early stage survival and through to business
growth. These freelancers ful?l managerial, technical and professional tasks.
Across all stages of new venture development freelancers help businesses to perform by allowing:
Access to external specialised and entrepreneurial talent on a ‘pay as you grow’ basis
Reduced ?nance constraints
Reduced sunk costs and risk
Greater ?exibility and agility
Increased ability to compete against large ?rms by reducing minimum ef?cient scale
The Freelance
Entrepreneurship Value Chain
The Role of Freelancers in the 21st Century British Economy 8
The value created in new ventures by freelancers is summarised in the Freelance Entrepreneurship Value Chain below.
The lower panel illustrates that freelancers are involved in projects in the start-up, early stage survival and business
growth phases of new venture development. The upper panel illustrates the roles in which freelancers add value.
The combined effect of these roles across all three phases is illustrated at the front arrow in terms of enhanced
pro?ts and job creation in new ventures.
Reducing Finance Constraints & Sunk Costs
Access to Entrepreneurial Talent
Increasing Flexibility
Enhancing Agility
Enabling Risk Management
Reducing Minimum Ef?cient Scale
F
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:
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J
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Business
Start-Up
Survival Growth
The Role of Freelancers in the 21st Century British Economy 9
In the research we also observe that freelancers play a key role in promoting ef?ciency-driven economic performance
which of course is both important in its own right but also key to ensuring that the maximum economic value-added
is generated from innovation.
The ability of businesses to draw on freelance talent enables:
Through these routes businesses can enhance their
ef?ciency and hence performance. The availability of
freelancers reduces barriers to entry and minimum
ef?cient scale thereby increasing competition and hence
economic ef?ciency. We provide a visual summary of the
effects in the diagram opposite.
Freelancers Promoting
Ef?ciency-Driven Economic
Performance
FREELANCERS
Capability
Productivity
Reduced Risk
Competitiveness
Ef?ciency-Driven
Economic Performance
CAPABILITY Access to a wide variety of talent / Reduced ?nance constraints
PRODUCTIVITY Specialisation of labour / Reduced worker downtime / Ability to transform an organisation
REDUCED RISK Lower sunk costs / Variable cost model
COMPETITIVENESS Lower barriers to entry / Reduced minimum ef?cient scale
The Role of Freelancers in the 21st Century British Economy 10
The total effect of freelancers on economic performance is then a combination of the corporate venturing and
entrepreneurship effects, working to promote innovation-driven economic performance, combined with enhanced
ef?ciency-driven economic performance promoted by the input of freelancers. The total effect of freelancers on
economic performance is depicted in the ?gure below. It underscores the importance of freelancers to the
British economy.
Freelance Drivers of
Economic Performance
Corporate Venturing Entrepreneurship
FREELANCERS
Business Ef?ciency
Freelancers Enabling:
Capability
Productivity
Flexibility
Agility
Competition
Innovation
ECONOMIC PERFORMANCE
The Role of Freelancers in the 21st Century British Economy 11
This analysis highlights that the common view that freelancers are just a shadow workforce for employees is a
misconception. The research ?nds that freelancers mainly serve a different economic function – particularly in driving
innovation and helping ?rms overcome the challenges faced by risk and uncertainty – and in doing so they help create
and sustain employment.
It is clear that the businesses in this study would create less economic value without freelancers and that a signi?cant
proportion of their employee base rely on the prior activity of freelancers to create their jobs. In carrying out this role
freelancers serve a unique business function which distinguishes them as distinct economic agents in their own right.
Based on this analysis we offer a new de?nition which can help identify freelancers so that public policy – particularly
in relation to ?scal matters, industry, enterprise and the labour market – can recognise this important resource to ensure
that Britain has a suf?cient supply of high quality freelancers to promote economic prosperity.
Freelancers are workers who supply their services on a contingent project or limited duration basis for remuneration
which is output focused. Freelancers take on all or most of the cost and risk of their own labour downtime and below
expectations productivity within projects. They take on all the cost and risk of economic inactivity between projects.
The lack of an up-to-date de?nition of freelancers which recognises them as a distinct economic agent in their own
right limits the optimisation of their use in the economy and by consequence stunts economic performance. Choosing to
become a freelancer should not involve unnecessary risk (particularly in relation to ?scal matters) as well as barriers to
trade for people just because this unique activity is not properly recognised.
The same holds true for businesses that want to use freelancers; they can be deterred from doing so as a result of the
?nancial and reputational risk stemming from regulation that solely justi?es the legitimacy of freelancers using older
economy classi?cations associated with employees and business owners. For instance, it is clear from the de?nition
above based on the distinct and important function of freelancers in the modern British economy, that being a business
owner is neither a necessary nor suf?cient condition to qualify as a freelancer. Yet, ?scal guidelines such as IR35,
incentivise freelancers to mimic a business owner in order to establish their legitimacy.
Likewise, industry associations and unions frequently put pressure on businesses to use employees instead of
freelancers hence completely missing the key ?nding in this study that in the modern economy these workers are
typically complements rather than substitutes for employees – indeed, the jobs of many employees have been created
by the prior work of freelancers. We need a fresh perspective across industry and public policy.
The important and distinct economic role of freelancers in the modern economy needs to be:
RECOGNISED
De?ned as unique economic agents providing an important and distinct
economic function to employees and business owners
PROTECTED
The unique economic value-added provided by freelancers is part of the core of
the modern British economy and hence needs to be allowed to thrive
NURTURED
It is good policy to ensure that British business always has access to a suf?cient
supply of high quality freelancers in order to optimise the potential of these
businesses
The Role of Freelancers in the 21st Century British Economy 12
1 Introduction
It also changed from the R&D/innovation of big business
to more of a continuous incremental activity that gave
smaller ?rms a role in the process. Correspondingly,
innovation became a ubiquitous activity and challenge
for ?rms of all sizes and ages. Competition also
increased as minimum ef?cient scale declined not
only enabling SMEs to challenge corporations but
also enabling business start-ups to become important
players in the competitive process
3
. These changes have
led to modern developed economies being called names
such as the innovation-driven economy, knowledge
economy, dynamic economy and entrepreneurial
economy
4
.
The impact of these changes has meant that economic
ef?ciency – the type that dominates discussion in
economics textbooks and courses – has been replaced
by innovation as the main driver of economic growth in
most developed countries. It is common now to classify
countries by the main driver of growth. For example
in the ‘Global Entrepreneurship Monitor’ reports;
countries such as the USA and the UK are classi?ed as
innovation-driven economies, whereas countries such
as Mexico, Brazil and Croatia are mainly ef?ciency-
driven economies. Countries such as India (labour)
and Egypt (oil) are factor-driven economies
5
.
There is an underlying development process embedded
in these de?nitions where most countries tend to
evolve from factor-driven to ef?ciency-driven and then
to innovation-driven economic performance. Figure 1
illustrates this hierarchy and represents a British
INNOVATION
EFFICIENCY
FACTOR
Some of the key attributes of developed economies have changed. The transformation
has been gradual and involves new trends that can be traced back at least four decades.
Self-employment and small business that had been in decline for most of the 20th century
started to become more important as a share of economic activity
1
. Innovation became less
of a sporadic event whose incidence could be measured with reference to decades and
more of an ongoing activity in business
2
.
1. Storey, D.J. (1994), Understanding the Small Business Sector, London: Routledge.
2. Reich, R.B. (1987), Entrepreneurship reconsidered: the team as hero, Harvard Business Review, 87(3): 77-83.
3. Audretsch, D.B. (1995), Innovation and Industry Evolution, MA, USA: The MIT Press.
4. Audretsch, D.B., Baumol, W. J. and Burke, A.E. (2001), Competition Policy in Dynamic Markets, International Journal of Industrial Organisation, 19(5): 613-634.
Porter, M.E. and Ketels, C.H. (2003), UK Competitiveness: moving to the next stage, DTI Economics Paper No. 3,http://www.esrc.ac.uk/_images/UK_competitiveness_tcm8-13559.pdf
Audretsch, D.B. and Thurik, R. (2004), A Model of the Entrepreneurial Economy, International Journal of Entrepreneurship Education, 2(2): 143-166.
Acs, Z. and Autio, E. (2011), The Global Entrepreneurship and Development Index: A Brief Explanation,http://www3.imperial.ac.uk/business...tionandentrepreneurship/events/gedi/aboutgedi
5. See the Global Entrepreneurship Monitor:http://www.gemconsortium.org/
Figure 1: Drivers of UK Economic Performance
The Role of Freelancers in the 21st Century British Economy 13
economy where innovation is the most important driver of economic performance followed closely by ef?ciency.
This underlines that economic performance is determined by performance across innovation, ef?ciency and
resource factors.
In the older – predominantly ef?ciency and factor-driven economy - freelancers were largely viewed as substitutes
for employees who competed for the same work. It was a zero-sum game relationship where one party’s gain was the
other’s loss. Typically, freelancers were viewed as the weaker party in this competitive relationship. They were the
non-unionised outsiders in the labour market - forced to compete on price as the only means of increasing
their appeal to businesses.
This report is motivated by the view that the economy has changed suf?ciently to warrant a re-appraisal of the roles
of freelancers. The aim is to identify the roles that freelancers play in determining the performance of businesses in the
British economy (which is mainly innovation-driven). We will explore the impact of freelancers on the two predominant
drivers of UK economic performance; innovation and ef?ciency.
Methodology
We use an explorative empirical approach in order to uncover the use of freelancers in the modern innovation-driven
economy. The research is based on case studies of 23 ?rms from key industries spanning from both corporations
and large independent ?rms to SMEs and young business start-ups. All of the ?rms chosen for the study make use of
freelancers and this allows us to explore the contexts in which freelancers are used by modern businesses.
There is a special focus on the use of more highly skilled freelancers given their greater role in the modern knowledge-
based economy. We focus our attention on freelance managers, senior of?cials, professionals and high skill specialists
which comprise Of?ce of National Statistics (ONS) Standard Occupational Codes (SOC) 1, 2 and 3. We interview
senior executives from 23 ?rms who have made use of skilled freelancers in order to ascertain to what extent they
use freelancers, in which roles, the reasons they hired freelancers and the means by which freelancers generate value
added for the organisation. The ?rms are listed in Table 1. The sample size is large for case study based research and
this is motivated by a desire for explorative rigour in uncovering different uses of freelancers. However, further research
is encouraged so that this trajectory of research can achieve a statistically signi?cant representation of the functions
and effects of freelancers across all sectors of the British economy. The ?rms covered in the case study analysis are
presented in section 2.
“The economy has changed suf?ciently to warrant a re-appraisal
of the roles of freelancers”
The Role of Freelancers in the 21st Century British Economy 14
Table 1: Businesses Researched in the Case Study Analysis
Corporations & Large Independent:
SMEs:

Industry: (2007 SIC 1 digit categories) Firms
Amadeus Capital
Bidwriting.com
Enhancing Clarity
Flexmort
H+K Strategies
Look, Touch & Feel
Magic Light Pictures
Market Gravity
Medsa Group:
PTS Consulting
Symvan
Transformation-Leaders & Top Interim
Financial and insurance activities
Professional, scienti?c and technical activities
Professional, scienti?c and technical activities
Manufacturing
Professional, scienti?c and technical activities
Professional, scienti?c and technical activities
Information and communication
Professional, scienti?c and technical activities
DTR Medical: Manufacturing
Construction – IT Infrastructure
Financial and insurance activities
Professional, scienti?c and technical activities
Shield Automotive: Manufacturing
Greased Lightning: Manufacturing
The Recycling Company: Water supply - sewerage, waste management and remediation activities
Wholesale and retail trade
Manufacturing
Information and communication
Electricity, gas, steam and air conditioning supply
Electricity, gas, steam and air conditioning supply
Information and communication
Financial and insurance activities
Electricity, gas, steam and air conditioning supply
Manufacturing
Manufacturing
Information and communication
Argos Direct
ARM Holdings
BSkyB
Centrica British Gas
Forewind
(JV: Statoil, SSE, RWE,Statkraft)
Global IT Corporation
Major International Bank
npower
NSG Group
Panasonic
Vocalink
K
M
M
C
M
M
J
M
C
F
K
M
C
C
E
G
C
J
D
D
J
K
D
C
C
J
The Role of Freelancers in the 21st Century British Economy 15
The ?ndings from the case study analysis indicate that freelancers in?uence economic performance through three routes
as depicted in Figure 2. They drive corporate venturing and also entrepreneurship activity. Both of these have positive
effects on innovation-driven economic performance. Finally, freelancers promote the ef?ciency and competitiveness of
businesses which positively affect economic performance.
These contributions of freelancers to the economy are investigated in sections 3, 4 and 5 of the report. In section 6
we look at how freelancers affect job creation noting that highly skilled freelancers are increasingly complements to,
rather than substitutes for, employees. In fact, the main ?nding is that much employee job creation and subsequent
sustainability is underpinned by the prior activity of freelancers. It would be a mistake to calculate the value of
freelancers to the economy as the sum of their fees. The case study analysis indicates many instances of a multiplicative
job creation effect of freelancers on employment; particularly in their roles driving corporate venturing, entrepreneurship
and ef?ciency through change management.
A central ?nding of the research is that freelancers serve a unique economic function in the modern economy. In section
7 we argue that they ought to be de?ned as a distinct economic agent for ?scal, regulatory and public policy purposes.
At present ?nancial and reputational risk created by misclassi?cation of freelancers deters businesses from making
optimal use of them. The key ?ndings of the report are brought together in the conclusion.
Corporate Venturing Entrepreneurship
FREELANCERS
Business Ef?ciency
Freelancers Enabling:
Capability
Productivity
Flexibility
Agility
Competition
Innovation
ECONOMIC PERFORMANCE
Figure 2: Freelance Drivers of Economic Performance
The Role of Freelancers in the 21st Century British Economy 16
2 Case Study Analysis
Each case study is based on an interview carried out between September 2011 and November 2012 with a senior
executive from a business that had hired freelancers. There was an emphasis on industries that used high skilled
freelance workers and that manifested some core sectors of the modern knowledge-based economy
6
. Therefore,
industries such as information, communications, manufacturing and ?nancial services feature a number of times
while there is no coverage of mining and agriculture. Although we cover 23 businesses, which is a large number
for case study analysis, we cannot be certain we have not overlooked some type of freelance activity not captured
in these case studies. Encouragingly, we observed extensive repetition of evidence relating to the reasons why
freelancers are used to create value for business and found there are some common reasons why organisations draw
on freelancers to enhance the performance of
their businesses.
We did not get agreement to participate in the research from every company that we approached. For example,
the supermarket retailer Sainsbury’s said they did not make use of freelancers and hence did not see any point in
taking part in the study. Alternatively, Tata said they would have been willing to take part in the study but were
undergoing some major transformation over the duration of the research and hence would not be able to participate.
Each case study is based on an interview with a senior executive from a business that had hired freelancers.
Therefore, the case studies mainly relate to the part of the business under the management of the executive who
was interviewed. All of the case studies have been proofed and signed off for publication by the relevant executive.
The research would not have been possible without the generosity and support of these people and we express our
thanks in the acknowledgements.
We now present the ?ndings of each case study which are presented in alphabetical order (as listed in Table 1b).
The aim of the case studies is to carry out an explorative analysis of the use of
freelancers across a range of businesses characteristic of the modern knowledge-based,
innovation-driven, dynamic and entrepreneurial economy. The aim was to investigate new
and incumbent organisations as well as both large businesses and SMEs.
6. An earlier study looked at the skilled manual workers in the construction industry: Burke, A.E. (2011), The Entrepreneurship Role of Freelancers - Theory with Evidence from the Construction Industry,
International Review of Entrepreneurship, 9: Issue 3, 2011
The Role of Freelancers in the 21st Century British Economy 17
Table 1b: Businesses Examined in the Case Study Analysis
Alphabetical Order:
Industry: (2007 SIC 1 digit categories) Firms
Electricity, gas, steam and air conditioning supply
Forewind
(JV: Statoil, SSE, RWE,Statkraft)
Look, Touch & Feel Professional, scienti?c and technical activities
M
Magic Light Pictures Information and communication
J
Market Gravity Professional, scienti?c and technical activities
M
npower Electricity, gas, steam and air conditioning supply
D

