Two weeks ago, I shared an article with my interpretation of how IT freelancers use their network to manage uncertainty. In this article, I follow up with another important aspect of managing uncertainty as a freelancer – networking, engaging and working with recruitment agencies (or as I like to call them, brokers).
Brokers primarily create value by matching disconnected buyers (clients) and sellers (freelancers) that would find it difficult to emulate a similar reach in their own networks. Among other things, they reduce the administrative burden for clients and freelancers by, for example, screening qualified candidates for clients and acting as a lead-generator (or promoter) for freelancers. In short, brokers reduce the potential for poor matches due to asymmetric information.
The reputation of brokers among high-skilled freelancers has recently suffered, due to increasing cross-border competition for the same roles in a tight market, where demand for important skills is high. There are sales-oriented brokers (also called “CV-pushers” or generalists), who have earned a reputation of compromising on the quality of information brokered to secure more contracts and returns.
Then there are brokers (specialists) who understand the market and freelancers well, using their network and technical expertise to improve the quality of the matches they recommend. Both still conceal the margins they take – a standard industry practice recently challenged by platform or digital-based brokers – leading to doubts over how brokers should best design their business.
The positive outcomes for freelancers, who build and maintain relationships with brokers, have been documented in numerous studies of high-skilled freelancing. Ethnographic research has inferred that seasoned freelancers prefer brokers with whom they develop a personal relationship and mutual trust, perceiving them as more competent at matching. A quantitative study of IT freelancers in the US found that the more months a freelancer worked for a single broker, the higher bill rates the broker could charge to clients for the freelancer’s services.
Another study of high-skilled freelancers in the Netherlands found that actively registering with (and visiting) brokers was one of two social capital variables (actively networking being the second) that had a positive and significant effect on freelancer revenue, while the effect on a more subjective measure of career success was insignificant.
Yet the purpose of this article is not to argue for why actively engaging with (or building relationships with) brokers can be beneficial for freelancers. Rather, I chose to ask the consultants about their experience with what makes a good broker, as well as how they view the role of brokers in alleviating uncertainty, to investigate the mechanisms that lead to positive relationship outcomes. My findings indicated two distinct types of levers that brokers can use to make it easier to be a successful freelancer – managerial levers and network levers.
2 Levers that Brokers can use to Create Value for Freelancers
1) Managerial Levers: balancing the roles of being a mediator, exponent, constructive critic, counselor and expert, integrates levers that are crucial to good brokering, from the perspective of freelancers.
2) Network Levers: designing their business to achieve a competitive network reach – supported by information systems, a focus on the personal relationship, an occupational user group and reciprocity – integrates levers that brokers can use to support freelancers and distinguish themselves from competitors.
Managerial Levers. One way that brokers could offer more value is by taking on a more prominent role as mediators between consultants and clients during projects. Although some freelancers felt that they were capable of sorting issues out with clients themselves, for a few, it ensured that their working relationship with hiring managers or employees was not affected by conflicts going forward. It also meant that, in the absence of an organizational holding environment, they still knew they could confide in someone who was on their side. Mediation also entails managing and communicating expectations with both parties, to pre-empt or find solutions to disagreements, as any good broker should do. Increasing their visibility as a mediator and actively supporting the onboarding process could be a way for brokers to counterbalance the paradox of gaining independence vs. being an outsider.
Sales and negotiation skills were mentioned as another important managerial lever by the consultants. They wanted to know that the terms they were sent to clients for, were competitive – without unnecessarily compromising on their rate and expectations. The data that brokers have access to offers opportunities for data-driven matching, using aggregate market data that most individual consultants or clients do not have access to. Although there are digital brokers creating algorithms to leverage such data, a useful lever could be to combine the relationship and data-driven matching approaches, to generate better matches for both clients and consultants, and support the decisions of account managers and recruiters.
Related to mediation was the need for a streamlined feedback process. Feedback is an imperative career management tool for freelance consultants, and brokers are in a good position to facilitate it both during the recruitment process (e.g., if the consultant does not get the job) and during the project (e.g., if the client has issues or suggestions related to the consultant’s work). Getting feedback before, during and after freelance projects was immensely important to the consultants, as a mechanism to remain competitive. One even suggested that an automated feedback process, if his CV reached the client, would be better than not hearing back at all.
Professional guidance and counselling were referred to as an often-unmet needs. Challenges with running a freelance business (especially when starting) might be more manageable if brokers facilitated guidance for issues like accounting, investment, insurance, pension, certifications, etc. Sadly, most of the consultants felt that there were very few brokers capable of doing so, whether due to a lack of effort or expertise. Furthermore, being a freelance consultant comes with client expectations that they will not have to provide anything substantial besides the contract fee, and sometimes, expenditures. Many freelancers take projects for MNCs in most of Europe, Asia, America, etc. While brokers usually help set them up with visas, get familiarized with local laws and provide support with logistics and housing, there were prominent differences in levels of support.
