New hires: buying vs. leasing

On display at the Cité des Sciences

Think about the last time you brought a new car home.  Did you buy or lease it?  What went through your mind when making the decision?  The right answer depends on your individual perspective and situation, whether it’s practical factors such as monthly payments or psychological factors like style and appearance.

Similar thinking needs to be applied to today’s hiring strategy.  Most industries have a long-standing inclination to “buy,” i.e. hire employees who tend to stick around for a long time.  You can find plenty of examples especially in capital intensive and network model industries.  Others have grown to operate more on a “lease” mentality, most notably agencies and professional services.

During the interview process, many managers vet candidates as if they’re being hiring into a tenure track.  Consequently, candidates must play the game and feign that they’d never dream of leaving if hired.  This generates a lot of wasted energy during the recruiting and ramp-up processes on both ends.

The root of the issue lies in our current work cultures.  From an earlier post on transformation:

The way people think about work has remained fairly static for most of the 20th century and into the next.  Sociologists say that the concept of work/life balance comes from a world where separation was necessary; work was a dull, necessary evil to support goals that society established for a “normal” lifestyle.  Today’s workers want to merge their passions and profession.  We should choose where we work with an “opt-in” mentality and opt-out just as easily.  Isn’t that what at-will employment means?  But what company is ready to foster this type of open culture?

Leverage isn’t a bad thing – it can be bad when improperly applied.  Likewise, not using leverage limits opportunities.  Managers must orchestrate a balance in employees leased vs. “owned.”  Employees must recognize their inclination for short- vs. long-term affiliations and seek positions accordingly.  You might be able to fool others, but ultimately you’ll end up fooling yourself unless you recognize your inclination.

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  1. If there are examples of companies that are actually hiring with a leasing mentality I’d sure like to see them because I do think the most instances we have to play the game. In reality, I want to say, “I want to work here from 1-3 years and acquire more knowledge and experience with respect to this, this and this. I think you’re a great fit for this because… Here’s how I can bring value to your organization to help you achieve your company-wide goals…”

    If it turns out to be a great fit, then who knows, the employee might stay put for the long haul, but it’s unrealistic to think (particularly when we come out of this economic slump) that people will hold on for dear life if they’re not passionate about what they’re doing, learning, etc.

    Good food for thought Pete. Thanks.

  2. Taking the hiring manager perspective here for a sec….the “own” mentality comes from the investment the company has to make in a new hire to properly orient and train them on the products, processes, philosophies and methodologies that enable them to do business and create their brand. Some companies do this better than others through rigorous onboarding exercises. I don’t believe anyone’s going into an interview thinking this is the hire/job that I’m going to spend the next 30 years working with/doing but I think you’ll be hard-pressed to find a hiring manager who will extend an offer to someone who claims to be coming in for a year or so to get some skills/experience in a particular industry or discipline.

    To be fair, we work with a lot of freelancers and they do great work. But the time/effort we spend “correcting” their work to be on brand, on message, etc..could just as well have been spent onboarding a full time employee who could build and learn and help us evolve our work.

    Finally, I think there is a secondary point here. “Leased” workers — whether full-time or freelance — are not treated as “full-fledged” corporate citizens typically. There is room for improvement here so that their work can be more informed and they can become more “onboarded” as they execute. This is the mental model that Peter mentions in the post though and it will be a tough one to break.

    It’s all about the investment in the person.


  3. I hate playing the game. However, I don’t think there is anyway around it at the moment. Can any entry to mid-level worker be interested in that job as their sole career ambition? Heck no. But we have to talk about the job as if it’s the second coming. Could we dispense with the b.s. already?

    Like the leasing philosophy Peter…just don’t see how to apply it at the moment.

  4. It is important to remember if you put the needs of your team first the company will always benefit. Recruiting with transparency is crucial to the success of the organization. I always look at hiring as a relationship that starts with courting and constantly needs a refill in the relationship tank. My attitude has always been develop people well enough to replace you or do their own thing. The reality is most people just want to follow others (or be a part of something bigger then themselves) so they tend to stay longer and be more immersed in the culture.