NSG Group Manufacturing
C

Panasonic Manufacturing
C
PTS Consulting Construction – IT Infrastructure
F
Major International Bank Financial and insurance activities
K
Symvan Financial and insurance activities
K
Transformation-Leaders & Top Interim Professional, scienti?c and technical activities
M
Vocalink Information and communication
J

Medsa Group: DTR Medical: Manufacturing
C

Shield Automotive: Manufacturing
C

Greased Lightning: Manufacturing
C
The Recycling Company: Water supply - sewerage, waste management and remediation activities
E
Financial and insurance activities Amadeus Capital
K
Wholesale and retail trade Argos Direct
G

Manufacturing ARM Holdings
C
Professional, scienti?c and technical activities Bidwriting.com
M
Information and communication BSkyB
J
Electricity, gas, steam and air conditioning supply Centrica British Gas
D
Professional, scienti?c and technical activities Enhancing Clarity
M

Manufacturing Flexmort
C
D
Information and communication Global IT Corporation
J
Professional, scienti?c and technical activities H+K Strategies
M
The Role of Freelancers in the 21st Century British Economy 18
Case Studies

Amadeus does not use freelancers for general work
within the business as it wants a core team committed
to the performance of the fund across its entire lifespan.
Therefore, it ?nds that it is more effective to use
employment contracts with terms that are positively
related to the length of time that a person remains with
the fund. However, Amadeus does draw on the use of
freelancers for some speci?c tasks; particularly in the
due diligence and post-investment stages of its activities.
Amadeus draws on freelancers to conduct both
technology and market due diligence. It uses freelancers
when it is capacity constrained and/or when it needs
to draw on some specialised expertise that it does not
have in-house. Due diligence involving an assessment of
market risk and potential can typically involve a freelance
industry expert with a deep knowledge of routes to
market and industry adoption practices for speci?c
types of new technology. Freelancers hired for
technological due diligence are often academics or
individuals with a science R&D based background
in industry.
These freelance contracts are typically self-contained
contingent projects. While the freelancers often justify
their fee with reference to the amount of time they will
need to spend on a project, they are typically paid on
an output/?xed-price basis for the successful completion
of the project. There is no commitment to re-hire
freelancers beyond the project. Amadeus ?nds most of
the freelancers for its projects through its own contact
base and network.
Alex van Someren notes that while it is typical for ?rms
in the venture capital industry to make use of interim
managers – particularly those focused on business
turnaround – Amadeus makes very little use of interim
managers: “Amadeus is mainly focused on high-growth
ventures and hence it is important that the management
team have a longer-term commitment to the venture”.
However, he points out that freelancers are used in other
roles in the post-investment stage: “Often a venture
will not require a full-time Chief Financial Of?cer and
therefore it is better to hire a freelancer with suf?cient
expertise to do this on an ‘as needed’ basis”. Likewise,
freelancers are sometimes used for sales and marketing
for the same reasons, while on the technological side,
the development of a prototype or a solution to a speci?c
technological need are sometimes contracted out to
specialist freelancers.
Usually Amadeus will make appointments to the Board
of Directors of the companies in which it invests. As well
as appointing its own investment professionals, freelance
non-executive directors (NEDs) are sometimes used
for this purpose. Usually these NEDs were previously
executives and/or entrepreneurs in successful high-
technology businesses.
Amadeus Capital
Partners Ltd.
Alex van Someren Partner and Investment Manager
Amadeus Capital is one of Europe’s leading venture capital ?rms and focuses on high-
technology ventures. It was founded in 1997 by Hermann Hauser, Anne Glover and Peter
Wynn and now manages over £500 million of funds and has, since inception, backed
over 80 companies. Amadeus has invested in companies in the software, hardware,
telecommunications, cyber security, media, life sciences and cleantech areas of business
in Europe and Israel.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 20
Amadeus Capital also takes on MBA students who work
for a limited time period as interns. Although these
posts are unpaid and hence technically not freelancer
roles, they operate in the same manner as freelancers
in every other sphere; particularly their project-based
and contingent nature. Alex van Someren points out
that as well as giving these students a great opportunity
to learn and gain experience, internships also enable
Amadeus to reduce the risk associated with job creation
through screening. Amadeus have occasionally hired
intern MBAs who have proved their high performance
capability.
Amadeus Capital Partners Ltd. uses freelancers when it is
capacity constrained and/or when it needs to draw on
specialised expertise that it does not have in-house.
The Role of Freelancers in the 21st Century British Economy 21
After the successful launch of Argos Direct, the company
needed a senior executive to drive the vision and strategy
for growth; particularly the ?nancial model underpinning
Argos Direct. An independent and project-focused interim
manager was seen as the best means of managing this
stage of the project. An in-house executive would be
more prone to succumb to ‘cash cow’ management
pressures associated with the core of the business.
Tony Lahert points out that this is usually associated with
the short-termism of an operations management mind-set
dominated by a sales and accountancy culture. In order
to make the innovation work, a longer term perspective
was needed and the project needed to be ring-fenced
from the dominant culture and pressures within the
parent organisation. A freelance interim manager would
be better able to focus on project delivery without fear
of internal politics. He or she would “not be afraid of the
boss – since they are not employed or reviewed by the
boss – and will speak up to say when something
is wrong”.
Having a penchant and aptitude for innovation, as well
as having observed freelancers at work in stage two
of the project, Tony Lahert decided that he wanted to
undertake the freelance interim manager post to roll out
Argos Direct. He resigned from the company in order to
take up the role of interim manager for the next stage
of the Argos Direct project. The company accepted this
proposal and Tony Lahert grew Argos Direct to a £100
million business in its second year.
On completion of the successful Argos Direct project Tony
Lahert then decided to pursue a freelance career in order
to maximise the value potential of his creative, strategic
and executive skills. He was also motivated by the desire
to avoid what he perceives as “the humdrum boredom
of being an executive focused on operations rather than
innovation”. He surmises that “when the knob turners get
a hold of a business, then I am off”. By contrast he feels
that freelancing offers diversity and fresh challenges.
Argos Direct
Tony Lahert CEO, Step Solutions
Tony Lahert spent 20 years with Argos from 1973 when it launched. In that time his
executive roles included Buying Director where he managed a £1 billion budget and a print
run of 22 million catalogues. He was also responsible for the creation of Argos Direct.
He launched and managed the development of this new corporate venture in three stages.
The ?rst stage involved the creative process of developing the idea for Argos to offer large
sized goods for direct delivery to customers and to convince the company to support this
innovation. Tony Lahert managed this process with a small team. The next stage involved
the implementation of the strategy and bringing it to market. This stage required a product
development team and Tony Lahert opted to hire freelancers rather than employees. His
view was that he “did not want to hire people on a project that might not work and who
he might have to sack”. He also wanted to set up a structure to enable the supply of a fully
outsourced entrepreneurial function i.e. creativity and start-up. He describes freelancers in
this role as “light of foot” where they can “act fast and innovate in order to make a value-
added impact in less time”.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 22
For these reasons he believes that most freelancers
prefer to work part-time on any project.
He argues that “innovators want freedom” and
freelancing is a means of achieving this objective.
In his freelance career, Tony Lahert works on major
projects with roughly three organisations every two
years. He believes that as a freelancer he is able to
undertake roughly eight times the number of innovation
projects that he was previously able to do over any ?ve
year period as an employed executive. He also argues
that freelancers have an advantage over employed
executives in terms of the quality of their input: “Just
as travel broadens the mind, a freelancer will have a
broader and more colourful experiential mind-set than
executives or owner-managers”. Thus, he argues that
freelancers are an important source of innovation in the
economy. In his freelance role, Tony Lahert has engaged
with business through a diverse set of conduits that
help differentiate his various areas of expertise. These
include Step Solutions which he runs, Grant Thornton,
Zolfo Cooper, the XtraMarket and Customer Heartbeat.
His freelance involvement with these businesses
included roles as a non-executive director and in
an advisory or oversight capacity.
“Just as travel broadens the mind, a freelancer will have
a broader and more colourful experiential mind-set than
executives or owner-managers”
The Role of Freelancers in the 21st Century British Economy 23
Bill Parsons, Executive VP of HR, describes the
essence of the company’s business model as being
like an “‘architect’s of?ce’ which produces designs
which it licenses and then gets royalties on the chips
that are made using the design”. In 2012 ARM was
named as one of Britain’s Top Employers by the CRF
Institute. The company also makes use of freelancers
from the clerical level such as a junior administrator
right up to professional technical specialists and senior
interim executives.
Freelancers can play a signi?cant role in developing
innovation for ARM. At the explorative stage of an
internal start-up or venture, a team could comprise a mix
of employees and contractors. Their objective might be to
develop a ‘thought experiment’ or put together a business
plan for a new venture. Sometimes these projects are led
by senior freelancers who were previously entrepreneurs
who have owned their own business with a turnover of
up to £1-2 million. Instead of developing new technology
independently, these entrepreneurs often work for ARM
on a freelance basis and if the new technology shows
promise then ARM will buy their business with the
freelance entrepreneur becoming an employed executive
at ARM. Bill Parsons describes this transition as “posh
temp-to-perm”.
If after the explorative stage is complete, the commercial
viability of the innovation has been demonstrated,
then ARM will typically staff it up with employees.
The preceding freelance intensive stage serves the
purpose of lowering sunk costs and managing the risk
of innovation. Bill Parsons points out that ARM are
“incredibly cautious about adding permanent headcount
and hence use freelancers to manage risk in innovation
and employment growth”. With regard to the latter he
describes it as “try before you buy”. However, he notes
that some people do not want to work as employees due
to lifestyle, a desire to be their own boss and to maximise
their income portfolio. In many of these cases the only
option is to hire them on a freelance basis.
ARM also stimulates freelance work on innovation
relating to open-source middleware. The aim here is to
encourage the community of IT engineers across the
globe who are committed to open source technologies
ARM Holdings
Bill Parsons Executive VP of HR
Advanced RISC Machines (ARM) was launched in 1990 as a spinout from Acorn
computers with backing from Apple. The business grew using a licensing model of its
microprocessor technology. Clients in the early 1990s included GEC Plessey, Sharp, Texas
Instruments and Samsung. The ?rm went public in April 1998 and Apple sold its shares
shortly afterwards. In 2005 ARM was named by Electronic Business as one of the top ten
most signi?cant businesses in electronics over the last 30 years. In 2011 ARM was listed
as 12th in the Fast Company’s 50 Most Innovative Companies. The company claims to be
“the world’s leading semiconductor IP company” having shipped over 20 billion ARM-based
chips, with “800 processor licenses sold to more than 250 companies”
7
.
7.http://www.arm.com/about/company-pro?le/index.php
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 24
to develop software that is complementary to ARM’s
technology. These freelancers are paid on a win-only
basis where winning occurs when the technology which
they develop is actually used in the open
source middleware.
ARM also use freelancers as a means of breaking
into new markets across the globe. The development
process involves a freelancer initially providing advice
on doing business in a region, then moving on to work
as a distributor and then if this works he or she will
then typically move into an employee role. In China
they initially hired a person on a freelance basis to
establish a foothold in the market and to explore its
viability. This global growth strategy proved successful
and ARM is now the market leader in China and
employs around 100 people. ARM is currently using
a freelancer in a similar capacity to help it break into
the Brazilian market.
Bill Parsons points out that freelancers are also used
as a means of managing peaks and troughs in demand
and to enable ARM to be expedient, agile and ?exible.
He says that ARM tries to keep around 10-15% of its
workforce as freelancers. However, he notes that in the
IT divisions this ?gure rises to around 50% because this
work is so project driven.
Instead of developing new technology independently
entrepreneurs often work for ARM on a freelance basis.
If the new technology shows promise then ARM will buy
their business.
The Role of Freelancers in the 21st Century British Economy 25
Bidwriting.com
Martyn Curley Director
Bidwriting.com offers a bid writing service for organisations bidding for work in a range
of areas including R&D, tax relief, social housing, construction and the Public Finance
Initiative (PFI). The business has an 85% success rate based on a formulaic and
systemised means of preparing the quality element of tenders. At start-up the business used
freelancers intensively in order to reduce ?nance needs by operating a variable cost model.
It also needed to be able to be expedient as a means of competing. Bids generally have to
be written in the range of one to eight weeks from the time of the call for tenders. Martyn
Curley, co-founder and Director, states that a key objective at start-up was to be able to
“turn bid writing teams on and off quickly to match short tender turnaround times”. He says
that they were also adopting a minimum overhead and maximum pro?t model. So for these
reasons it made sense to launch the business using a freelancer intensive model.
As the business developed it moved to a more employee
plus freelancer model. Martyn Curley explains that it is
necessary to have core expertise in-house in order to
ensure that the company’s unique approach to writing
is maintained. He believes that it takes up to ?ve years
for the company to fully train a person up to a level
where they can handle a tender on their own. The
founders had many years of tender writing experience
prior to start-up. He says that the company will always
make use of freelancers in order to gain access to their
specialist skills, maintain an element of a variable cost
?nancial model and also to ensure that the company
remains agile and ?exible. However, he points out
that freelancers can suffer from “the loneliness of the
long distance bid writer”. He explains that writing the
bids in a central of?ce has the bene?ts of motivation
coupled with the ability to spot and solve problems early.
Therefore, their combined employee plus freelancer
model enables the business to capture the bene?ts
of both modes of working.
In addition to writing bids the company also offers
a number of services to housing associations and
businesses in areas such as the environment, health
and safety, HR, and community service. These services
sometimes involve supplying interim managers to these
organisations in order to solve a problem requiring
hands-on management. Bidwriting.com uses freelancers
for these contracts given the contingent project-based
nature of the work. Martyn Curley also emphasises that
the use of freelancers means that Bidwriting.com and
their clients do not have to take core staff off front line
activities to write the bids. He says that these freelancers
then acquire new knowledge which can become very
useful as an input into new tender bid documents.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 26
BSkyB
Martin Leach Head of Transformation
BSkyB is a corporate television broadcaster and communications provider for both home
entertainment and business users. In the 12 months to June 2012 the company had a
turnover of £6.8 billion with a customer base exceeding 10.6 million. In the same period
the company had 22,800 employees
8
. The company estimates that its business underpins
over 56,000 jobs in its supply chain
9
which involves many freelance intensive sectors such
as media and entertainment, IT and telecommunications.
It makes direct use of freelancers in order to manage
peaks and troughs in its business activity; particularly in
IT related projects. Freelancers have also been used to
resource short-term intensive activity such as customer
retention. Freelancers enable the company to draw on
specialised skills on a short-term project basis necessary
to maximise the impact of these campaigns.
Freelancers have been used to provide other ?xed-term
needs such as maternity cover and this can involve
appointments that operate at a relatively senior level.
For example, in the company’s Transformation team, a
freelancer with a background in TV/media was hired as
an interim senior manager to support the business to
adopt innovative ideas. This involves building and testing
hypotheses with senior business stakeholders as well as
interfacing with the team involved in data analysis and
insight on these projects.
In the same Transformation team a freelance senior
manager has been hired to support projects that use
customer’s viewing information. Martin Leach, Head of
Transformation, points out that this freelancer has been
charged with the responsibility of providing answers to
the business opportunity created by the availability of TV
viewing information. Therefore, it involves innovating in
areas where this information can be applied.
Martin Leach explains that freelancers can be hired on
a contingent programme basis and that the contract
terminates once the programme is complete or once the
full-time employee returns from maternity leave, or the
demand for the work goes away. The specialist expertise
required, alongside the contingent project-based nature
of this programme, weighs the appointment in favour of
a freelancer. This is especially the case when the team
may be reassigned to a totally different business problem
where different expertise is required.
However, in terms of achieving the business objectives of
gaining access to quick short-term specialised talent, as
well as ring-fencing the cost and risk of a transformation
project, Martin Leach points out that objectives can in
certain circumstances be equally supplied by consultants
as well as freelancers. The key for BSkyB is to be able to
contract out the project to an able individual. He explains
that consultancies can save the hiring manager the time
and hassle involved in hiring contractors. This transfers
the risk from BSkyB and the recruiting manager to the
consultancy ?rm who is responsible for the delivery of
the outcome. He also points out that contracting to a
consultancy can be less risky for long-term assignments
as they handle all training and holiday issues associated
with a contractor.
8.http://corporate.sky.com/about_sky/key_facts_and_?gures
9. The Economic Impact of Sky on the UK, Oxford Economics, 2012
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 27
Centrica
British Gas
Dan Taylor Director of New Ventures
British Gas ring-fence some of their more revolutionary innovation initiatives from the core
of the company with a view to integrating them later if successful. This serves the purpose
of having a dedicated innovation team who do not disrupt the focus of the core organisation
as well as enabling ?nancial risk management. Dan Taylor is Director of New Ventures for
many of these innovations across Smart Homes; smart meters, electric vehicle services,
home energy management and home automation. In this role he outsourced much of
these innovation projects and it did not matter to him whether these sub-contractors used
employees or freelancers. However, given the short-term and specialised nature of these
projects requiring diverse areas of expertise, many contractors made use of freelancers. For
instance, Dan Taylor used a consultancy ?rm to develop the electrical vehicles innovation
and this ?rm delivered the project using a 50:50 ratio of employees to freelancers.
Dan Taylor points out that the innovation projects
usually involved two stages. The ?rst stage comprised of
exploring and developing strategies for new opportunities
and the second stage entailed strategy implementation.
The ?rst stage involved areas such as idea generation,
business analysis, market analysis, strategy creation
and business case development. Dan Taylor contracted
much of this work to consultancies. Dan Taylor explains
“outsourcing allowed us to ring-fence the risk of the
innovation but consultants are expensive so it is
important to ascertain viability as soon as possible. If the
innovation is not going to work we need to know quickly
so that we can terminate the project”. Correspondingly, if
the innovation is looking increasingly positive then they
may want to scale up the team working on the project at
short notice, which is when the consultancies often made
use of freelancers. Part of the appeal of using freelancers
at this stage is the fact that these projects required
“short sharp bursts of activity: short-term availability is
important so consultancies with a sizeable portfolio of
freelancers are better able to supply this level of service”.
Therefore, having an available supply of freelancers and
contractors who are willing to work on this high risk basis
is a key support mechanism for this outsourced approach
to corporate innovation.
If the innovation shows suf?cient promise in the ?rst
stage then it can be progressed onto the next stage which
involves execution of the strategy. In this stage, project
management is required, and British Gas often made use
of freelance interim managers. The ?rm also made use
of freelancers in short-term specialist roles which were
required on the project. Dan Taylor emphasises that this
is an evolutionary stage where the workforce involved
in the project evolves from freelancers/consultants to
employees. He explains that in the ?rst two months
of this stage that it is not unusual to have a workforce
which is entirely comprised of consultants. However, as
the project progresses these contractors increasingly work
with employees as the task is to integrate the innovation
back into the parent organisation. Eventually the team
evolves to be comprised entirely of employees and hence
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 28
the jobs created by the innovation process are to a large
extent underpinned by the ability to use contractors/
freelancers.
In terms of the lessons he has learned from hiring
freelancers, Dan Taylor emphasises the importance
of having a network of freelancers. He prefers to
hire freelancers he has hired before and who have
performed well. In general, he has found freelancers to
be very productive, due in part to their professional and
external expertise, but also due to their high motivation
and dedication as a result of knowing that they can
be let go at any time. He argues that “since they have
a lack of history with the organisation, they tend to
be more objective and have a balanced perspective.
They also tend to be experienced people who are more
mature and have a high level of emotional intelligence
so able to deal with internal politics”.
Dan Taylor notes that company law and regulation can
make it dif?cult for corporations to make optimal use of
freelancers. He argues that “the need to have approved
suppliers causes additional administration costs and
delays if a corporation wants to make use of
freelancers quickly”.
Elsewhere in British Gas he notes that freelancers are
used to manage peaks and troughs in business activity.
“Outsourcing allowed us to ring-fence the risk of the
innovation but consultants are expensive so it is important
to ascertain viability as soon as possible. If the innovation is
not going to work we need to know quickly so that we can
terminate the project”
The Role of Freelancers in the 21st Century British Economy 29
Enhancing
Clarity
Philip de Lisle CEO
Enhancing Clarity is an executive mentoring and ‘thinking services’ business which focuses
on strategic development and business planning. The business was founded by Philip de
Lisle who is a former serial entrepreneur. He previously ran a software business which ran
on a ‘lean and mean’ plus adaptable business model using a 65:35 employee to freelancer
ratio. The business evolved into an internet dot.com venture (Business Online Group plc)
with external investors and involvement from MCI WorldCom. Philip de Lisle’s main “buzz
and enjoyment” from the business was on the creative and strategic side. He says he is not
a “completer-?nisher” type of person and has only got on well in business when he has an
operations person on board. The gradual formalisation of the business prompted Philip de
Lisle to resign from the Board in 2001.
Philip de Lisle did not want to form another company
but rather focus on exploiting his talent for creativity
and strategy. He therefore became a freelancer with no
employees trading under the name ‘Enhancing Clarity’.
He provides mentoring, advisory and non-executive
chair roles mainly for SMEs with a turnover of between
£1 million and £10 million and who have growth
potential. He mainly gets involved in projects on strategy,
innovation and corporate governance. He does not take
on interim manager roles and will hire other freelancers
to take on these tasks on an as needed basis. He says
that the freelancer role allows him “to be independent
and to think in a less pressurised environment”. In this
freelancer role Philip de Lisle is able to ‘stand back’ from
the business and map out a way forward. By contrast, he
says that owner-managers ?nd this task dif?cult as they
are too close to the business.
Philip de Lisle sees himself as an entrepreneur in terms
of wanting to maximise the impact of his innovative and
creative talent. He says that this is where his passion
lies and enacting it in a freelancer rather than owner-
manager capacity makes it most enjoyable: “I get to play
in other people’s sand boxes and I get paid for it. How
good is that?” He points out that as an owner-manager
his creative output was limited by the scope of the
business and the demands that it placed on his time.
As a freelancer he works with roughly nine businesses
per year. Therefore, in terms of his creative output and
impact on the economy, he argues that it has increased
by around a factor of nine as a freelancer over what it
was previously as an owner-manager. He argues that he
has “affected more change as a freelancer than as an
entrepreneur and with greater ease can see the wood
from the trees”.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 30
Flexmort: (Roftek Ltd
trading as Flexmort)
Simon Rothwell CEO
Flexmort is a Birmingham based company specialising in ?exible mortuary solutions.
It produces mobile cooling systems in order to preserve recently deceased people in
hospitals, hospices and funeral directors. The ?rm is a recent start-up and was founded
by Simon Rothwell in 2010. The company supplies products to 40% of NHS hospitals
and a wide range of funeral homes in the UK. It has recently begun to export to customers
in Holland and Australia and also expanded to the design and development of medical
products. The company operates a ‘lean and mean’ approach to management in order to
carefully manage cash ?ow and to keep its products cost-competitive. Although the plan is
to take on more permanent staff, it currently has three employees (CEO, sales manager and
administrator) and makes extensive use of contractors and freelancers. The company hires a
freelancer to undertake product design for its innovation. The company aims to transfer this
person to an employment contract once the volume of business grows suf?ciently to warrant
a full-time designer. It also uses freelancers for invoicing and project-based work such as
packaging envelopes for a marketing campaign.
The company outsources manufacturing, the servicing
equipment supplied to clients, and some marketing.
It also sources machine parts from a wide number of
suppliers and then does assembly in-house. In terms of
the ?rm’s objectives, Simon Rothwell CEO, points out
that it does not matter whether the outsourcing goes to
a contracting company or a freelancer as both enable his
business to adopt a lower risk variable cost model. The
combination of freelancers and businesses used in an
outsourcing intensive model allows Flexmort to innovate
without having to carry a high overhead, and hence the
need for a substantial up-front capital requirement. This
facilitates this lean start-up to do its own product design,
development and manufacturing as well as sales and
marketing, while minimising the need to raise money
from investors and banks. This variable cost approach to
innovation manifests a modern model adopted by new
ventures where the use of freelancers and contractors
enable them to lower barriers to entry and compete with
more ?nancially resourced incumbents.
Simon Rothwell also points out that “outsourcing means
that the ?rm can draw on fresh ideas and expertise from
a range of different suppliers. The company tends to use
a large number of suppliers to reduce the risk of trade
secrets being learnt by suppliers as well as reduce the
risk of over reliance on any one supplier”.
The freelance/outsourcing virtual model employed by
Flexmort enables it to have greater ?exibility in servicing
clients in dispersed geographic regions. The agility of the
company is also increased as freelancers and outsourcing
reduce the regulatory/administrative burden and risks
normally associated with hiring employees. Simon
Rothwell notes that this model has freed up his time
so that he can specialise on directing the company –
particularly focusing on sales and innovation - rather
than being drawn into every activity as a ‘jack of
all trades’.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 31
Forewind – Joint Venture:
Statoil, SSE, RWE, Statkraft
Lee Clarke General Manager
Forewind is a joint venture between four major European energy companies cooperating in
order to manage the creation of a substantial UK offshore wind farm in the Dogger Bank
zone. The site is located in the North Sea roughly 150km off the Yorkshire coast. The wind
farm is nearly 9,000km
2
, equivalent to the size of Yorkshire. It has potential for up to nine
wind farm projects of about 1GW, each requiring an investment of around £3 billion per
project. The planning process takes roughly two years of data collection and preparation,
followed by 18 months for each ‘permission’ to be determined. Forewind is responsible for
the consenting phase to get the planning permission - after which it is planned to hand the
projects to the shareholder organisations - each of which will take a lead in the construction
and operation phase of each wind farm. The projects within the Dogger Bank zone are
expected to seek ?nance from banks or pension funds once each is complete. This will
enable the recycling of ?nancial capital from one wind farm project to the next.
Forewind has 40 core staff working on the current
project comprised of 30 employees (most seconded
from the JV partners on 2+ year contracts) plus around
ten contractors (involving a mixture of freelancers and
contractors). In addition, they have up to 200 people
involved in contracting/freelancing work on vessels doing
engineering and survey work on site. The company
faces restrictions on hiring employees from the parent
organisations and hence often uses freelancers to do
short-term work which is required quickly. They also
have a number of small sub-projects (e.g. meteorological
equipment being installed in Dogger Bank) and use
several freelance engineers on these projects. Similarly
they make use of freelance engineers in fabrication yards
for health and safety and other specialist skills which
are not required in the company on a longer term basis.
Lee Clarke notes that he has had a good experience
of using freelancers, especially in terms of getting new
perspectives and fresh ideas. He also observes that it has
not caused a ‘them and us’ culture between employees
and freelancers. He has always treated employees and
freelancers as equal partners and hence generated an
integrated team culture.

