Wil Schroter
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.
In Case You Missed It
Adding Staff Isn't a Sign Of Success, Revenue Is (podcast) Increasing your staff does not necessarily mean growth, but a deliberate liability.
Treat Departing Employees like Future Employees While saying goodbye to departing employees isn’t easy, how we handle it is totally in our control and can impact our future professional relationships.
Don’t Work Long Hours, Work Efficient Hours. As Founders, we should stop being "long hours" champions and instead start being proud of how much we can do in as few hours as possible.
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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.