Challenges and benefits of managing a virtual business using home-based independent contractors
Business Week Online’s Entrepreneur Profiles features an interesting article by John Jordan, based on his own experience running a “virtual” PR firm, Principor Communications.
In this article, entitled “Managing ‘Virtual’ People,” Jordan writes:
In 2002, after eight years with three public relations agencies, I opened my own firm, Principor Communications, as a virtual organization. My major reason was to eliminate the cost of office space and everything connected to it. . . . [T]he major cost savings have been in the area of labor. The skilled, experienced professionals who staff my agency are all independent contractors. They’re women who are home raising young children.
Like many new parents, they enjoy the challenges of working and don’t want to fully sever their relationship with the work place and their colleagues. Their ability to obtain health insurance through their spouses gives them the freedom to work part-time to keep up skills and networks. Virtual companies provide parents of both sexes with opportunities that did not previously exist.
The challenge in this low-cost model is to keep in mind that eliminating an office doesn’t entirely eliminate all the social needs fulfilled through working in a common physical space. . . .
Running a virtual company eliminates a great deal of the more time-intensive elements of management. The office conflicts, tensions, and politics are minimized and nearly eliminated in a virtual company. . . .
It’s important for contractors to know they’ll profit more both financially and socially by working with a new client through your business than by servicing that client on their own. . . .
An entrepreneur has to deliberately create an environment in which a contractor owes it to himself or herself, in terms of work satisfaction and professional development, to work through your company. . . .
A virtual company allows maximum flexibility and autonomy for everyone concerned. Contractors set their own hours with little oversight. The entire business exists in something of a netherworld in which time and space don’t apply. All of this can be extremely liberating. It’s also immensely challenging. While it’s easier to relinquish control working with trusted, competent people, it’s still not a simple thing to do. . . .
I’m not certain I’ll run a virtual company indefinitely. This model is an effective way to get a full-service company off the ground quickly and in a way that minimizes costs and maximizes earnings, which, in turn, can be reinvested in the business at the appropriate time. It also allows a great deal of freedom for the entrepreneur and staff.
With freedom come challenges, yet each can be met through conscious, deliberate, and planned activities. . . .Read more
The control issues and flexibility discussed are essential aspects of success on the important legal issue of whether the workers are properly characterized as independent contractors.
If they work from home, using their own computer and other office equipment, have some flexibility in hours of work, and are paid on a per-job or percentage basis, rather than straight hourly or salary, these facts will go a long way towards proving this status.
Watch for this type of business model to grow substantially during the upcoming business expansion.
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