Forewind will probably wind-down its activities after the
nine permissions have been secured. Lee Clarke, having
pursued a corporate entrepreneur career previously with
npower, notes that the management team on this project
have similar risk taking attributes in terms of being
willing to take on the job despite knowing that it entails
an uncertain future once the project ends.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 32
Global IT
Corporation
Senior Executive Consulting Division
This company is a global information technology corporation with a presence in the
UK that kindly supported the research by providing an interview from a senior executive.
The executive and the company prefer to remain anonymous. The following relates to
the pan European, Asian and African consulting part of the organisation. The ?rm has
always made use of freelancers. Typically, around 30% of a 4,000 person workforce in the
consulting part of the business is comprised of freelancers. Managing the opportunities,
costs and risks of peaks and troughs in demand is one of the main reasons why the
organisation hires freelancers. In boom periods the use of freelancers has risen to as high
as 60% of the workforce while in downturns it can fall to as low as 10%. In the part of the
business based in Great Britain, roughly half of freelancers are UK domiciled while the rest
are sourced from overseas.
The company has a long-running target level of
30% freelancers in the workforce in order to have a
signi?cant variable cost base to mitigate risk. This target
was prompted by prior dif?culties with using a more
employee-intensive model where the ability to downsize
proved time consuming and costly. As a result, a greater
use of freelancers was sought in order to increase the
agility and ?exibility of the organisation as well as to
avoid the risk of bearing costly employee downtime.
To this end, the ?rm uses freelancers in generalist roles
so that they can be replaced easily; ensuring that the
core of the business does not become reliant on unique
skills of non-employees. The workforce target of 30% is
also a long-term upper limit on freelancers because the
company believes that it is essential that customers feel
they are buying corporate consulting services and hence
it is necessary to have this predominantly delivered
by employees.
While freelancers can be used to manage opportunities
and risks across the business cycle, the company ?nds
that this can be challenging as the supply of freelancers
tends to be pro-cyclical. The senior executive notes: “In
boom periods employees want to work as freelancers
but then in downturns the same people want to return to
employment contracts”. The senior executive pointed out
that in the recent downturn “we ended-up re-employing
many of our former employees who had become
freelancers”. In order to balance this countercyclical
supply, the company has adopted tactics in boom periods
such as offering freelance style higher risk performance-
related pay to employees in order to maintain the desired
ratio of employees to freelancers. For example, an
employee on a ?xed annual income of £60,000 could
be offered £10,000 ?xed plus a percentage of
revenue generation.
Freelancers are hired on a project basis and mainly for
a technical input. Roughly a third of the company’s
demand for freelancers is due to a skills mismatch
between employees’ capability and the variable
technical needs of the organisation. The corporation
also uses freelancing as a test-bed for screening and
hiring employees. Freelancing reduces some of the risk
associated with job creation.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 33
H+K Strategies
Czarina Charles Talent Acquisition Manager
H+K Strategies are a PR and communications consultancy based in London which
predominantly serves major global corporations and public sector clients. The business
makes use of a mix of employees and freelancers. The freelancers are mainly hired to
serve one or more of three functions. The ?rst is as a short-term workforce for contingent
contracts with a ?nite life span such as one contract H+K had for the London Olympics.
Freelancers are also used for interim positions varying from junior posts through to more
senior managerial posts such as an Associate Director. H+K Strategies also use freelancers
as an integral part of the ?rm’s entrepreneurial business model. Czarina Charles, Talent
Acquisition Manager at H+K Strategies highlights that the agility of freelancers is a key
means of being able to offer fast start dates for new contracts. “Freelancers can be deployed
quickly and can hit the ground running which enables us to win business by being able to
offer swift and effective delivery”.
Czarina Charles says that the company encounters two
types of freelancers in the market. She describes one
type as “career freelancers” and the other as “lifestyle
freelancers”’. “We ?nd that career freelancers tend to be
specialists best at the tactical side of our campaigns.
So these types of freelancers are good to hire for speci?c
and focused projects. By contrast “lifestyle freelancers”
are usually those who have worked their way up the PR
career ladder, but then opt for the freelance route as they
want to work part-time, to be closer to their families or
pursue a passion which may not necessarily generate the
money needed to work on it full-time.
Others prefer the ?exibility of freelancing as they can
choose their own holidays. Others like the variety of
working across a range of projects and companies and
the fact they are not embroiled in the company politics.
Lifestyle freelancers tend to have a broad skillset and
therefore are more able to manage bigger projects which
have a wider remit”.
“Essentially, the ability to have the freedom to choose
a work-life balance appears to be a major factor and
sometimes this is manifested by a desire to do a
personal project like writing a book”.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 34
Image for illustrative purposes only.
“Freelancers can be deployed quickly and can hit the
ground running which enables us to win business by being
able to offer swift and effective delivery”
Image for illustrative purposes only.
Look, Touch & Feel
(looktouchfeel.com)
Rick O’Neill CEO and Creative Director
Rick O’Neill started as a freelance product designer in 1999 after graduating from university
and as his client base grew he evolved to set up a successful business which he sold in
2008. After this exit, Rick O’Neill returned to freelancing in the areas of branding and
website development and as his customer demand increased, his business evolved from
a freelancer to a limited company trading under the name of Look, Touch & Feel in 2009.
He says that “there was no eureka moment, I just noticed that demand was increasing and
so I needed to create a business”. The company was set up on a ‘skinny/lean’ variable cost
model which involved the use of freelancers. He points out that “you have more of a hunger
and an instinct for cost-effective entrepreneurship if you have been self-employed before
than if you start with a lot of money in the bank”. He began with Simon McFarlane who he
has known since he was three years old. Simon was hired on a freelance basis and looked
after the technology aspects of the business while Rick took care of design. Rick would win
business and then contract with Simon on a project by project basis. The business grew
and Rick took on a graduate designer on a full-time employee basis with some
share options.
The company continued to grow causing Rick to move
it out of his home and into a barn down the road which
he had secured on an economical rent and which he
felt provided a creative work environment. The company
continued to grow, winning more prestigious contracts
with clients such as the Open University, Aspire and the
Jelly Bean Factory. As a result, they then hired another
designer and a developer on a freelance basis in order
to test these people out. Neither of these people proved
to be a good ?t with the company and Rick was able to
terminate these freelance contracts. Freelancing was used
as a means of managing the risk of hiring the
wrong people.
Rick O’Neill notes that it is important to be able to
manage the con?ict of interest that can sometimes arise
for young and small businesses when hiring freelancers
who sell the same services as the hiring business. He
points out that “freelancers are normally good at project
management but at times can have a con?ict of interest
as they sometimes can try to cut the business out of the
contract and work directly with the client”. He now only
tends to use freelancers who he knows and also limits
their direct contact with clients until he knows he can
fully trust them not to run off with the business. He says
that it takes about a year to build up trust with a new
freelancer in order to be con?dent that they can represent
the business. In addition, the company’s contracts with
freelancers have been changed in order to protect IP and
to include non-compete clauses.
Look, Touch & Feel also secure work through agencies
and hence must respect their clients in exactly the
same manner that they demand from freelancers.
In other words, they often ?nd themselves acting as a
representative of an agency and hence must not pitch
for business for Look, Touch & Feel. He notes that this
type of industry business model leads to people having
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 36
multiple email accounts and business cards. It involves
assembling a team around a project with everyone then
working under a single badge/brand even though it may
involve many different companies and freelancers.
He notes that about 10% of Look, Touch & Feel’s
business involves working under different brands/labels.
In terms of adding these clients to their portfolio of
testimonials for marketing purposes, Rick notes that
these are normally agreed in advance with the agencies
e.g. a recent contract involving the National Farmers’
Union involved such a permission.
The core team of Look, Touch & Feel are four employees
who have shares in the business. In addition, the
business uses four freelancers. The freelancers’ work
adds up to around 130% of a full-time employee.
Freelancers are mainly hired to access specialised skills
and maintain a variable cost base in order to manage
the risk and cost of what Rick describes as the “feast
and famine” in customer demand. He also highlights
that freelancers increase the agility of the company by
enabling it to put together a team to deliver a project
at very short notice. However, he notes that sometimes
they have no option but to use freelancers as a lot of
people in this business sector like the freelance lifestyle
and are only willing to offer their services on this basis.
Different types of freelancers are paid on a different
basis. Developers are paid on a project fee on a
contingent contract while graphic design freelancers
are hired on an hourly or daily rate. Look, Touch
& Feel often bundle a number of jobs together and
hire designers to work on them all simultaneously.
Ultimately designers also work on a contingent contract
basis with a de?ned end point (purchase orders) to
place a ceiling on the number of hours. The company
also contract out the accounts of the company to a
freelancer for half a day per week.
Rick O’Neill points out that while it is important to
have a balanced team of employees and freelancers,
ultimately the core of the business relies on the
employees: “With employees you have commitment
and know that you can draw on them when you
need them”.
The Role of Freelancers in the 21st Century British Economy 37
Magic Light Pictures
Martin Pope Co-founder and Producer
Magic Light Pictures produces independent ?lms and manage the rights for the children’s
story and ?lm character, the Gruffalo. The company is based in London and produces both
live action ?lm such as Sparkle and Wild Target, and animation ?lms such as The Gruffalo,
The Gruffalo’s Child and Chico and Rita. The company was founded in 2003 by BAFTA
Award winners Michael Rose and Martin Pope. Martin Pope’s previous career includes
producing ?lms such as A Touch of Pink, The Heart of Me, The Cottage and The Turn of the
Screw. Michael Rose’s credits include Chicken Run, Wallace and Gromit: Curse of the Were-
Rabbit, and A Close Shave.
At the outset, Martin Pope is quick to point out that in
choosing crew ?lm makers, they do not make a particular
distinction between freelancers and employees working
for contractors. A key necessary option for ?lm producers
is to be able to contract out signi?cant parts of the
production process to highly skilled professionals at an
affordable price. Martin Pope explains that the objective
is to “?nd the right skills for the relevant task. People
who have the skills for one ?lm typically don’t have the
skills required for the next ?lm that the producer wants to
make. But they will ?nd that their skills are required by a
?lm made by another producer”. Therefore, whether the
legal entity contracted to do the work is a freelancer or
contractor with employees makes little difference to a ?lm
producer. The motivation for outsourcing in both cases is
based on the same objectives including: ?nding the right
expertise to ful?l a particular specialist task, avoiding
excessive overheads associated with downtime when
using specialised labour across the ?lm production life
cycle, reducing the uncertainty and risk associated with
trying to accurately budget the cost of a ?lm, and also
to ring-fence the ?nance of each ?lm in order to enable
access to external funding.
Martin Pope explains that there is also a supply-side
constraint that causes ?lm producers to use freelancers/
contractors. He says “a lot of people in the industry are
motivated by the desire to use their talent in ways that
ful?l them personally. Freelancing enables them to choose
work that achieves this objective and so it is often only
possible to hire people on a freelance basis”.
He explains that the ?lm production process is different
between animation and live ?lm. The former is typically
a longer process and can involve a smaller team than the
latter. The use of freelancers varies over the pre, actual
and post production phases of ?lm making. In the case
of animation, the pre-production phase might involve four
or ?ve people of which roughly half are freelancers; most
usually involved in the script and story development.
In the production phase it is common to outsource a
signi?cant amount of the work to an animation company.
In the case of The Gruffalo, Magic Light Pictures used
a German company who deployed a core staff of eight
employees plus approximately 30 freelancers to the
project. In the post-production phase the activity then
downsized to around two or three people comprising
Magic Light employees plus contracting work out to a
PR consultant.
While a live ?lm may begin with a similar pattern with
four or ?ve people developing the pre-production phase,
it gradually scales up to around 60% of the size of the
production phase before ?lming begins. In the production
phase a typical crew and cast size could be around 80-
100 people of which around 93% are freelancers and
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 38
contractors
10
. In the post-production phase the team
size falls back to around ten people of which roughly
60% are freelancers or contractors .
Martin Pope points out that the transformation
of the ?lm business from the highly concentrated
studio controlled industry in the 1950s to the more
segmented and entrepreneurial market of today has
increased the importance of freelancers. While the
old industry was more monopolistic, the vertically-
integrated studios faced less uncertainty and hence
were able to budget on a lower risk basis. In the new
environment, freelancers enable smaller companies
to access diverse and exceptional talent on a variable
cost basis which reduces risk. Combined, these
effects lower barriers to entry and concentration in the
industry, thereby promoting competition and greater
diversity. However, Martin Pope highlights that this
new business environment requires ?lm producers
to be more innovative and to manage more risk:
“Innovation becomes very risky in this environment
and consumers have developed a thirst for continuous
innovation”. In this dynamic and risky environment the
ability to be innovative and manage risk by outsourcing
to freelancers/contractors becomes pivotal for the
performance of the industry.