  5. Peter,

    I’m not sure I completely agree with your assumption. As head of Internal communications at two corporations in the early to late ’90s, we actively communicated that the social contract between employer and employee had changed. No longer was it in either party’s best interests to expect or desire lifetime employees. One of the corporations was a retail company where turnover was about 60% each year. The other a union-shop utility where turnover was much less but was rising quickly, including in the line ranks. In the white collar sectors, entire departments had nearly 100% turnover within any 5- to 10-year period. Last year, CEO turnover was nearly 50% in the corporate world. And all of us in Marketing know that the head of the department likely will turnover every two to three years. Of course we can find data to support either argument, but I do believe that leasing has become more usual since the ’90s and continues to grow in popularity. As for “playing the game,” leasing has had little impact on that, except where flex time, telecommuting and virtual employment are the norm.

  6. Don’t forget the elephant in the room: healthcare insurance. As long as basic medical coverage is tied to regular, full-time employment, most workers will have a strong disincentive to lease their services.

  7. In some cases it’s a question of ROI. When I started at Andersen Consulting, there was a week of local office onboarding and a week of strategy consulting training in St. Charles. I assume that a smart firm like that balances the resources invested vs. length of voluntary tenure and return generated. Of course, the starting situation was always pretty similar, i.e. new college grads on a 2-3 year path to MBA.

    Balance this with corporate culture. When I interviewed at PUMA AG, their biggest hesitation was that I hadn’t been with the same employer my entire career. Many people I worked with there had spent their entire working life with the firm. But there was no training program or onboarding process and certainly no ROI evaluation. However, from my perspective I was sure to weigh the return of a FTE vs. an agency when setting my budget and always had a healthy mix.

    Agreed about the “full-fledged” nature of lessees. I worked at Fidelity Investments, where contractors may have been working there for 10+ years, but wore a different colored badge (red vs. green) and were the first to get cut when times were rough.

  8. Of course Lewis, the shift is required as our economy moves toward an information rather than industrial basis. But your point is unclear to me – that leasing is already quite accepted today? If so, then why have we had so many displacements because of layoffs over the past nine months?

  9. Peter,

    There isn’t a cause/effect ratio to layoffs and whether or not a hire is leased or bought. Most of the jobs lost are in industries tied to manufacturing and housing and many of those jobs might never come back. I simply see no connection between how one is employed and whether or not their job stays or goes. And I also fail to see how layoffs have much to do with my point, which is that leasing has been around for nearly two decades, it’s not a new concept, and that industries such as Retail and Health Care have made it a common employment practice.

  10. Sorry Lewis, you’re wrong. As I mentioned in the response to Jeff above, I saw it happen at Fidelity.

    And to your point, while hiring contractors have been around for two decades, actually you clearly missed the entire point of the post. I never said that this is a new concept. It’s about the mentality that both employee and employer take into hiring and work relationships.

  11. Jeff, I will take on the leased employee role here since I have invested many years working as a leased employee in marketing. You are definitely right about the time and effort it takes to train someone to do the job so HR has to take that into account. I think that the key there is to really try to work with people who have the mental attitude of longevity. I worked hard to build a good reputation for excellence so that companies would request me specifically and that dedication landed me positions where I stayed for years and became efficient at the work. I became a recognized “corporate citizen” although I still missed out on moral boosting activites sometimes or employee learning opportunities. That could be done better.

    My view nowadays is that a new question is arising. It is leased vs. remote. As a virtual worker, I still find it very hard to break through to HR managers that the alternative of virtual or remote workers is viable and way less expensive. So the onboarding process will still be the same but cost less to execute and you get a person who intends to stay a while. It’s still a mental thing because now you can’t see the person just the end result.

    The times they are a changing. Companies who embrace change even while it doesn’t fit in with the accepted models will survive. Look at what we’re doing today. Do you remember when email was new? Now could you live without your email? Even in HR where paper rules. What would you do if you company had banned email when it was still new?

    I think that we are coming to a time when leased and virtual will be the way businesses are staffed. Having regular employees will not disappear, however, I believe that the desire to save our planet and to save money will facilitate the need for policies and procedures that allow more leased, virutal, and telecommuting opportunites.

  12. Quite true. I know that there are more opportunities now to get personal health care insurance but I am unaware of costs involved. I wouldn’t be able to be work virtually if my spouse’s job didn’t provide insurance for us.