Market awareness and understanding was another immensely important criterion. Perhaps the lever that distinguished brokers the most in my own and other studies was the level of technical expertise and business acumen that differed vastly across brokers. This area is also related to brokers using market data to enable their recruiters to make more informed decisions. Data-driven matching could not only reduce uncertainty for freelancers in terms of access to a satisfactory pipeline, but also give recruiters real-time insights that might increase performance. For example, detailed forecasting of demand and supply periods, to smooth out the volatility of being booked or free, could be useful. A few consultants mentioned the dread of being stuck with a project that ends in June, which all but guaranteed two months on the bench.
Finally, supporting skills development was another aspect that was referred to as a potential lever. One freelancer mentioned that foreign brokers offered discounts, on career-making courses or certifications, to freelancers who were members of the broker’s occupational community (within SAP). Others talked about the need for allocating time to skill development, or researching what skills to upgrade and where. A few freelancers suggested that the value of information on skill developments and market insights was critical to a successful freelance career, e.g., if certain certifications were at risk of becoming obsolete via replacement or augmentation, in the near future.
Network Levers. The more clients and contacts they had, or the bigger the reach of a broker’s network, the more attractive they were to freelancers. Brokers build their networks via databases, acting as a supplier of leads to both sides of the market, and the consultants talked about outsourcing the search for new contracts to them for that very reason. Some consultants expected brokers to invest into providing services that were not purely recruiting activities, such as networking events and opportunities.
Numerous examples during the interviews, demonstrated the importance of the speed at which roles are filled, due to most clients requesting immediate support. Successful matching is externally constrained by how fast brokers or freelancers can access and benefit from available information, but brokers devote more time and resources to this process than freelancers.
A lot of such information, comes from the relations the broker’s contacts have with other market actors. For example, a potential client might have a role that fits a specific candidate, known to a broker. Said broker may rely on a formerly contracted consultant, now working for the client, to act as the bridge that transfers such information between client and broker. Simply put, building strong relationships and having expertise is not enough to deliver service quality. Brokers need to have an ability to collect, process and use vast amounts of relevant information that can add value.
On the other hand, knowing the consultant, building the relationship, and offering the right price and terms from the start was a fundamental characteristic of good brokering. Most of the freelancers specifically referenced the importance of personal relationships in the market. They wanted assurances that recruiters understood their situation and abilities, both so they didn’t waste time on inevitably fruitless requests, but also so that the account manager could sway clients who were unaware or unconvinced of the consultant’s profile match, due to the inherent ambiguity of CV information.
Along the same lines, a core competence of good brokers was distinguishing between the relationship needs of different consultants. Some of the consultants preferred arms-length relationships, or were opposed to pressures to be too familiar or exclusive, while others desired a very close relationship with a preferred broker. The nuances linked to these contrasting relationship types suggest a need for applying different networking approaches to relations with different freelancers.
Half of the participants mentioned the lack of a local SAP user group, occupational community or support base. One consultant compared the lack of one with the existence of others outside of Denmark, noting that SAP user groups for freelancers were a good place to find information. For example, on which courses to take or other market/career insights. The expressed need to organize freelancers in occupational groups and give them similar opportunities and benefits (that full-time consultants have access to) is synergistically linked to many of the levers from both perspectives, though mainly skill development, professional guidance and opportunities for networking.
To end, the consultants mentioned a lack of reciprocity in general by brokers in the market, even though they respected the broker’s fee for services rendered. For example, some of the consultants voiced frustration with not being rewarded for contract extensions. Also, most brokers do not reciprocate information that successfully leads to a new contract, such as information on available roles or candidates. Often the broker who acquires relevant information and makes the right connections first, wins the contract. Thus, even though coincidence plays a role, optimizing the flow of (and access to) critical market information – by building an influential, efficient and even innovative network – can be a long-term differentiator that will be rewarding for stakeholders and tough for competitors to imitate. Incorporating a higher level of reciprocity may have a key role in building such a network.
What did they say?
Previous studies have suggested that actively building their relationship is key to the performance of both brokers and high-skilled freelancers. In this article, I have tried to take a more in-depth look at the mechanisms through which this occurs, to uncover how brokers can help freelancers manage uncertainty, from the perspective of the latter. Managerial levers and network levers were two overall themes that I interpreted to be ways for brokers to distinguish themselves and support freelancers. While the reputation of brokers has suffered and questions for how they should design their business continue to unfold, they remain a key figure in supporting and partnering with freelancers in well-structured markets like IT consulting. It is not unthinkable that good brokers can distinguish themselves from the masses by focusing on the needs of freelancers as much as clients, leading to a high-performance relationship, characterised by mutual loyalty and support.
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Artiklen her er skrevet ud fra en Case Study baseret på IT-freelancere. Skriv til hvis du ønsker denne tilsendt.