Martin Pope emphasises that a suf?cient supply of
freelance/contractor talent needs to be available in order
to promote this dynamic industry model in the UK.
To this end, he points out that public policy initiatives
to support the ?lm industry such as ?lm tax credits play
a very important role in this high risk business: “It is a
known fact that there are really good crews in the UK
which attract foreign production companies to make
their ?lms here. But this advantage can be undermined
if Government policy to support ?lm declines. If
Government policy remains consistent then it will help
create a more stable basis for the industry to grow with
consequent employment possibilities for freelancers”.
10. Martin Pope notes that “crew sizes vary according to budget or size of ?lm. Hollywood ?lms shooting in UK can employ many more (150); while a micro-budget ?lm could have 20 (or fewer) crew”.
The Role of Freelancers in the 21st Century British Economy 39
Major International
Bank
Executive Programme Assurance Of?ce
The programme assurance team is responsible for all central programme functions
including:
• Resource management, recruitment, on-boarding, contract management
• Financial control - including business case preparation, forecasting, reporting and
control, bene?t tracking and modelling
• Risk and issue management
• Change control
• Programme governance – running all programme level governance forums
The executive (who wanted to remain anonymous)
was hired in a role within the programme assurance
of?ce which was the central point of coordination for
a number of work-streams under the banner of the
‘Transformation Programme’.
Within this programme, freelancers were used on a
number of these work-streams in order to be able
to mobilise a team to progress the work-stream
development, tap into expertise not available from
employees in the company, as well as to bring in an
independent mind-set with a fresh perspective and
enthusiasm for each project. The executive points
out that building up a new team with employees
would involve long pre-employment checks and other
administrative burdens that would slow the process down
to an unacceptable level. The executive also highlights
that “freelancers are part of a different budget line which
has less external scrutiny on it and therefore are more
?exible in terms of deployment”. The executive believes
the main reason for this is that freelancers pose less of a
?nancial risk for organisations because they are easy to
move on if they are underperforming, whereas permanent
employees have a number of HR steps that need to be
implemented before dismissal can be considered.
Therefore, when faced with the task of mobilising the
Transformation Programme the executive was able to
quickly expand from a team of 20 people and rapidly
scale it up to 200 people in six months through the
use of freelancers – accounting for 75-80% of the
workforce throughout this phase of the project. The
programme involved a full scale transformation of all the
client channels the company uses to provide services
to its customers such as telephony, branch and online.
As a result, the team required a diverse set of skills,
some of which were not necessarily available within
the organisation. The executive explains that the use
of freelancers involved “a full spectrum from senior
interim managers right down to junior analysts”. When
the programme rolled into its second phase of build
and implementation, a plan to redress the balance of
freelancers to employees reduced the freelancer share
of the workforce down to a target of 30%.
The executive observes that few of the freelancers in the
integration programme took up the resulting employment
positions because the remuneration packages on offer
translated into substantial cuts to the current rates being
paid on the programme.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 40
Image for illustrative purposes only.
Market Gravity
Gideon Hyde Partner
Market Gravity is a consultancy business specialising in corporate venturing. It also hosts
the Corporate Entrepreneur of the Year Awards. The company’s service offering allows
corporations to outsource innovation. This involves a number of stages of the innovation
process from idea development, market testing, launch and through to re-integration with
the core business of the corporate client. The company delivers this service using a core
team of full-time consultants alongside associate freelancers. Freelancers are used in order
to be able to draw on expert knowledge on a short-term project basis. This can entail work
in both interim management and to supplement professional/specialist consultant roles.
Sometimes the company is obliged to hire freelancers who it would prefer to employ only
because some freelancers prefer to work on a freelance basis serving multiple clients and
ultimately being their own boss.
Gideon Hyde, co-founder of Market Gravity points out
that their core business is much more entrepreneurial
than change management. He describes their remit as
“bringing a start-up mentality to a corporate environment
where venturing is more than technological change. It
also involves changing both people and culture as well
the creation of another business”. He argues that this
“inevitably challenges the way a company works and
cuts across structures and silos”. In addition, he
highlights that “corporate venturing involves greater
uncertainty than change management as it involves a
lot more trial and error. It also involves more learning
by doing, evolution of innovation and self-direction [so]
leadership and strategic vision are very important”. He
argues that trying to operate in this manner within a
corporation is dif?cult due to governance structures and
cultures created to support the ‘status quo’. Therefore,
businesses often seek to outsource this innovation
process so that it can be progressed in a supportive
environment. The duration of one of Market Gravity’s
contracts can extend three to ?ve years if successful.
Market Gravity can be tasked to take the innovation
from creation through to re-integration and freelancers
are typically involved to some degree at every stage of
this process.
But the value-added provided by Market Gravity’s
outsourcing of innovation extends further enabling a
corporation to ring-fence the cost and risk of innovation.
This ensures that the corporation is not stuck with “idle
or mis?t” employees if the business venture fails. He also
points out that this form of outsourcing of innovation
limits the political and ?nancial downsides of failure
by providing a “fail quick and fail cheap” option for
corporations. He says: “Market Gravity turbo charge
the entrepreneurial process so that corporations can
assess the worthiness of an innovation before it has to
commit long-term resources to it”. Gideon highlights
that Market Gravity enables senior executives to
“externalise responsibility as well as blame if the
venture is unsuccessful”.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 42
In order to achieve this risk-embracing and ?exible
service offering for corporate clients, Market Gravity
make use of freelancers who can take on some of this
risk as well as work on a project basis in a swift and
?exible manner. Some of the freelancers who they
use on projects are entrepreneurs who are between
ventures. Gideon points out that even if one desired, it
would be very dif?cult to hire these entrepreneurs on an
employment basis because this style of work is alien to
them. Therefore, engaging them instead on a freelance
basis means that Market Gravity can access and hence
supply some unique and high calibre entrepreneurial
talent to corporations.
Market Gravity also needs to be able to draw on high
calibre freelance interim managers. Gideon argues that
this is particularly important at the re-integration stage
which requires great expertise due to its challenging
and tricky nature: “Bringing the new venture back into
the business too early can kill it as it faces too many
constraints, while leaving it too long can mean that the
cultural divide with the parent organisation is too great”.
The Role of Freelancers in the 21st Century British Economy 43
The Medsa Group
Richard Salvage Group Director
The Medsa Group comprises four companies: DTR Medical, Greased Lightning, Shield
Automotive and The Recycling Company. The ?rst three of these are manufacturing based.
DTR Medical produces sterile medical instruments, Greased Lighting makes wax polish
for cars and Shield Automotive makes car maintenance products. The Recycling Company
is a waste management service provider. The Group de?nes its values and approach to
business as “listening to the customer, being innovative and changing quickly all through
harnessing the capabilities and potential of its key asset - its people”
11
. Richard Salvage,
Group Director, explains that for this modern innovation driven company “its people” is
not restricted to employees but also extends to freelancers and customers. Harnessing the
insights and talent of these people in an agile and ?exible manner has been the driving
force behind the company’s innovation-led rapid growth.
Freelancers are central to the Group’s R&D strategy
which is strongly customer led. Richard Salvage places
a strong emphasis on asking customers what they need
and what problems they have with a view to using
innovation to provide a solution. The company has its
own laboratories and uses freelance scientists to deal
with the diverse and specialist skills required to solve the
varied customer needs and problems identi?ed through
their market research. He points out that the use of
freelancers in this role not only enables the business to
match the capability of a much larger ?rm’s R&D unit but
also reduces the ?nancial risk involved in innovation: “If
the innovation does not work then what does it cost? It’s
all variable cost”.
Freelancers are used extensively across the Group’s
activities. They are used for diverse roles, which enables
the business to avail itself of the bene?ts of specialisation
of labour while still being a medium-sized enterprise.
For instance, Greased Lightning makes use of a freelance
television presenter to sell its products on Ideal World TV.
Greased Lightning also hired a team of freelancers with
experience in automotive retail to sell its products in 125
garden centres across the UK. This became a platform
that enabled Greased Lightning to get its products into
over 500 retail outlets in just 18 months. DTR Medical
uses highly skilled freelancers to deal with peaks and
troughs in demand. Richard Salvage describes the
performance enhancing effects of freelancers as being
like “putting a turbo charger on an engine. You can either
enjoy the increased power or travel at the same speed
at a lower cost. But how often have you heard people
say that they used a turbo charger but reduced the size
of their engine?”. Translated into economics terminology,
freelancers increase productivity and reduce minimum
ef?cient scale.
Richard Salvage also uses freelancers in senior executive
roles at the start-up phase of some of the Group’s
activities. He says that instead of hiring a high skill/cost
11.http://www.medsagroup.com/
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 44
executive to set up and run a new business activity,
he hires a high skill/cost freelancer to do the dif?cult
front-end part and then hands it over to a lower cost/
skill employee-manager to do the easier task of running
the operation afterwards: “I will always expect a good
freelancer to build a function or process that is good
enough to work well without them”. He describes this
approach as separating short from long-term needs.
He points out that it optimises executive cost and skills
in start-up activities as well as helps to de-risk the
probability of being stuck with an expensive employee
executive overhead if any particular venture does not
succeed.
Freelancers are used extensively across the Group’s activities.
They are used for diverse roles which enables the business to
avail of the bene?ts of specialisation of labour while still being
a medium sized enterprise.
The Role of Freelancers in the 21st Century British Economy 45
npower:
Home Energy Services
Lee Clarke Former Head of Home Energy Services
Lee Clarke led the creation of Hometeam, npower’s home energy services corporate
venture. He initially used the services of a consultancy ?rm (Edengene) to develop the
business plan and sell the concept of the venture to the business. Once approved, npower
decided to set the operation up as a ring-fenced entity which required Lee Clarke to in effect
create a start-up. The venture was part of the retail division of npower but was based in
a serviced of?ce in Solihull separate from the main organisation. There was a shortage of
suitable of?ce space within npower for the start-up, but in fact Lee Clarke also wanted an
independent location. He felt that this would allow the start-up to be different, fresh and to
have a new culture - at least during the launch and growth phase. This approach allowed
the venture to develop fast as it could do activities such as its own marketing without
having to seek services from central marketing (whose main focus was on the ‘cash cow’ of
the business). The separate location also helped to de-risk the venture because if it failed its
closure would have a less disruptive effect on the core operations of npower.
Lee Clarke used a start-up team comprising roughly
of an even split between employees and freelancers.
The freelancers held the more senior roles as he
used them to bring in experienced and higher level
management that would not have been possible to secure
from among npower’s employee base. For example, the
lack of sales turnover at the time of start-up would have
meant that it would have been very hard for him to justify
employing a senior sales manager using internal grading
structures based on size of the turnover and number of
employees reporting to the manager. Therefore, it was
necessary to turn to freelancers to get the high level of
expertise required to successfully set up a new sales
team. The use of freelancers also enabled the de-risking
of the corporate start-up as these people could be laid-
off quickly at minimal ?nancial cost. Freelancers also
minimised reputational risk of failure for the business
as the corporate venture could be quickly closed with
minimal disruption to the workforce of the
main organisation.
The start-up proved to be successful and it became
necessary for a tenfold increase in the size of the
workforce from 20 to 200 people. The ?exibility of
freelancers was important for the evolution of the
management team in this process as it was possible
to easily transition from one head of sales to another –
ensuring that the right type of managerial expertise was
always in place. In this growth phase of development,
the ratio of employees to freelancers started to increase
dramatically. This process entailed the number of
freelancers staying roughly ?xed at ten people but with
the total number of staff gradually growing to over 250.
The scale-up of the corporate venture in this phase
also included a number of business acquisitions and
the company used some freelance interim managers
to run these ?rms after the original management had
departed. By the end of the scaling up of the corporate
venture, most freelance roles including those at executive
level, had either left the business or transitioned into
permanent employee roles. This evolutionary process
was enabled by the contingent project nature of the
freelance contracts.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 46
Lee Clarke observes that “freelancers don’t come cheap
and so you must throw a lot of work at them to make
sure you get value for money”. Although the freelancers
were paid on a day rate, the number of days were
justi?ed on the basis of achieving key performance
milestones which effectively broke the work into
projects. This then meant that each project could have
a ceiling placed on its cost, based on the time it takes
for completion.
Although the freelancers were paid on a day rate, the number
of days were justi?ed on the basis of achieving key performance
milestones which effectively broke the work into projects.
The Role of Freelancers in the 21st Century British Economy 47
NSG Group
David Bullimore Specialist Applications Systems Manager
NSG Group is a global manufacturer of glass serving the global building, automotive and
speciality glass markets. In 2011 the company had approximately 32,000 employees
across the globe and a turnover of just under ?ve billion euros. The top three markets for its
products are Europe (41%), Japan (29%) and the USA (14%). The company was originally
founded in 1918 and growth entailed an acquisition of Britain’s Pilkington plc in 2006.
The study focuses on the Specialist Applications Systems
development team unit - with team members based in
the UK, Poland, Brazil and Japan - which serves all parts
of the business. The Specialist Applications Systems
team operates under the management of David Bullimore
who is the Specialist Application Systems Manager. This
unit has roughly 30 full-time members and operates with
an average of ten UK-based freelancers at any one time.
Freelancers are typically used on creative and innovation
projects. David Bullimore describes it as “semi-
outsourcing projects while retaining full management
responsibility for delivery and quality”. Freelancers are
tasked with taking an innovation from concept through
to completion. They are not just alternatives to employee
R&D but also a substitute for buying applications in the
market place; ‘off the shelf’. David Bullimore highlights
that the key advantage of using freelancers in this realm
is in better managing entrepreneurial risk and also the
quality of innovation. Packaging R&D objectives into
freelance projects enables NSG Group to accurately
cost the innovation as the freelancer takes the risk and
responsibility being paid on an output basis.
This risk management process is helped by the high
quality supply of freelancers available in the UK.
David Bullimore points out that they can get freelance
developers with a ?rst class honours degree from a top
ten university with ?ve years of work experience and
a track record of successful projects. He points out
that there is an incentive to use the same freelancers
across different projects because this avoids losing key
knowledge which they have previously acquired with
NSG Group through learning by doing.
He points out that freelancing is more effective than
outsourcing as it allows him to choose appropriate
developers directly. He also points out that outsourced
projects usually involve the use of the supplier selected
employees who, in some cases, have not been as
dedicated and output focused as hand-picked freelancers.
These employees have often competing tasks within their
organisation and are less output focused.
NSG Group also use freelancers to manage the cost
and risks associated with peaks and troughs in demand
across the globe. For instance, David Bullimore says that
“a workload peak in Brazil can be satis?ed by using high
quality freelancers in the UK”. He says the quality of the
British freelancers is one of the key reasons why they can
engage in this type of international trade.
He argues that if the exceptional freelance talent
was not available in the UK then NSG Group would
consider moving more of its activities to overseas
outsourcing companies where workers can be cheaper.
The availability of a suf?cient supply of high quality
freelancers in the UK helps support British-based
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 48
NSG Group employees as it helps make them more
internationally competitive. David Bullimore emphasises
that although freelancers can be perceived as being
expensive, overall project timescale and cost can be
reduced by using the right talent at the right time. In
his experience, the best project results are achieved
using the smallest possible number of highly skilled,
highly focused and highly ?exible resources. Time and
cost is reduced by getting things right ?rst time and
eliminating the cycle of requirements gaps, quality
shortfall and re-testing that often plagues projects
with a larger team size. Freelancers can play an
import part in achieving these goals.
David Bullimore concludes that he is very satis?ed by
the freelancer-employee partnership model used for
innovation in NSG Group. He notes that the NSG Group
Specialist Applications Systems team have increased
the proportion of freelancers used in its projects over
the last ?ve years. This change has been triggered by
the successes achieved using the approach and by its
observed cost-effectiveness.
Image for illustrative purposes only.
Freelancers are tasked with taking an innovation from
concept through to completion. They are not just alternatives
to employee R&D but also a substitute for buying applications
in the marketplace ‘off the shelf’.
The Role of Freelancers in the 21st Century British Economy 49
Panasonic
Nigel Cowmeadow Director of Logistics
The company was founded by Konosuke Matsushita in 1918 trading under the name
Matsushita Electric Housewares Manufacturing. The company began with a strong
innovation ethos. Konosuke Matsushita set out the company’s mission as “... the mission
of a manufacturer is to make products to enhance one’s life - and bene?t society”
12
.
The company began when he left the Osako Electric Light Company because they had
no interest in an electric light socket that he had invented. He could not ?nd any buyers
for his product but picked up an order for fan insulation plates and then used the pro?ts
from this contract to re?ne his innovation to produce a two-way socket and attachment
plug which had a cost advantage over rivals
13
. The company gradually evolved from basic
electric components to consumer products such as irons and radios. The company grew
by widening its product portfolio of electronic goods through relentless innovation and
expanding internationally. The company had a turnover of approximately 78 billion US
dollars in 2010
14
.
Panasonic tend to use freelancers in three areas: to
deal with seasonal peaks in manufacturing, to ?ll short-
term demand for unique IT expertise, and for business
projects; particularly those involving change management
and innovation. In terms of the use of freelancer
involvement in senior management roles, this is usually
con?ned to project management. Nigel Cowmeadow,
European Logistics Director has observed that the need
to use freelancers in these roles has increased as a
result of the increasing adoption of lean management
structures: “Lean management has meant that there
is less spare capacity in senior executive teams and
also less movement of executives across functional and
business areas. As a result, there is limited scope to put
an internal manager on secondment in order to manage
a project as they are unlikely to have the time and broad
management expertise to manage it effectively. This is
where freelancer interim managers can be very useful”.
But Nigel Cowmeadow goes on to point out that the
bene?t of freelancers extends beyond their expertise.
He points out that they can bring fresh ideas from other
industries. By contrast internal management are often
so involved in the detail of their work that they can often
“miss the wood for the trees” or be overly pessimistic;
“we tried that before and it didn’t work”. Freelancers
can often overcome this type of internal scepticism
or opposition to innovation if they can provide ?rst-
hand examples and evidence of an innovation working
in another business. He also observes that because
freelancers are independent agents it enables them to
be objective when dealing with internal politics and
even-handed in managing vested interest groups.
Nigel Cowmeadow makes reference to a major technology
change management programme at Panasonic UK as
a good example of how freelancers can add value to a
12. Ibid.
13.http://panasonic.net/history/corporate/chronicle/1918-01.html
14. Annual Report 2010, Panasonic Corporation, for the year ended March 31, 2010.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 50
business. The company decided to adopt a uniform
SAP information system across all of its European
operations and in the UK this involved replacing an
existing system which had been developed by an
independent provider. Nigel Cowmeadow likened that
change to an organisation undergoing a heart transplant
as “one essential life organ of the company is lifted out
and replaced by a new one”. The change management
project involved the most complex and important KPIs.
The risks were considerable as Panasonic UK had an
annual turnover of £700 million and accounted for
roughly 35% of Panasonic’s European sales.
In order to overcome these challenges Nigel
Cowmeadow hired Val Cross, a senior freelance
manager from TopInterim, who previously had worked
in the IT company that had supplied Panasonic’s
existing information systems. This enabled the
company to put in place a high level technical expert
at a senior executive level who could be fully focused on
this specialist and highly risky technical operation.