  13. Geez, Peter, I didn’t realize that you don’t allow dissenting point of views here. I got your point and disagreed with it. You saw it happen at Fidelity. As I said in my comment–“Of course we can find data to support either argument.” Apparently, the data only matters if it supports your experiences. Sorry. Didn’t mean to try to start a discussion. Apparently, when you wrote “We should choose where we work with an “opt-in” mentality and opt-out just as easily. Isn’t that what at-will employment means? But what company is ready to foster this type of open culture?I’ll avoid disagreeing with you in the future,” you wanted all of us say that those cultures don’t exist. I disagree. Mea culpa.

  14. You assume too much and sarcasm is weak.

    Why don’t you try and be more helpful? First of all, by naming the companies where these cultures exist? Starbucks? Puget Sound Energy? Secondly, since you’ve seen leasing cultures in action, what were the results? Is it a good or bad idea?

    The only points of view I don’t care for are the ones that are empty.

  15. I will be eager to see how this thinking works its way into the Dachis Corp. new enterprise 2.0 product offering. Like it or not, agree or disagree, a corporate solution that addresses this question is going to be a smart solution.

  16. I’ve seen both sides of this: first as an employee and then hiring manager within public corporations (such as Apple, Aldus/Adobe and HP), and now as a self-employed consultant since 1994. I’d bridle at being labeled “leased talent” but recognize that there are lots of situations when companies seek interim (AKA temporary) executives or senior managers. To me there’s a substantive difference in the value delivered by a true consultant versus a contractor (a contractor by definition is one who fits the leased employee model discussed here). In the contractor:employer relationship, the employer normally dictates the modes of work, goals/objectives, workmanship standards, tools, processes, etc. In the consultant:client relationship, typically the consultant determines how the work will be performed, based on agreed-to objectives and desired outcomes.

    Based on my personal experience with corporate cultures (principally West Coast, tech sector) I’d say most managers, including execs, would rather treat their leased talent the same way they treat employees (except for the legal/tax/HR differences). For some of my engagements this has included their wanting me to use company-provided equipment, email addresses, office space, etc. — even in some cases, company business cards (which I generally refuse). Some have mandated that I take the same time-wasting online training they require of employees… Because so many managers confuse efforts with results, they feel more comfortable when they can see their leased talent sitting in an office so they can see you at work — even if you might be far more productive working, at least part of the time, in your own office facilities. Some mix of working on their premises, and virtually from your own, could be optimal. These are cultural issues, particularly when the company is trading off productivity for normative behaviors.

    Another issue that no one in this discussion has mentioned is the question of exclusivity. Generally speaking, hired employees must provide their services exclusively to a single employer; and may have to sign an employment agreement that prohibits moonlighting for any for-profit entities. Leased employees may well have more flexibility to serve multiple clients (AKA temporary employers), as long as there are no competitive issues or other conflicts of interest.

    I know that one of the aspects of real value that I offer my clients is project/experience diversity: because I haven’t worked exclusively for the same company for a long period of time, I’ve got broader perspectives to offer. Another benefit is the courage to ask the really tough questions, the ones that people who are hostage to corporate politics are unwilling to ask (but desperate for someone else to pose).

    Lastly, the cost of personal health insurance. I’ve paid around $1000/month for a 2-person family, no kids. Self-employed people have no group buying power to negotiate down premium costs (unless they buy insurance through some professional association.) It’s a very real issue, and a significant reason why many people who might otherwise be wonderful sources of “leased talent” are unwilling to do so.

  17. You are exactly right here, Peter: The term I’ve seen recently is ‘Temp Job with Benefits’ in describing Permanent/Fulltime positions these days. Very many companies out there will review you as a candidate, expect you to have stayed at your last company[s] for 10+ years each [even though you’re only 25…or 35], and express your undying love for them. And that you’ll want to stay with them forever.

    Meanwhile, they themselves may have turnover of 150%, and cannot expect to know whether the entire Department you are working in will even be around by next year…you along with it. My point is not to be cynical here, or “dump” on the evil Corporate world here. But truly, let’s call it out for what it is, figure out a genuine new Work model [Health care, 401k’s, etc], and move on. On both sides.

    Excellent insights as always, Peter!

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