Why Do We Still Have Full-Time Employees?

Articles

Wil Schroter

Why Do We Still Have Full-Time Employees?

For as much as we startup Founders love to innovate business models, we sure have done a lousy job of innovating on the employment model. Our salary lines tend to be our single largest expense in a company, and yet the biggest innovation we've had to date has been moving to a remote work system.

We've agreed that we don't need offices or "40-hour work weeks" anymore, so why haven't we agreed that we don't need the "full-time salaries" that came with them?

(Gasp!)

Yeah, I said it. Yeah, I'm about to be exponentially less popular. And, well, I wasn't that popular before, so…
But seriously, why haven't we reconsidered compensation in an era where everything has become fractionalized?

Full-Time is Dead

Very few people actually work full-time anymore. That's because we don't really need all of the people's time the way we used to. Remember that we're just surpassing two eras where people's hours were a factor — the Industrial Era when we needed humans to make things, and the Office Era where people had to physically commit 8-10 hours of their day solely to us.

But for most startups — none of these factors exist anymore. Our most dynamic team members — engineers, salespeople, and marketing (among others) tie their performance to outcomes, not hours. Why are we paying for their time when all we need are the outcomes?

This is nothing new. The entire world of professional services, from attorneys to accountants to consultants has been charging like this for centuries. Yet up until recently the rest of our professions have been stuck in an antiquated value model.

The Fractional Employee

It took about 5 seconds for smart employees — mostly engineers initially — to realize that with the rise of remote work, they could start taking on multiple jobs in parallel. Why? Because their value was no longer tied to being present somewhere. If they hit their milestones, they had delivered value, and therefore why limit that value to a single employer?

But that works in reverse too. As employers, does it really make sense for us to pay for 100% of someone's time when only 30% of it drives value? Think of how much time we pay for that we get no value from whatsoever.

What we really need is to build a workforce of fractional employees, and ideally align our cost structure accordingly. The world is already heading this way, as more and more high-demand talent becomes capable of handling multiple priorities at once.

Historically we called these folks "freelancers," but very quickly, we're realizing this is a more efficient model for employers, especially startups who have very little financial bandwidth to pay for anything that's not an outcome.

But What About Their Attention?

Right now, just about every startup begins with fractional employees, because we're typically broke! But as we grow, we become obsessed with the idea of full-time hires. In our minds, if we pay for all of the people's time, we must get all of their attention.

Yet that's complete fiction. Yes, we're paying for all of the people's time, but we've never really guaranteed their focus. Not sure? Go ask a remote-working parent with 3 kids at home during Summer break how much focus they have during the day! That ship has sailed.

We're in an era where attention is gone. We can't group people into cubicles and shut them out. All we can do is optimize for the performance and outcomes that are available by only paying for what we can use.

The rest of the world has moved on. It's time for us to catch up.

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Benny Bernald

Outcome-based work is great for individual contributors, but can be difficult to manage in a fluid startup environment. The best approach is a mix of committed team members and fractional experts.

•Reply•2 years ago

shahriar naghshineh

We hired new full-time employees, using referrals and advertising. We put them through a few interviews and reference checks. We hired them with a 3 month probation requirement. We then trained and motivated them. We found hiring staff from other small firms especially competitors to work out better than hiring from large companies.

•Reply•2 years ago

shahriar naghshineh

Great article topic for discussion. I have founded and co-founded four startups. Human Resources and hiring and keeping talent is the achilles heel of every startup. That is where more planning and focus comes into effect. But more important is to attract talent and keep them motivated by the mission and recognition. Then there is the compensation issue. As they say salary is a dis-satisfier never a satisfier. Overall I have had a few consultants and 30 to 40 full-time staff in the various startups. There is no way I think I could have had the focus and loyalty needed in the hectic startup world without full-time employees. Each one was offered stock options with good benefits when we could afford it.

•Reply•2 years ago

Tim Kilroy

The "fractionalize" everything or "outcome focused work environment" is really appealing. But it has some serious limitations...especially in startups.

There is no reason to track time to determine FT employee status any more...no one should care if you work 28 hours one week and 48 the next...you do the work that needs to be done.

But if you are only working on outcomes, there a few things that have to be defined:

What is the desired outcome? (That is hard for startups --> many things are tests and there isn't a reasonably defined measurable outcome.)
What is the financial compensation for achieving the outcome? Should that compensation be variable if the outcome is partially achieved or significantly surpassed? (Variable expenses that aren't tied specifically to revenue-generating activities can be a huge cashflow killer for a startup.)
What about work that evolves and emerges over time? If I am a outcome based worker, and my leadership asks me to do something that is not 100% related to achieving my outcome, I should ask to adjust my compensation model to include this new task. That means every time there is a task or responsibility added to someone's plate, the compensation needs to be renegotiated. That is a ridiculous level of emotional and management overhead.
Outcome based work is terrific for individual contributors. For an outcome based worker, they need to have as much control as humanly possible around their work so that they can meet the outcomes. This makes teamwork, collaboration and shared goals much more difficult to manage.
Outcome based work is largely focused on a discrete set of inputs and outputs. Startups, especially, have incredibly variable inputs and outputs...so the outcome based work needs to be constantly renegotiated.
The best companies are trying to leverage the cooperative work of multiple people, groups and departments to accomplish a mission. Fractional or outcome-based workers are uniquely compensated to focus on THEIR output rather than OUR output, and that does set up an environment where the outcome-based worker might be executing their responsibilities as expected, but has no impetus or obligation to investigate how their work can positively impact the outcomes of other workers, team and groups.

In startups, nothing is defined. Roles and responsibilities change frequently. Metrics and definitions of success change frequently. An outcome based worker isn't well suited to a fluid environment. Employees who buy fully into the mission/culture/team have a greater sense of responsibility (and therefore fluidity) than those who are measured on specific discrete outcomes.

The best is a mix of committed team and fractional or outcome based experts that if they are successful create more opportunity for the organization as a whole.

•Reply•2 years ago

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