Apart from the technical and business risks, the project
necessitated winning over the hearts and minds of
staff that had grown used to the existing information
system. Nigel Cowmeadow decided to use a freelancer
to manage the project. The decision was prompted by
a number of factors. There was nobody internally who
had the technical depth and breadth of knowledge of
this particular information system to be able to provide
direction to ensure that the new system would work
effectively when implemented. This was going to be
important because successful implementation was
going to involve blending the expertise of Panasonic’s
business area managers (e.g. accounts, marketing,
logistics etc.) with IBM consultants who were hired
to implement the SAP system, alongside an internal
Panasonic team from Germany who had knowledge of
the system working there. Each of these teams involved
a rough 50:50 ratio of employees to freelancers.
As the IBM consultants were being paid on a day rate,
it was key to have a project manager who would not be
at a knowledge disadvantage in terms of ascertaining
how long their part of the work ought to take. At its
height, the IBM consultants were costing £250,000
per week, so it was important to get this aspect of cost
management right without hampering their progress.
The new system was given a successful trial run
over an Easter bank holiday weekend and then ?nally
implemented over a May bank holiday weekend.
The integration was delivered on time and on budget.
Panasonic then hired Val Cross on a further two month
contract to deal with any glitches that may arise in the
new system.
Nigel Cowmeadow points out that that corporate
executive careers tend to create narrow areas
of expertise as people work in silos. By contrast
freelancers tend to experience a greater variety of
business situations and challenges in their work and
so have a broader skill set. He argues that since
freelancers are more independent, unbiased and lack
con?icts of interests, they can be in a great position to
cut through political and cultural obstacles which can
stand in the way of a project’s success. In summation,
he notes that on ?nite business projects which require
broad and impartial programme management and
budgetary expertise, it usually makes more sense to
use a freelancer rather than an employee executive.
Freelancers tend to experience a greater variety of business
situations and challenges in their work and so have a broader
skill set. Since freelancers are more independent, unbiased and
lack con?icts of interests they can be in a great position to cut
through political and cultural obstacles which can stand in
the way of a project’s success.
The Role of Freelancers in the 21st Century British Economy 51
PTS Consulting
Group PLC
Kevin Perrett CEO
PTS is a real estate IT infrastructure project management and associated services company.
It mainly serves organisations in banking and ?nance, insurance, law, Government,
education, healthcare, and media and entertainment sectors. PTS was initially founded
as a subsidiary of the Construction Group in 1983. It became an independent ?rm when
CEO Kevin Perrett led a management buyout in 1990. He has continued in the role of
CEO to the present day. Initially, the newly independent company focused mainly on UK
market penetration. In 2000 it started to focus on exports and by 2010 it had of?ces in
ten countries. The current phase of the company’s evolution is to turn an organisation with
a global footprint into a truly global organisation. In its ?nancial year ending March 31st
2012, the company had a pro?t of £2.33 million against a turnover of £38 million.
Kevin Perrett believes in building a team around him
made up of individuals who have complementary skills
and greater experience than him in certain areas. He
wants his team to challenge him and does not employ
“yes men”. However, these people need to ?t in with the
cultural ethos of PTS Consulting. He has a strong belief
that PTS must have a core of highly skilled employees.
To this end, recruitment is done carefully and over time
the company has evolved to a situation where very often
working as a freelancer for PTS turns out to be the means
by which ability, motivation and ?t can be assessed for
suitability of a full-time employment job offer. In effect,
utilisation of freelancers can serve as a means of lowering
the risk of hiring the wrong people.
Prior to 2008 Kevin Perrett never used to hire freelancers
and all of the ?rm’s business was carried out by
employees. The differentiation of the company was built
around being a specialist IT infrastructure provider that
used an employee-only delivery model. To achieve this
policy objective, the company would often turn down
business that would require PTS to employ more people
who they might have dif?culty to sustain on a permanent
basis. Kevin Perrett remembers how he once turned down
a contract requiring 20 new members of staff because
he could not ?nd work for these prospective employees
when the contact was due to ?nish.
He says the employee-only model was forced to change
after the 2008 crash. “The crash caused a big fall in
demand and over £1.5 million in bad debts. We were
left with a large amount of employee downtime and
had no option but to lay off 9% of our workforce. When
growth started again we mitigated the risk of over-hiring
employees by using contractors”. Kevin Perrett says that
in the new model freelancers work in partnership with
employees on a project basis. Most of these projects have
a duration of two to three years. He says this new model
is necessary because “times have changed and become
much more uncertain and risky so using contractors is an
important means of managing this risk”. He argues that
if you have a “variable cost freelance fringe then you can
avoid ?ring core staff”. He believes that this new model
engenders core employee loyalty and allows the company
to grow as well as meet variable demand. Freelancers
used to manage perceived peaks in demand that turn out
to be a trend are often then hired as employees.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 52
This new ‘core employees with freelancers’ model is
also important because the company is now more
diverse than before, serving more countries with a
greater range of services across more varied sectors.
This is in contrast to the earlier days of the ?rm when
most of its business was concentrated in the banking
sector in the City of London. The ability to be able
to draw on diverse freelance talent on a short-term
basis and often at short notice was an important extra
dimension required for the capability of the company’s
workforce.
“Times have changed and become much more uncertain and
risky so using contractors is an important means of managing
this risk”
The Role of Freelancers in the 21st Century British Economy 53
Symvan Securities
Kealan Doyle CEO
Symvan Securities is a corporate ?nance house which is based in London and focuses on
serving the needs of SMEs with a market value of between £20 million to £200 million.
Symvan specialises in the oil and gas, mining, real estate and technology sectors. The
?rm’s service offering includes fundraising (private equity, pre-IPO placements and IPOs),
research, investor relations and broking between corporations and their institutional
investors. The ?rm was founded in 2010 and has ?ve employees and two freelancers.
One freelancer works on investor relations to promote
the company and boost secondary trading i.e. to make
existing stock attractive and hence promote its value.
This freelancer is hired because of her specialist skills;
particularly her network of key personal contacts in terms
of private clients who have an interest in the sectors
targeted by Symvan. She is hired on a deal by deal basis
and this avoids idle downtime between deals, but CEO
Kealan Doyle explains that there is also the element of
supply-side ?t: “If the freelancer does not like the deal
or it does not ?t her clients then she will pass on it”.
Overall, this freelancer is hired in order to increase cost-
base ?exibility (replacing ?xed by variable costs), reduce
idle downtime and also to promote performance. Kealan
Doyle observes that “this freelancer likes working on this
?exible and project-based basis which also allows her to
work on other exciting deals with other companies, so
that overall she is highly motivated, which increases her
productivity”.
Symvan also outsource some sales and marketing
projects to another freelancer who is hired on a deal by
deal basis. The motivation is the same as above.
Kealan Doyle, points out that “we de?nitely pay
freelancers more than employees but feel it is worth it as
they are very productive and we only pay them on an ‘as
needed basis’ so there is no wasted spare capacity that
you would have shelling out a monthly salary”.
The company also outsource accountancy, legal, and
IT support as the ?rm is currently not large enough to
justify having a full-time person in house. Kealan Doyle
notes that “in terms of the bene?ts of outsourcing, the
distinction between freelancers and employed contractors
is not that important as both serve the objectives of
managing risk, minimising idle capacity, and lowering
costs”. In sum, the ability to outsource reduces barriers to
entry and promotes market entry by new business such
as Symvan.
In terms of the vision for the future, Kealan Doyle
expects that “as the company grows we would of course
envisage using more freelancers but likewise as the risk
of idle downtime declines we would also envisage some
freelancer roles evolving into employee posts”.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 54
Image for illustrative purposes only.
Transformation-Leaders
and TopInterim
David Pinchard CEO
TopInterim provides freelance interim managers to organisations at senior executive and
board level. The company was founded in 2000 and for market segmentation purposes has
evolved to trade both under its own name and as Transformation-Leaders. The business
has a select network of freelance senior executives to provide organisations with interim
directors and manager in areas such as general management, ?nance, IT, international
HR, sales and production. Reputation is key to the success of the business where
recommendations, referrals and trust are core drivers of the hiring process.
David Pinchard, founder and CEO of TopInterim
explains the optimality of using an employee or freelance
manager is determined by the organisational needs
of the business. A ?rm requiring stability, continuity
and evolutionary change will usually opt for an
employee-manager while a ?rm operating in a turbulent
environment requiring transformation will often draw
on the services of senior interim managers. The typical
projects that these freelancers will manage include
innovation, adoption of internally disruptive
technologies, business turnaround and downsizing.

