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36
OPERATIONS

Virtual Reality
 

The pitfalls and rewards of using subcontractors are explained by a manager who relys on them.
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Are there ways to stick to your craft and avoid management chores as your company grows in revenues? Maybe. But creating a virtual corporation isn't one of them

Six years ago I had every reason to be proud. At the time, my advertising-communications business was eight years old, employed 49 people, and had a superb client portfolio and a reputation as a hot shop. But the growth of the business had forced me into administrative work and away from the creative tasks I loved, and I missed my craft. As I looked around the industry and saw with envy more and more individuals striking out on their own and freeing themselves from business structures, I resolved to join them.

In April 1989 I left the firm my two partners and I had built and opened the doors to a new enterprise. With $100,000 from my old business, I opened a bank account and purchased furniture, a couple of Macs, a printer, and a fax machine. I brought a single staffer from my previous business to manage the projects and offer clients strategic counsel. Since the main feature and differentiation of the business would be the independent professionals whose services I would bundle with my own, I turned the ubiquitous "& Partners" title on its head, calling my organization Partners & Simons Inc.

My strategy for competing in a market populated by full-service organizations literally came from next door, where a general contractor was working on my neighbor's house. I figured that his model of hiring the best subcontractors for each particular job was ideal. Like a professional contractor, I could tap into a market of skilled independents on a project-by-project basis, assembling the team solely for the work at hand, and then disassembling them when we "wrapped."

That format would provide one distinct advantage over my previous business: the organization would be made up of doers. It would be a flat, horizontal enterprise, composed of individuals with enough experience, contacts, and confidence to be able to operate successfully outside a structured, hierarchical workplace. The approach would lessen the enormous overhead of traditionally organized firms, enabling me to charge lower fees. The model appealed to the reluctant manager in me, who yearned to work with experienced, mature, and motivated specialists who would require little, if any, supervision.

Partners & Simons got off to a running start. In the first few months I was able to attract assignments from clients, and I found a number of independent specialists and specialist firms that were interested in collaborating with me. Best of all, I was excited and energized again. It seemed I had actually managed to reengineer my workplace successfully with a business model that wouldn't require any of the administration and management that had driven me away from corporate hierarchy.

Of course, everything I thought and had heard about the virtual organization ignored one crucial element: doing away with the formal organization didn't eliminate my managerial responsibilities. If anything, it made them more complex. Partners & Simons has required every bit of management skill I've been able to muster. Though some might describe my enterprise as a virtual corporation, there is nothing virtual about the organizational and administrative challenges this kind of enterprise presents.

A month after Partners & Simons opened its doors, a well-regarded independent copywriter asked for a check for his work -- just days after he'd submitted the assignment. I was nave enough to be taken aback. As I had envisioned it, our team would be paid when I was. Instead here I was, one month into Partners & Simons, with a partner looking for a payment in the same way an employee expects a paycheck on payday.

I was in a tough spot. If I were to pay him then and there, I would have to draw upon my modest balance of capital. It seemed particularly ironic that my ability to get my independent venture off the ground was being threatened by a partner who was bent on maintaining his own business.

I blinked.

Yes, it conflicted with my original plan. But I paid the contractor for his work before I was paid. That time. His future loyalty was worth that risk. Nonetheless, I learned a valuable lesson. Since then I always lay out the financial ground rules before a collaboration begins: Our work arrangement is a true partnership and not a work-for-hire situation. My collaborators get paid when I do.

That was the first of many encounters with the conflict between independence and organization.

My next lesson came when I had to confront an assumption about how my organization would redefine the conventional relationship between a service organization and its clients. In traditional ad agencies, clients are generally solicited by one deal maker. In mine, I wanted to believe, clients would be introduced to the organization by any one of the independent members of the enterprise. Pre-existing relationships between clients and members, of course, would be treated with reverence.

About a year into Partners & Simons, I enlisted the support of a respected member of our collaborator network for an assignment for a new client that I had been cultivating. During the project, my colleague developed a fine working relationship with the client. The project was a success, everyone was paid, and all were happy. A short time later, however, I heard through the grapevine that this collaborator was quietly meeting with the client again, working independently on some new assignments. I was out of the loop. What's more, the collaborator had involved other independent resources whose expertise overlapped our own in-house capabilities. It hadn't even occurred to me that collaborators introduced to clients might corrupt our relationship by making off with them.

I felt betrayed.

While I didn't believe that my enterprise had to be involved in every assignment, I did believe that my collaborator was obliged to tell me what he was up to. In my navetÉ I had looked forward to sharing clients with my collaborators just as they would be willing to share them with me. But this experience forced me to rethink that assumption. The person who had betrayed me was not dishonest; he was simply prey to the temptations of the aggressive and competitive nature of the game. His call-of-the-wild conditioning overcame my innocent -- perhaps foolish -- working approach. I no longer work with him.

His behavior, along with the realization that the vast majority of our assignments came from clients I had signed up, was a wake-up call. Few of my collaborators have introduced my business to their clients. I came to realize that my belief that clients could be shared among independent businesspeople was hopelessly immature. The strong competitive paranoia that colors client ownership is in the very nature of the business. Today I guard my client relationships closely, and the only collaborators I encourage clients to work with are those whose trustworthiness has been proved time and again.

A third revelation came when my expectations of how to structure the enterprise were once again challenged. I had figured that to deliver the best of all possible collaborators, the business would use the most modern communications technologies to keep all our members networked. My goal was to work as efficiently as if our offices were part of the same suite.

A few years into this enterprise, I signed on a collaborator with formidable talents who was just leaving a large firm. Unfortunately, while she liked the idea of working together on projects, she resisted becoming connected to my virtual corporation via electronic mail or other high-tech pathways. So once again I compromised. It became clear to me that if we were to work together, I would have to respect the independence of the independent, as it were. Today this collaborator has worked on a number of teams. She never asks for a check before we get paid. I never worry about her squiring off one of our clients. And her work is uniformly superb. However, I rarely involve her in projects that are time- and communications-sensitive.

Those types of compromises have taught me that any organization, virtual or actual, needs management, and that in both, managers must respect the individual nature of independence. The conflict between the needs of the organization and the needs of the individual can never be neatly reconciled. Still, Partners & Simons has managed to grow significantly even as I have continually grappled with the fine-tuning of my original concept. Last year alone, we completed 549 assignments for 38 clients. Which, I am forced to admit, is a lot of managing.

* * *

Tom Simons is president and creative director of Partners & Simons Inc., a Boston-based advertising firm.

Last updated: Oct 1, 1995




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