Qualitative interview study with 36 US employees of a global technology company who could hire freelancers on Upwork through a company pilot program. Interviews in April and May 2019 lasted 25 to 40 minutes.
Ten pilot interviewsTen pilot interviews came before the full study.
36 employeesThere were 15 managers and 21 non-managers across 32 teams, drawn from nine categories of experience with the platform.
InterviewsInterviews covered the tasks given to freelancers, the value sought and the responsibilities involved.
CodingThe first author coded the interviews inductively, and all authors discussed the resulting themes.
BWhat the study found
Why employees hired freelancersthe value interviewees described
•Interviewees described saved time as the main value of hiring freelancers.That meant more work done faster, room for specialised work, skills the team lacked, and hiring in hours rather than weeks.
Costs that fell on the clienttransaction costs interviewees described
•Interviewees described not knowing how much to pay freelancers.Interviewees wanted a fair deal for freelancers and careful use of company money. One asked whether $250 for an icon was a lot or a little.
•Interviewees described defining the task as a major cost borne largely alone.This meant carving out the work, describing it and setting milestones and pay, often for roles interviewees had never managed.
•Interviewees described being unsure how far rules let them manage a freelancer.Interviewees often waited for the final deliverable and could not steer work that went off track. When it failed, interviewees tended to blame themselves.
•Interviewees described new management work compared with agency contract workers.This included vetting, setting pay, time zones, briefing people without company knowledge, and freelancers' lack of access to internal tools.
Power and fairnesshow interviewees saw their position
•Interviewees said they wanted to narrow the power gap with freelancers.Interviewees did not report exploiting that power as much as might be expected. Interviewees may have stressed benefits because the interviewer was linked to their company.
CKey takeaway
Hiring freelancers can save employees time yet bring transaction costs, leaving them caught between employer, platform and freelancer. Guidance on pay, task definitions and management rules may help employees treat freelancers fairly and hire more widely.
Made for this site with AI assistance from the verified research brief. It is not the paper's own figure.
Abstract
Corporations are increasingly empowering employees to hire on-demand workers via freelance platforms. We interviewed full-time employees of a global technology company who hired freelancers as part of their job responsibilities. While there has been prior work describing freelancers’ perspectives there has been little research on those that hire them, the “clients”, especially in the corporate context. We found that while freelance platforms reduce many administrative burdens, there are number of conditions in which using freelance platforms in a corporate context creates high transaction costs and power asymmetries that make it difficult for clients to negotiate work rights and responsibilities. This leads corporate employee clients to feel “stuck in the middle” between their employer, the platform, and the freelancer. Ultimately, these transactions costs are a potential barrier to wider adoption. If corporations want to leverage the value of the freelance economy then better guardrails, guidelines, and perhaps even creative technology solutions will be needed.
Research brief
By Caitlin Lustig, Sean Rintel, Liane Scult, and Siddharth Suri.
Takeaway: Hiring freelancers saves corporate employees time but leaves them 'stuck in the middle' of employer, platform and freelancer. They want to treat freelancers fairly yet struggle to define unfamiliar tasks and set pay. Pay guidance, examples of good task definitions and clear management rules could unlock wider use.
Why this matters
What was known
Prior research analysed the transaction costs and power asymmetries borne by on-demand workers, mostly on micro-task platforms. What sets our work apart from these previous studies is that we are focusing on the transaction costs that those who create the work, the clients, incur.(§2, p. 3)
What this paper adds
Where earlier work centred on workers, mostly on micro-task platforms, we interview the clients (employees hiring through their company's internal pilot program with Upwork). We turn their costs into recommendations for companies and platforms. This paper contributes to ongoing conversations in CSCW about transaction costs and power asymmetries in the on-demand economy by providing scalable recommendations for companies that use the freelance economy(§1, p. 2)
Who it matters to
Companies that hire freelancers, freelance platforms, and the CSCW research community. Companies and platforms have the power to create a more equal power dynamic, and we urge them to take our suggestions into consideration.(§7, p. 26)
Research questions
What is the nature of corporate employee clients' tasks and the value they seek from freelance workers?
How does the nature of those tasks bear on clients' responsibilities to both freelancers and their employers, and how does clients' navigation of these responsibilities affect freelancers?
What are the transaction costs when clients are trying to leverage freelance work?
Method and data
Design
Exploratory qualitative interview study.
Setting
A global technology company running a pilot Freelance Services program with Upwork. All full-study interviewees were located in the U.S.
Participants / data
46 interviews in total: ten pilot interviews, and 36 full-study participants (23 men and 13 women) across 32 teams, 15 managers and 21 non-managers, recruited from nine categories of experience with the platform.
Duration
Full-study participants contacted in April and May 2019. Interviews generally 25-40 minutes.
Analysis
Inductive coding of the 36 full-study interviews by the first author, with axial coding into themes discussed by all authors. Data sliced by overall themes, experience level and manager status.
Findings
Speed, not savings. The 36 employees of a global technology company we interviewed, most of whom had hired freelancers on Upwork through an internal pilot program, mainly valued saved time. That meant more work done faster, room for their own specialised work, skills they lacked, and hiring in hours rather than the weeks a staffing agency can take. #
“I was floored by how well it worked, how quick it was. It was way faster turnaround than we could do with employees.”