They all hinge on adding value to a business and
the basis for freelancers’ remuneration is usually
performance/output based rather than a temporal/
input basis. David Pinchard describes the process as
businesses outsourcing entrepreneurial management
where the interim managers are entrepreneurs
themselves. He says they “serve an entrepreneurial
function in that they manage economic disequilibrium”.
He argues that these freelance executives are visionaries
and at an individual level “must be ?nancially
independent in order to be willing to risk losing the
project if their vision is not going to be implemented”.
He also describes them as “portfolio managers” who
tap into their unique talents and apply them across
diverse organisations.
David Pinchard argues that “interim managers add
unique value by bringing an objective and independent
managerial approach to business”. They can remain
aloof from internal politics which can be daunting when
a business is faced with major transformations such as
downsizing a Government department or transforming
a business which faces much internal opposition. David
Pinchard contrasts this with employee executives “who
are too tied-up with internal politics and have a vested
interest in the outcome”. He also believes that employee-
managers are too risk averse to be effective in this
entrepreneurial context: “Full-time employee-managers
are afraid that it will all blow up in their faces and cause
them to lose their job”.
David Pinchard points out that at ?rst sight some
organisations may view senior interim managers as
expensive and he admits that “it is true that these are
high calibre executives with ‘must-see CVs’ who are paid
well”. However, he says that they are highly productive,
focused and driven executives who deliver results for
organisations. In these terms they are very good value
for money. He also argues that they are less risky than
employee executives as they are paid on results.
CASE STUDY
The Role of Freelancers in the 21st Century British Economy 56
Since his ?rst assignment as an interim manager,
David Pinchard has observed a trend where it
is becoming increasingly accepted as normal for
organisations to hire an interim executive when change
management is required. As this trend continued,
this growing market segmented into senior interim
managers and what David Pinchard terms more
“top-end” senior “Transformation-Leaders” – the latter
particularly important in highly uncertain business
contexts which accelerated after 2008. These
developments necessitated the dual trading names for
his business in order to more clearly differentiate the
service offering and hence better target these different
market segments. The business is currently expanding
internationally with entry into China.
The Role of Freelancers in the 21st Century British Economy 57
Vocalink
Philip McCarthy-Clarke Innovation Director
Vocalink is a company owned by banks and building societies which run much of the
UK’s payment infrastructure – include BACS, Faster Payments and the LINK ATM network.
It connects over 60,000 ATMs, processes roughly £3.5 billion transactions each year,
has approximately 700 employees and is owned by the UK’s largest banks and building
societies. Philip McCarthy-Clarke was the Director of the Innovation Department from
2006-2009 with a brief to manage corporate venturing. The division investigated and
developed innovative ideas through a ?ltering process that would often see just ?ve ideas
commercialised from a starting point of 200. He points out that due to industry short-
termism there was a leaning towards incremental technical innovation rather than longer-
term game-changing innovation.
CASE STUDY
Initially, Philip McCarthy-Clarke tried to build his
innovation team by hiring employees but could not ?nd
people with the required talent for innovation despite
being able to offer top rates of pay. He attributes part of
the problem to the fact that the company was located
outside of London and that it was a lesser known brand.
He remembers losing one employee to a lower paid job
in RBS based in London. However, he also believes that
it is generally hard to ?nd talented employees for an
innovation role as people with the right pro?le are few
and far between. He says that “delivering innovation
requires people with both creative and entrepreneurial
capabilities - gifted generalists with both left and right
brain capability”. Having worked previously in growth
consultancy, he had to turn to freelancers and consultants
to ?nd these attributes. This approach facilitated project-
based innovation as these contractors enjoyed fresh
challenges, were con?dent and motivated to embrace the
uncertainty associated with innovation. They thrived on
a sense of project ownership and delivering change, even
against political opposition.
Freelancers were typically engaged after a stage when
the broad strategic objectives behind innovative ideas
were complete. This left them with the remaining tasks
of re?ning the innovations and converting them into
commercial opportunities.
Once commercial potential had been established, the
next challenge was to re-integrate projects back into
the parent organisation. The organisational and cultural
divide between the Innovation Department and the core
of the company made this transition dif?cult. The parent
organisation had an employee mind-set and was an
operations focused organisation. There was often no real
interest or commitment to make any of the innovations
work. Philip McCarthy-Clarke noted that “95% of
Vocalink’s income for the next ?ve years was assured
from existing service offerings and hence there was no
pressure to innovate”.
In order to facilitate the re-integration process Philip
McCarthy-Clarke decided to hire employees to work
alongside freelancers in the Innovation Department.
The Role of Freelancers in the 21st Century British Economy 58
However, this approach was not successful as these
employees were not as talented and motivated as the
freelancers. Philip McCarthy-Clarke explained that the
employees did not have the same sense of ownership
of the innovation project as freelancers. He argues that
“freelancers are more independent and retain their
own mind-set. They are motivated by seeing a project
through to completion. They are more resilient when a
project requires ‘pushing it through’”.
The parent organisation was keen for Philip McCarthy-
Clarke to use a preferred list of suppliers for recruitment
and to make greater use of employees. He tried to
convert freelancers to employment contracts but they
preferred to be hired for speci?c projects rather than
on a continuous employment basis with a car, pension
etc. However, the parent organisation forced the issue
leaving the freelancers with no option but to disengage
from their activity with the organisation or take up
employment. Some took up employment but ultimately
this change led to a decline in the performance of the
Innovation Department. Ultimately, it prompted Philip
McCarthy-Clarke to leave the organisation – and he is
now back in a consulting role as a Partner in a leading
growth advisory business.
The Role of Freelancers in the 21st Century British Economy 59
3.1 Innovation in the Knowledge-based Dynamic Economy
The relentlessness of innovation is one of the hallmarks of the modern economy. Innovation not only leads to
the creation of new markets but is also one of the main factors determining competitive advantage and hence
the allocation of market shares across businesses. It plays a role in determining the size of the market and its
distribution across ?rms. As a result, innovation is a key driver of economic performance and employment.
However, being innovative can also present a challenge for corporations especially when it diverts focus and
attention away from the core areas of activity which are generating value – the ‘cash cows’. Innovation can also
be costly to ?nance and with an uncertain outcome entails a risk for a business. Innovation has to clear many
hurdles before it creates value for a ?rm. It can fail at any stage across its development from conceptualisation, to
commercialisation and through to integration with the core business. Innovation which fails to achieve its objectives
can also pose reputational risks for senior executives and corporations who operate in ?nancial markets renowned for
myopia and a susceptibility to media sensationalism.
The challenge for executives is therefore to be able to unleash the potential of innovation to create economic
value-added while keeping its negative effects under control. In order to achieve these dual objectives executives
are turning to freelancers at every stage of the innovation development process (from innovation creation, to
commercialisation and through to integration with the parent organisation). We now examine the role of freelancers
at each of these steps in this process.
3.2 Freelancers Creating Innovation
In the case studies we observe that in a diverse and rapidly changing economic environment it is dif?cult for any
corporation to have all the creative talent it needs in-house, and even where it has depth of talent, it is often
productive to get a fresh and independent external perspective. The ability to tap into freelance talent is a key
resource for businesses operating in this type of business environment. It is common for corporations to outsource
innovation projects to specialists who can invent and develop new technology. We observed ARM Holdings using
freelancers for the proof of concept stage of innovation and also to test out the viability of new markets on a low
risk basis. The same was also true for BSkyB, Centrica British Gas, npower and the client bases of Market Gravity
and Transformation-Leaders as they both use freelancers to manage innovation for corporate clients. We also found
that corporations such as the NSG Group semi-outsource key parts of innovation to freelancers for projects in their
automotive, construction and speciality glass businesses. This is facilitated by an exceptionally high quality supply
of freelancers in the information systems sector. They prefer freelancers to contractor ?rms using employees because
they believe that freelancers are higher quality and more motivated.
Vocalink indicated that it often found it hard to ?nd a “creative entrepreneurial mind-set” within the organisation
and so turned to freelancers where these talents can be found. Often these freelancers were previously entrepreneurs
who have made an exit from their original business. The transformation of their economic status from owner-
manager to independent freelancer liberates their creative talent from the boundaries of a single ?rm.
3 Corporate Venturing:
Providing and Enabling
Innovation
The Role of Freelancers in the 21st Century British Economy 61
They are no longer restricted to innovation which is core to the strategic focus of their own ?rm and likewise, are not
restrained by the ability of an SME to only commercialise a small number of opportunities at a time. As a freelancer,
they can supply their talent to many different ?rms and in the process increase the impact of this (scarce) talent on
the economy.
The contingent project-based nature of these freelancers’ contracts with businesses distinguishes their creative input
from that of employees, executives and owner-managers. Likewise, this form of contract enables their ability to serve
many different organisations. It also enables these organisations to hire creative talent on a low risk basis without
having to make an unnecessary commitment to longer term employment or business partnerships – a common theme
in the case studies.
3.3 Freelancers Commercialising Innovation
This stage of the process entails testing an innovation in the market and undertaking any necessary adaptations to
improve its commercial worth. It can also involve changing strategic direction as a result of learning of an unforeseen
pro?t opportunity. Typically, businesses do not want innovation to distract employees from core ‘cash cow’ activities.
Therefore, they often choose to ring-fence the organisation and ?nancial risk of the commercialisation of an innovation
until its viability can be determined. Frequently, freelancers take on managerial, technical and professional roles in
this process. They usually work in partnership with some key employees/executives who are already involved in the
innovation process and who will play key roles in the integration phase of the innovation if the pilot commercialisation
project proves successful. In the case studies we observe organisations such as Argos, ARM Holdings, Centrica British
Gas and npower using freelancers to set up a corporate venture separate from the main organisation in order to limit
disruption with the core ‘cash cow’ of the organisation.
The prime objective is to test the market potential and re?ne the innovation suf?ciently in order to ascertain its
commercial worth. We observed BSkyB using freelancers in this role in a process they termed as “hypothesis testing”.
The Vocalink case study indicated the extent of the risk of failure associated with innovation, where only about 3%
of ideas would make it successfully through from conceptualisation to integration. The use of freelancers at the
commercialisation stage of the innovation enables corporations to terminate an unsuccessful project with limited
?nancial and political cost. In developing Argos Direct, Tony Lahert involved freelancers in the commercialisation
stage because he did not want to risk hiring employees who he might later have to lay off. Freelancers also ?tted his
requirement for being creative and agile which are helpful attributes given the uncertainty and hence adaptability
required for early stage innovation projects.
If the commercialisation of the innovation proves successful then it can be integrated with the core business. The
availability of freelancers who will work on contingent project-based contracts reduces these risks and so increases the
incentive for businesses to innovate. As a result, freelancers help create jobs that result from successful innovation.
3.4 Freelancers Integrating Innovation into the Corporation
This is a stage that requires handover and change management. Here it is common for freelancers to be hired as interim
managers to complete a project. Freelancers are also hired to complete the handover process to employees, which
can involve training, support and further innovation required for integration. It is also a stage where some freelancers
are offered permanent employment as the entrepreneurial risk involved in the innovation has been realised and worker
contracts move to resemble the more continuous non-contingent employee-type. Tony Lahert resigned in order to be
hired back as a freelance interim manager to roll out Argos Direct once the pilot launch had proved successful. He felt
that this was necessary to avoid being drawn in to deal with short-term ‘cash cow’ issues of the parent organisation
and also to have the ability to stand up to internal pressures and stay focused on the core innovation project. Once the
project was complete, having achieved a turnover of £100 million, Tony Lahert was replaced by an employed executive.
The Role of Freelancers in the 21st Century British Economy 62
Tony Lahert points out that the generalist skills of freelancers make them very effective interim managers for
innovation and change management. He believes these skills emanate from their varied career background: “Just as
travel broadens the mind, a freelancer will have a broader and more colourful experiential mind-set than executives
or owner-managers”.
We ?nd similar evidence with other companies such as Panasonic who indicated that they often draw on freelance
interim managers because modern executives tend to work in silos and therefore it is useful to draw on freelancers
who typically have a more varied career experience. They also note the advantage in change management to have
a freelancer who is independent and so can be objective and impartial when tackling internal politics seeking to
derail innovation. David Pinchard of Transformation-Leaders and TopInterim describes this process as “businesses
outsourcing entrepreneurial management” where the interim managers are entrepreneurs themselves. He says they
“serve an entrepreneurial function in that they manage economic disequilibrium”. He argues that these freelance
executives are visionaries and at an individual level “must be ?nancially independent in order to be willing to risk
losing the project if their vision is not going to be implemented”. He also describes them as “portfolio managers”
who tap into their unique talents and apply them across diverse organisations.
This ability for businesses to ring-fence the cost and risk of the innovation process by using freelancers enables
the creation of employment. Without this prior freelance state, innovation and the jobs that it creates would
be diminished. Therefore, in the innovation-driven economy many employees depend on freelancers to create
employment. Freelancers precede employees in the innovation process and the existence of the process itself is
very much reliant on the availability of skilled (SOC 1-3) freelancers.
3.5 Summary: The Freelance Innovation Value Chain
We summarise the evidence and analysis in Figure 3 which illustrates how freelancers create value throughout the
innovation supply chain. The lower part of the diagram depicts the three stages associated with the development
of an innovative concept through to commercialisation and then integration of the ?nal innovation with the parent
organisation. Innovation which can successfully make this journey enhances the performance of the organisation and
creates value manifested in pro?t and job generation. These are represented as the arrowhead of the diagram which
denotes the prime objective of innovation. We note that freelancers are involved in projects comprising each stage of
the innovation development process.
The upper panel of the diagram illustrates the roles freelancers play in increasing innovation performance.
They drive innovation value creation through a combination of their skills and talent and the contingent basis upon
which corporations can draw on this expertise. This enables corporations to hire the right type of person to drive
innovation at each stage of its development. They can make use of specialised freelance labour without the cost of
carrying spare capacity. This has a virtuous dual value creation effect of increasing the likelihood of success (reward)
while simultaneously reducing risk. The availability of freelancers enhances the organisations ?exibility to tackle
varied innovation projects as it is not constrained by the limits of its employee talent base. Freelancers also enable
the agility of the organisation as it can create and disband innovation teams faster than it could through employees.
By allowing the ability to ring-fence innovation while it is under development or by being able to work remotely,
freelancers facilitate the transformation capability of corporations to accommodate innovation in an organisation
currently focused on exploiting ‘cash cows’. The upper panel of the diagram shows how these six freelance value
creation drivers permeate through all three stages of the innovation development process. In sum, the diagram
illustrates the important role that freelancers play in driving corporate venturing in an innovation-driven economy.
The Role of Freelancers in the 21st Century British Economy 63
Figure 3: The Freelance Innovation Value Chain
Enhancing Managerial Expertise
Enabling Specialisation of Labour
Increasing Flexibility
Enhancing Agility
Enabling Risk Management
Enabling Transformation of the Organisation
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The Role of Freelancers in the 21st Century British Economy 64
4.1 Market Entry: Freelancers Reducing Barriers to Entry
The availability of freelancers has a profound effect on business start-up activity and performance. New business
start-ups face barriers to entry such as a lack of ?nance and the risk associated with sunk costs. The ability to use
freelancers instead of hiring employees reduces both of these impediments to business start-up. The amount of
?nance required for a start-up is reduced when entrepreneurs can use freelancers on a ‘pay as you grow’ model.
By contrast, an employee model involves a longer term ?nancial commitment and entails a cost regardless of
whether the employee is fully utilised or not. This greater ?nancial requirement for employees is also entirely a sunk
cost thereby raising the ?nancial risk involved. Therefore, the ability to draw on freelancers makes it easier and less
risky for people to start up new businesses. This was evident in the case of branding and web design venture Look,
Touch & Feel which was able to offer a full portfolio of service offerings to clients from start-up by being able to draw
on diverse freelance talent. The same is also true for the consultancy business Enhancing Clarity which has been
able to draw on freelancers on an ‘as needed basis’.
The Medsa Group’s approach to innovation illustrates the importance of freelancers in promoting innovation among
new ventures and SMEs. The company engage with their customers to explore unful?lled consumer needs and then
refer these potential opportunities to their laboratory to develop products. Since consumer requirements and needs
vary, the Group’s R&D laboratory needs to be able to have diverse scienti?c and technical expertise. It ful?ls these
needs by using freelancers who thereby enable an SME to have R&D capabilities comparable with corporations.
Moreover, it only has to pay for this on a variable cost basis which reduces the risk involved in researching
speculative market gaps. This has enabled the Group to spawn a diverse range of companies covering medical
care, automotive products and recycling.
4 Entrepreneurship: New
Venture Creation, Survival
and Growth
New ventures play a central role in the modern dynamic economy. They are not only major
conduits of innovation but also increase competition. Through these routes they increase
innovation-driven and ef?ciency-driven economic performance respectively. Freelancers have
played a role in the success of new ventures in terms of making it easier for new business
to enter markets, survive and grow.
The Role of Freelancers in the 21st Century British Economy 65
4.2 Freelancers Enhancing New Venture Survival
The availability of freelancers not only promotes entry, it also assists the survival of new ventures by reducing minimum
ef?cient scale. The ability to outsource diverse labour requirements on a swift basis promotes small ?rm ?exibility and
agility. This not only means that ?rms do not have to be large to have a diverse capability, but also means that small
?rms’ ability to be more agile can be mixed with access to diverse freelance talent to make them capable and ?exible
competitors for incumbents. Among our case studies we were able to observe small new entrants such as Flexmort,
entering an R&D and hi-tech manufacturing intensive industry with minimal ?xed cost requirements, mainly because
it could outsource freelance talent as well as other key inputs to its operations. The same also applied to Symvan who
were able to use freelancers (as well outsourcing of other inputs to the their business activities) in order to overcome
barriers to entry to the ?nance industry. Similarly a company such as Transformation-Leaders is able to enter and
compete in the high calibre interim manager market with established incumbents as a result of assembling an exclusive
portfolio of senior freelance executives to offer to its clients. Likewise, a relatively new entrant, Market Gravity is able
to offer corporations the option to outsource large corporate venturing projects by making extensive use of high calibre
freelance talent in this specialist area of executive expertise.
It is hard to conceive how businesses such as Transformation-Leaders and Market Gravity could supply their clients
exclusively drawing on an employee base as it would involve a huge cost increase which would be associated with
a decline in its capability to deliver. Thus, we observe multiple routes through which freelancers promote new
venture survival.
4.3 Freelancers Driving New Venture Growth
As new ventures grow they typically need to draw on more talent than the founders can provide. This can be both
at a strategic and technical level. Freelancers are used extensively in entrepreneurs programmes such as Cran?eld
School of Management’s Business Growth Programme. In this programme freelancers coach and impart expertise to
owner-managers of other businesses in order to help them formulate a growth strategy. SMEs that have engaged in the
Business Growth Programme include businesses such as Go Ape, Hotel Chocolat, Hudson Contract and Paci?c Direct.
Freelancers who serve the entrepreneurial market are usually former entrepreneurs who have cashed out of their
business. Tony Lahert, the freelancer behind Argos Direct, points out that the creative motivation and mind-set for
entrepreneurs are very similar to freelancers. They both like the creativity and freedom associated with innovation
and being your own boss. As he puts it: “When the knob turners get a hold of a business, then I am off”. Tony Lahert
believes that he can do many more innovation projects as a freelancer than he could have done as an employed
executive. This point is backed up by Philip de Lisle who once ran the dot.com Business Online Group plc and is now
CEO of Enhancing Clarity who says he works with roughly nine businesses per year. In terms of his creative output and
impact on the economy, he argues that it has increased by around a factor of nine as a freelancer over what it was
previously as an owner-manager. He argues that he has “affected more change as a freelancer than as an entrepreneur
and with greater ease can see the wood from the trees”.
The conclusion here is that the growth potential of SMEs is enhanced through access to freelance entrepreneurial talent.
Correspondingly, the impact of entrepreneurial talent working through a freelance conduit rather than through an owner-
manager whose talent can be constrained by the boundaries of the scope of the ?rm, raises an interesting question on
how best to get the most economic value-added out of any country’s entrepreneurial talent base. What is clear is that
after exit, an entrepreneur who moves into freelancing can continue to make a positive impact on innovation-driven
economic performance.
The Role of Freelancers in the 21st Century British Economy 66
4.4 Summary: Freelance Driven Entrepreneurship
We summarise the discussion with reference to Figure 4 which depicts the Freelance Entrepreneurship Value
Chain. The lower panel represents the start-up, early stage survival and growth phases of development. As we have
discussed above, freelancers play a key role in driving innovation in new ventures at each of these three stages.
The functions they serve across all three phases are represented in the upper panels. They involve lower ?nancial
requirements by enabling a contingent cost ‘pay as you grow’ model. This contingent variable cost model enabled by
freelancers who are willing to work on a project basis means that these new ventures face lower sunk costs thereby
reducing barriers to entry and promoting innovation and growth. Freelancers allow SMEs to have a capability beyond
the constraints of their relatively small size by allowing them access to a wide range of freelance talent to use on an
‘as needed’ basis, thereby enhancing the ?exibility and agility of these ?rms.
In combination, all of these features reduce minimum ef?cient scale which enhances the viability of relatively smaller
new ventures across all stages of development. Put differently, without freelancers, starting a new venture would
involve more uncertainty (and risk), require more ?nance and have a lower prospect of survival when competing with
larger incumbents. In short, there would be less entrepreneurship and innovation. Freelancers are signi?cant drivers
of the pro?ts and jobs created by the entrepreneurial economy.
Reducing Finance Constraints & Sunk Costs
Access to Entrepreneurial Talent
Increasing Flexibility
Enhancing Agility
Enabling Risk Management
Reducing Minimum Ef?cient Scale
F
U
N
C
T
I
O
N
S
S
T
A
G
E
S
P
E
R
F
O
R
M
A
N
C
E
:
P
R
O
F
I
T

