Nakul Sharma - Hostmaker founder and CEO, a London-based hospitality management service in the sharing economy - comments on sharing economy businesses and the importance of hiring employees in-house.
The explosive growth of the sharing economy is often attributed to its a employment model: which uses flexible, outsourced contractors or freelancers who work as and when they want, getting paid based on the amount of work they do.
These kind of companies often under-invest in their most precious resource - people, stripping their employees from pension, health and insurance benefits. They try to cut corners locking their employees into ‘sham contracts’ to avoid paying them adequately. This in turn, often results in strikes and class action.
Think of the Yelp employee who had to write an open letter to her CEO to explain just how poor her quality of life was living on minimum wage and was sacked for her honesty - this is exactly the kind of thing that should not be happening in tech startups.
I made a conscious choice not to use contractors when setting up Hostmaker and ensured that over 90% of our staff in London, Rome, Paris and Barcelona were actually employed by the company. This raised eyebrows among investors who pointed out that this would not be a very exciting way to grow margins and would mean slower growth. However, when I was able to show through our low employee attrition rates, higher customer loyalty and superior service delivery that our model made sense, we found backers who believed in our vision of building a more sustainable business model.
Insourcing is the future for startups: it decreases supply chain vulnerability, helps maintain full control of the company’s operations, thus driving down costs and increasing a company’s valuation through retained high-skilled talent - a scarcity nowadays.
While outsourcing will always have its place, it should rarely, if ever, be front and center for your company. Startups should seek to grow their companies with a strong foundation of in-house talent and technology rather than rely on an army of outsourced help.
At the end of the day, keeping talent in house translates into happier employees and consequently better customer service as well. Sharing economy businesses must go beyond ensuring that employees are paid above the minimum wage - it involves the employer having a deep understanding of each individual member of staff.
Nakul Sharma
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