Nobody knew what to pay. Their main concern was using freelancers responsibly, balancing a fair deal for the freelancer against careful use of company money, and above all not knowing how much to pay. #
“$250 for an icon, is that a lot or a little? I have no idea.”
Defining the task fell on the client. Defining the task (carving out the work, describing it, setting milestones and pay) was a major cost that clients bore largely on their own. #
“The irony was that the very reason that brought the client to the platform-to get something done they could not do themselves-meant they were also unfamiliar with managing people working in that role”
No way to course-correct. Clients were unsure how far company and platform rules let them manage a freelancer. So they often waited for the final deliverable and could not steer work that went off track. When it failed, they tended to blame themselves, sometimes discarding it. #
“You enter the tunnel and you get everything at the end of the tunnel. But while they are inside this tunnel, there is no way for you to help them go back to the correct road.”
A different kind of overhead. Compared with contract workers from a staffing agency, freelancers brought new management work. This included vetting, setting pay, time zones, briefing people without tacit knowledge of the company, and working around their lack of access to internal tools. #
“Since I was already working 80 hours a week, I was up at midnight every night when [freelancers] were messaging me.”
Clients wanted to narrow the power gap. Although clients on such platforms usually hold the power, the employees we interviewed did not report exploiting it as much as might be expected, and said they wanted to reduce the gap. #
“on-demand economy platforms are characterized by a few requesters who are responsible for posting the overwhelming majority of the work. This results in the requesters holding the power in the market”
Questions this paper answers
Why do corporate employees hire freelancers?
Mainly to save time. Freelancers increased the volume and pace of work, let employees focus on specialised work, and supplied skills they lacked. They could also be hired in hours rather than the weeks or months a staffing agency could take. (See §5.1, p. 9.)
What makes hiring freelancers hard inside a big company?
The work of setting up the job falls on the individual employee. The platform handles payment and paperwork but leaves clients to define the task, judge fair pay and vet people. Meanwhile, company rules on sensitive data and on managing freelancers pull in other directions. (See §5.2, pp. 13–14; §5.3.1, p. 16; §5.3.1, p. 17; §5.3.1, p. 19.)
Do companies use freelancers just to get work done cheaply?
Not only that. Managers did mention cost savings, but clients worried about paying freelancers fairly and said they wanted to reduce the power gap. Some non-managers were explicitly turned off by talk of cost savings. (See §5.2, pp. 13–14; §6, p. 22.)
Why do freelance projects fail when you hire for skills you don't have?
Partly because of the 'task definition problem'. Carving out the work, describing it and setting milestones and pay is harder without the skills yourself. Such clients also struggled to vet applicants and were unsure how far they could manage freelancers, so work was sometimes discarded, and they often blamed themselves. (See §5.3.1, p. 16; §5.3.1, p. 17.)
Contributions and implications
Help give freelancers a fair deal with minimum rates or pay ranges by experience, platforms publishing wage data, and portable benefits. we urge platforms to publicly publish data on wages, which would allow companies to compare themselves against other companies or against the average rate(§6.1, p. 23)
Companies should set norms for responsible use, including telling employees when freelancing is appropriate and training non-managers in the kinds of managing they can do. The freelance economy is most appropriate for short projects that can be clearly defined.(§6.2, p. 23)
Companies and platforms should provide examples and guidelines for good and bad task definitions.
Give freelancers temporary access to internal tools, and clarify what counts as IP and PII.
Educate employees about deferred benefits and fund first job postings to allow low-risk experimentation.
Limitations
All participants came from one large software company with a dedicated cross-functional Freelance Services team, which most companies lack. First, participants were all from one large software company.(§6.6, p. 25)
Participants used only one platform, Upwork.
Participants may have emphasised benefits because the interviewer was associated with their company.
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Concepts
Transaction costs
A concept from economic theory. In the on-demand economy some of these costs are passed on to clients and freelancers. The basic sense: the concept of transaction costs refers to" expenses associated with managing the production of goods and services"(§1, p. 2)
Task definition problem
Our name for a major transaction cost clients faced: we define "task definition" to be the act of carving out a piece of one's work, describing it in a job description, defining the milestones, setting the pay rate, and putting it on a freelance platform(§5.3.1, p. 16)
Platformic management
Jarrahi and colleagues' term for how platforms such as Upwork mediate between clients and freelancers, referring to a platform that may incorporate algorithms to maintain control over workers (e.g., Upwork' s online reputation system [8]) but may also use "technological and social mechanisms" to control work(§2, p. 3)
Stuck in the middle
Corporate employee clients caught between responsibilities to their employer, the platform and the freelancer. (§5.2, p. 13)
How to cite
Caitlin Lustig, Sean Rintel, Liane Scult, and Siddharth Suri. 2020. Stuck in the middle with you: The transaction costs of corporate employees hiring freelancers. CSCW2020. https://doi.org/10.1145/3392842
This brief was prepared with AI assistance and published by Sean Rintel. It is not the authors' published text. Page numbers refer to this PDF.
BibTeX
@inproceedings{lustig2020stuck,
author = {Lustig, Caitlin and Rintel, Sean and Scult, Liane and Suri, Siddharth},
title = {Stuck in the middle with you: The transaction costs of corporate employees hiring freelancers},
organization = {ACM SIGCHI},
booktitle = {CSCW2020},
year = {2020},
month = {May},
publisher = {ACM},
url = {https://doi.org/10.1145/3392842},
doi = {10.1145/3392842},
}