&

J
O
B
S
Business
Start-Up
Survival Growth
Figure 4: Freelance Entrepreneurship Value Chain
The Role of Freelancers in the 21st Century British Economy 67
5.1 Introduction
Economists use the term ef?ciency to represent the outer limit of business performance. This form of ef?ciency
de?nes the state of best-practice from a performance point of view. Sometimes ?rms do not adopt best-practice
when there is effective opposition to change within the organisation. It can also be constrained from adopting best
practice as a result of being unwilling to take the risks involved in change and/or being ?nancially constrained so that
it cannot afford to invest in change. In addition, the incentive to be ef?cient is itself positively affected by the level of
competition in the industry. The need to compete to survive tends to promote ef?ciency. Combined, these factors play
a key role in determining the performance of industries and hence economies. It is noteworthy that the availability of
freelancers promotes all of these factors which encourage ef?ciency and economic performance.
5.2 Capability: Accessing Expertise Plus Enabling Flexibility
and Agility
Virtually all of the executives interviewed in the case studies identi?ed enhanced ?rm capability as one of the
reasons they make use of freelancers. Access to freelancers on a swift variable cost basis enabled these ?rms to
respond quickly and effectively to changing market opportunities. The freelance variable cost model meant that they
faced lower ?nance constraints. The decision to hire an employee requires a greater ?nancial commitment than a
freelancer. Freelancers offer businesses the ?exibility to draw on an immense range of skills and expertise which
means that their capability is not limited to that of their employee base. In the case of Panasonic we observed an
organisation where adoption of a ‘lean and mean’ managerial style meant that they had no spare executive talent to
draw on in order to manage the integration of a new technology. Furthermore, many business such as NSG Group,
ARM Holdings, Look, Touch & Feel, Magic Light Pictures and Symvan to name a few pointed out that certain types
of expertise are hard to ?nd except on a freelance basis; presumably as that is the preferred mode of working for
many people.
The freelance model also allows businesses to make productivity gains through increased specialisation of labour
as the risk of idle downtime diminishes. The ability to apply the right expertise to each job without fear of building
up unsustainable overhead costs was a reason cited by executives or if not, was “taken as a given” when prompted
in the interview. Closely related to this bene?t is the importance of agility and many businesses mentioned this as
a key reason why they use freelancers. Businesses such as npower, the major international bank, TopInterim, H+K
Strategies, BSkyB, Flexmort, Forewind and Centrica British Gas all emphasised the importance of being able to use
freelancers to increase the agility of the organisation; especially without building up a huge ?xed cost base.
5 Ef?ciency: Pushing
Performance to its Limits
The Role of Freelancers in the 21st Century British Economy 69
5.3 Productivity: Adopting Best Practice and Technology Plus
Enabling Change
The impact of freelancers on this element of ef?ciency is similar to our discussion of the integration of innovation in
section 3 except that it is more about imitation of innovation. Here the organisation is changing to accommodate best
practices and/or new technology from the market. Examples include introducing new information systems, adopting new
managerial techniques or adapting the business to new technologies, regulation or consumer preferences. In this realm,
freelancers are often used to supply speci?c outputs on a project basis. Interim managers are often used to undertake
change management; especially when unique expertise is required. The use of freelancers for these functions manifests
the contingent project-based nature of freelancer engagement with business. They play a key role in enabling ef?ciency
improvements in ?rms. This is achieved by minimising distraction of employees from the core business while allowing
short-term access to specialist expertise, as well as general worker capacity that would become super?uous if hired on
longer term employee contracts. Businesses such as the major international bank, Forewind, Transformation-Leaders
and Panasonic have used freelancers to undertake the transformation required in order to adopt new technologies.
5.4 Maximise Performance Across Peaks and Troughs in Demand
Dealing with peaks and troughs in demand and business activity poses a big problem for businesses. If they scale up
their employee base to meet peaks in demand they face the costs of greater idle downtime in troughs. If they turn down
extra business in peaks then they lose revenue opportunities. Freelancers offer a way out of this dilemma by providing
a variable cost workforce capable of delivering the cyclical dimension of demand. Figure 5 illustrates the case where
a ?rm attempts to avoid the cost of all employee downtime due to troughs in demand. It hires employees to produce
products/services for the non-cyclical risk-free component of demand (revenue) and then supplements this workforce
with freelancers who supply the risky variable component of the demand. In the diagram, the ?rm’s utilisation of labour
(L) required to produce output is positively related to the ?rm’s revenue (Y) which is comprised of guaranteed (Ymin)
and uncertain consumer demand (Y-Ymin). Employees (E) are used to produce the output to supply the ?xed component
of revenue E(Ymin) and freelancers (F) are used to serve output associated with variable revenue F(Y-Ymin). Therefore,
L = E(Ymin) + F(Y-Ymin). This approach allows a business to manage the risk in variable demand and maximise its
output/pro?t performance as well as the amount of work undertaken by labour (employees plus freelancers) across
cycles.
Figure 5: Managing Performance Across Peaks and Troughs in Business Activity
LABOUR
UTILISATION
L=E+F
LABOUR:
L=E+F
EMPLOYEES:
E=E(Ymin)
FREELANCERS:
F=F(Y-Ymin)
TIME
Freelancers
Employees
The Role of Freelancers in the 21st Century British Economy 70
Over half of the businesses in the case studies said they used freelancers to manage peaks and troughs in demand.
NSG Group’s British operations serve a global market and it uses freelancers to manage peaks and troughs in
international demand. The global IT corporation (who preferred to remain anonymous) indicated that due to cyclical
demand it had adopted a policy of having 30% of its workforce accounted for by freelancers in order to maintain
a signi?cant variable cost element of its labour costs. It also pointed out that the supply of freelancers is pro-
cyclical and that more people want to be a freelancer in a boom period. So in boom periods they often have to offer
more performance-related pay to employees in order to retain them. ARM Holdings indicated that it seeks to have
around 10% of its workforce accounted for by freelancers in part to manage peaks and troughs in demand (other
simultaneous objectives include agility and ?exibility).
5.5 Reducing the Risk of Growing a Business
There is usually uncertainty and risk involved in expanding a business in order to exploit new pro?t opportunities.
Freelancers enable businesses to reduce the risk and uncertainty in adopting these growth strategies. There are sunk
costs involved in a business taking on employees in order to grow. If the target opportunity does not materialise
then these sunk costs are borne by the business. Freelancers provide a solution to this problem by offering to work
on a contingent project basis which eliminates the risk of costly downtime. If the pro?t opportunity is realised then
the contingent nature of the contract disappears and the business can then evolve to hiring employees instead of
freelancers. In this manner freelancers create jobs by reducing the risk of employment growth.
We illustrate this in Figure 6 which is similar to Figure 5 except that the business faces an unexpected upsurge in
demand. This indicates the possibility of a new pro?t opportunity and if realised, then scope to grow the business.
Figure 6 illustrates the case where the business uses freelancers to de-risk the exploration of the pro?t opportunity.
Freelancers are used to serve these new consumers and once the ?rm is con?dent that this custom is sustainable it
then grows the business – hiring employees to replace the short-term rise in the use of freelancers. By contrast, if
?rms are unwilling to take the risk involved in serving and exploring this new market space, they can get stuck on
the lower employment panel with cyclical demand remaining at its original mean. In other words, other ?rms capture
the new market space and/or as a result of their absence in the new market space they simply remain unaware of its
potential. Freelancers make this latter scenario less likely by reducing the risk of growing to serve speculative
market space.
Figure 6: Freelancers Reducing the Risk of Revenue and Employment Growth
LABOUR
UTILISATION
TIME
Original Employment Base
New Employment Base
Freelancers
Freelancers
L=E+F
LABOUR:
L=E+F
EMPLOYEES:
E=E(Ymin)
FREELANCERS:
F=F(Y-Ymin)
The Role of Freelancers in the 21st Century British Economy 71
In the case study analysis we observe that this freelance driven growth means that freelancers are used as a means of
creating employment. The de-risking of growth approach is used in both corporations such as the major international
bank, Centrica, ARM Holdings and the global IT corporation as well as SMEs such as H+K Strategies, Symvan and
Look, Touch & Feel. We also observe that PTS Consulting used to operate an employee-only model and as a result
sometimes had to turn down new business when it was not con?dent that it would be able to ?nd follow-on work for
employees hired to service the new account. The company ?nally decided to adopt a model where freelancers are
used to service new business growth and in cases where this business proves more permanent they then move to
an employee model – where some of these freelancers are offered employment contracts.
5.6 Summary: Freelance Driven Eff?ciency
We observe freelancers promoting ef?ciency-driven economic performance by increasing capability (access to freelance
expertise, ?exibility and agility), productivity (gained through specialisation of labour and adoption of new technology)
and the ability to reduce decision-making under uncertainty by better management of risk. In section 4 of the report
we observed how freelancers lower barriers to entry for new ventures and reduce minimum ef?cient scale which have
the effect of increasing competition and hence further enhancing ef?ciency. The combined effects of freelancers on
ef?ciency-driven economic performance are depicted in Figure 7. It is clear that a popular view that freelancers only
serve the purpose of competing with employees does not have much resonance in the analysis of the case studies.
Instead, we ?nd that in the ef?ciency-driven economy, much employment depends on freelancers and the executives
interviewed use freelancers mainly as complements rather than substitutes for employees. This leads us onto the next
section of the study.
Figure 7: Freelancers Promoting
Ef?ciency-driven Economic Performance
FREELANCERS
Capability
Productivity
Reduced Risk
Competitiveness
Ef?ciency-Driven
Economic Performance
The Role of Freelancers in the 21st Century British Economy 72
We noted at the outset of the report that the traditional view of freelancers is one where they are competitors of
employees and represent a shadow workforce. In a factor-driven economy, this view would be true as long as the
skills of both groups are rather similar. We have noted that in many of the case studies such as ARM Holdings,
npower, Vocalink, Panasonic, Symvan and Look, Touch & Feel that certain skills and expertise are dif?cult to ?nd
among employees as some segments of the labour force appear to have a preference for freelance work. NSG
Group indicated that they base a signi?cant amount of their innovation related employment in the UK because
they can ?nd highly skilled freelancers to do R&D projects. Their British-based operations are underpinned by the
availability of high quality freelancers e.g. engineers specialising in information systems with a ?rst class degree from
Cambridge. They point out that if a suf?cient supply of high quality freelancers were not available in the UK, NSG
Group would consider moving its innovation activities overseas. This scenario challenges the simple competitor or
substitute orthodoxy between freelancers and employees.

However, this study was mainly focused on the innovation-driven economy and to a lesser extent the ef?ciency-
driven economy. We found that in both cases freelancers are used to serve different functions to employees. They
play a major role in enabling businesses to manage the risks of developing new innovation and growing a business
to exploit new business opportunities. They also play a major role in supplying innovation to businesses as well as
encouraging innovation through new business ventures. By using freelancers for these distinct roles businesses are
able to create sustainable value-added which underpins employment. Simply put, in the modern economy much
employment would not be created and some would be unsustainable without the availability of freelancers.
Far from competing with freelancers, many employees actually depend on them for their jobs.
Furthermore, freelancers help organisations to undertake transformation suf?cient to adopt new innovation and
the latest technologies with the least disruption to the core employee base of the organisation.
Of course these ?ndings do not rule out the existence of a competitive relationship between freelancers and
employees as no doubt this exists. However, research has found that this is not the only relationship between
freelancers and employees, and in fact, there are others which are more signi?cant. The executives who were
interviewed mainly saw freelancers as serving a different function to employees. These executives also pointed
out that freelancers typically cost more per day than employees but it makes sense for businesses to pay these
higher rates of pay given the value created. Once the freelancer-speci?c function is complete these organisations
usually look to replace freelancers with employees. The sustainable price differential between freelancers and
employees is a clear indication that freelancers provide something different to employees. Our research ?nds
much evidence to support this view. A signi?cant difference in function is that freelancers play a major role in the
employment creation and sustainability in innovation-driven and ef?ciency-driven growth. Far from competing
for work with freelancers, employees depend on freelancers to create suf?cient sustainable revenues to create
employment. Figure 8 symbolises the relationship for innovation and ef?ciency-driven economic performance
respectively. However, it will require future statistical analysis to quantify the relationship between different types
of freelancer use and job creation and sustainability. For the present we aim to highlight the importance of
uncovering this important causal relationship.
6 Freelancers Creating and
Sustaining Employment
The Role of Freelancers in the 21st Century British Economy 73
Figure 8: Freelancer-driven Employment Creation and Sustainability
JOB CREATION
& SUSTAINABLE
EMPLOYMENT
FREELANCERS
INNOVATION
& EFFICIENCY
The Role of Freelancers in the 21st Century British Economy 74
A central ?nding of the research is that freelancers serve a role as a distinct economic agent which serves to create
value in innovation and ef?ciency-driven economies. If Britain, or indeed any innovative economy, wants to optimise
its performance then nurturing the supply and competitiveness of its freelance talent base is key. Public policy will
need to factor in this distinct role of freelancers; particularly in relation to ?scal, enterprise, industrial and labour
market policies. This requires freelancers to be recognised in their own right as a unique economic agent. In Table
2 we show that while freelancers are self-employed, their unique function is not as a business owner: they are
primarily serving an ‘own account’ worker function. They offer their services on a project by project basis. The
validity of their contract with a business is contingent on the project going ahead. Remuneration is usually based
on output (paid for the completion of a speci?ed project) rather than input (paid in return for labour time). Of course,
freelancers will sometimes justify or quote for a project lasting an agreed duration of time with reference to day rates
(an input price) but this limited duration de?nes the project-based nature of the contract and effectively converts
this to an output price i.e. a cumulative price to complete a project. There is no legal obligation for the business to
continue to hire the freelancer once the project is complete.
It is clear in this depiction that while freelancers may have some areas of commonality with, and indeed often are
business owners, their unique function is independent of owning a business. The essence of freelancing simply
involves workers taking on risk and supplying their services on a contingent project or limited duration basis.
It is evident from these features that people who voluntarily opt to become freelancers manifest entrepreneurial
characteristics in terms of being risk takers and being paid on a performance basis – primarily to win a contract
and then usually on the basis that the remuneration in the contract is output based. Freelancers do not necessarily
have to function as a business to offer their services and make an impact on the economy. They do not have to
contract via an intermediary such as a limited company, have business premises separate from their home or supply
materials or equipment. Yet despite this, existing taxation rules which determine their eligibility to be classed as self-
employed such as those relating to IR35, usually require freelancers to mimic the features of self-employed business
owners. This emphasis creates a risk for freelancers and businesses alike as it raises the probability that the
genuine use of freelancers will be categorised as false self-employment with both negative ?nancial and reputational
consequences. This can result in a simultaneous fall in the supply and demand for freelancers resulting in negative
economic consequences.
Of course any solution to this issue should also seek to avoid the problem of false self-employment, where in an
attempt to avoid taxation, businesses can lay off employees only to re-hire them as ‘freelancers’ but tacitly on
more or less the same effective terms. We need to capture the de?ning and unique features of freelancers which
7 De?ning Freelancers as
Unique Economic Agents
Table 2: Labour Market Economic Agents by Function
Source: Burke (2011)
Worker Manager Status
Executive
Entrepreneur
Employee
Freelancer
Employed
Self-Employed
The Role of Freelancers in the 21st Century British Economy 75
15. HMRC (2012), Intermediaries Legislation (IR35): Business Entity Tests. Example Scenarios, Version 1, May 2012, HM Revenues & Customs.http://www.hmrc.gov.uk/ir35/guidance.pdf
differentiate them from other economic agents. From a ?scal perspective, the challenge is to separate freelancers from
employees. One option is to use a de?nition of freelancers based on some of their unique characteristics in the modern
economy such as the following:
Freelancers are workers who supply their services on a contingent project or limited duration basis for remuneration
which is output focused. Freelancers take on all or most of the cost and risk of their own labour downtime and below
expectations productivity within projects. They take on all the cost and risk of economic inactivity between projects.
The dividing lines between freelancers and employees which are implied by this de?nition are depicted in Table 3.
It is true that elements of existing ?scal guidelines pick up some of these distinguishing features. For example in
HMRC (2012) a contractual incentive for ‘ef?ciency’ which can entail reducing within project downtime, is used as an
indication that a worker is validly self-employed
15
. However, the lack of a freelance ‘entrepreneurial worker’ category will
inevitably leave many short of meeting the ‘business owner’ requirements. Correspondingly, the lack of a clear freelancer
de?nition can incentivise false self-employment as employee contracts can be changed to mimic business owners (e.g.
having a business premises or address, using an intermediary, supplying some equipment or materials, invoicing) in
order to avoid tax. Employees who transfer from employment to a continuous sequence of self-employment contracts
which are not contingent on speci?c projects should not qualify as legitimate self-employment. They do not serve a
different economic function to employees in the economy and hence would fall into the employee category using the
de?nition in Table 3.
So an improvement would be to create a new speci?cally freelance self-employment category, which is identi?ed by
the de?nition above and the distinguishing features in Table 3. In practice the dividing line between employee and
freelancer will often be blurred and require the scrutiny and discretion of the authorities. However, this is already
the norm as HMRC engage extensively in this activity to provide advice on legitimate and false self-employment.
Furthermore, the greater accuracy that this new freelancer category will provide ought to make this job easier and
more ef?cient in terms of its economic outcome. To this end, the type of business scenarios which this de?nition seeks
to support can also be used as illustrations where valid freelance self-employment applies. Not surprisingly, these
constitute some of the main areas identi?ed in this report where freelancers add value in the economy.
Table 3: Distinctions Between Freelancers and Employees
Employee Freelancer Status
Project based, limited duration Continuous Term of contract
Output based or if input based is
of limited project duration
Usually input based Remuneration
Entirely or mainly borne by the worker Entirely or mainly borne by the business
Intra-project downtime
and below expectations
productivity: costs & risks
Borne by the worker Borne by the business
Inter-project downtime:
costs & risks
The Role of Freelancers in the 21st Century British Economy 76
The lack of an up-to-date de?nition of freelancers which recognises them as a distinct economic agent in their
own right limits the optimisation of their use in the economy and by consequence stunts economic performance.
Choosing to become a freelancer should not involve ?nancial risk (particularly in relation to ?scal matters) as well as
barriers to trade for people just because this unique activity is not properly recognised.
The same holds true for businesses; they can be deterred from using freelancers as a result of the ?nancial and
reputational risk stemming from regulation justifying the legitimacy of freelancers using older economy classi?cations
associated with employees and business owners. For instance, it is clear from the de?nition above based on the
distinct and important function of freelancers in the modern British economy, that being a business owner is neither
a necessary nor suf?cient condition to qualify as a freelancer. Yet, as we have already noted ?scal guidelines such as
IR35 incentivise freelancers to mimic a business owner in order to establish their legitimacy.
Likewise, some unions only consider freelancers in a competitive shadow workforce role and so frequently put
pressure on businesses to use employees instead of freelancers - hence missing the key ?nding in this study that in
the modern economy these workers are typically complements rather than substitutes - many employees rely on the
work of freelancers to create and sustain their jobs. We need a fresh perspective across industry and public policy.
The Role of Freelancers in the 21st Century British Economy 77
8 Conclusion
Freelancers play a pivotal role in Britain’s 21st century innovation-driven economy. They
are sources of and conduits for innovation in both corporations and SMEs. They enable
businesses to manage, in fact reduce, entrepreneurial risk and so promote innovation and
enterprise. They also liberate businesses from the limits of their internal resource base and
enable the use of exceptional talent that would otherwise not be economically feasible to
hire on employee contracts.
Corporate Venturing Entrepreneurship
FREELANCERS
Business Ef?ciency
Freelancers Enabling:
Capability
Productivity
Flexibility
Agility
Competition
Innovation
ECONOMIC PERFORMANCE
The Role of Freelancers in the 21st Century British Economy 79
Freelancers also help de-risk the uncertainties of the market so that ?rms can scale up to meet variable demand,
rather than operating at a smaller scale, where demand is more assured and suf?cient to fully utilise employee capacity.
These contributions also promote ef?ciency-driven economic performance. They do much of this in partnership with
employees; playing a key role in both creating jobs and underpinning the economic sustainability of employment
contracts. The total effect of freelancers on economic performance is depicted on page 79.
Despite these important economic functions, freelancers are still largely under-analysed and unheralded economic
agents in the modern British entrepreneurial economy. The main reason for this is that their new pivotal role has only
really come to the fore with the dominance of the innovation-driven economy over the last three decades. In this setting
businesses need to be innovative, ?exible and agile as well as able to manage entrepreneurial risk and greater market
uncertainty. Freelancers enable businesses to do all these things and hence have become a key driver for economic
performance in the modern economy. Their important and distinct economic role needs to be:
Their important and unique economic role needs to be:
This research highlights that a key priority for leaders of industry and Government must be to ensure that Britain has
a suf?cient supply of highly skilled and expert freelancers to maximise the performance of its modern innovation-driven
economy.
RECOGNISED
De?ned as unique economic agents providing an important and distinct
economic function to employees and business owners
PROTECTED
The unique economic value-added provided by freelancers is part of the core of
the modern British economy and hence needs to be allowed to thrive
NURTURED
It is good policy to ensure that British business always has access to a suf?cient
supply of high quality freelancers in order to optimise the potential of these
businesses
The Role of Freelancers in the 21st Century British Economy 80
ABOUT PCG
PCG, the voice of freelancing, is the cross sector association for freelancers, contractors and
consultants in the UK, providing its members with knowledge, representation, community
and insurance. With around 21,000 members, PCG is the largest association of independent
professionals in the EU. It is PCG’s fundamental belief that ?exibility in the labour market
is the key to ensuring Britain’s future economic success.
CONTACT PCG
Heathrow Boulevard
280 Bath Road
West Drayton
UB7 0DQ
T +44 (0)208 897 9970
W www.pcg.org.uk
© Copyright PCG 2012
No part of this publication including any article, table or graphic, in whole or in part may be reproduced
without PCG’s express permission. PCG does not endorse or indemnify any product, organisation or service
mentioned within this document unless speci?cally stated.
Cover photo © Stuckincustoms

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