March 30, 2009 by James Waters

In the good old days, landing a job with a big, stable company and riding that horse to retirement was the way to go.  Employees’ lifelong loyalty was rewarded with generous pensions.  But that, as they say, was then and this is now.  Employee perks of the previous century, including holiday parties, company cars, and 401(k) matching are vanishing.  In fact, companies that were assumed to be unshakable and supposed to endure for generations are being absorbed and brought to their knees.  Both sides – companies and employees – have begun to question the assumptions of previous generations.

One of the great things about capitalism is that it allows companies and individuals to experiment with new ways.  Take UPS and FedEx for example.  While both of their services may appear similar to the casual observer, their business models are as different as day and night.  UPS delivery personnel – the folks in the brown uniforms driving the brown trucks – are full-time employees.  The trucks they drive are provided, gassed, and serviced for them by UPS.  The drivers are unionized and their performance is carefully scrutinized by the company.  The company pays attention to every little detail of their activities to shave off even the smallest inefficiencies.

FedEx drivers, on the other hand, are independent contractors.  They get no benefits, no overtime, no sick leave, and no insurance.  They pay for and maintain their own vehicles.  However, they are given independence in how they operate.  A successful independent contractor can even hire their own drivers and manage multiple routes, allowing them to grow their delivery business.  And FedEx provides very little oversight; so long as the customers are happy, FedEx is happy.

FedEx is neither a young company nor a small one, but it has embraced a new model of doing business.  By utilizing independent contractors for their delivery fleet, they’ve both decreased their own costs and created opportunities for others to run their own businesses.  The independent contractors are now incented to make smart business decisions because of their impact to their own bottom lines – for them, “raises” come from their own ingenuity, efficiency, and hustle – not their bosses.

It’s not yet clear to what extent America is ready to shift to independent contractors over full-time employees.  What is clear is that American businesses are more willing then ever to experiment with ways to increase their own efficiencies and decrease their expenses.  At oDesk, we’re certainly seeing an increase in outsourcing and homeshoring, as more small businesses discover the value of contractors.  Only time can tell how far this trend will take us.

  • Dennis

    Big Brown has now begun to outsource to China. China has a CSC which has begun to do the work which once only divided between American domestic centers. Drivers are being asked not to come in at an alarming rate, but one will never here lay offs. It is all about image. Big strong brown is in the mud; soon the micro managers will soon be taking calls and will beg mom and pops to ship their cookies again.

  • Jonathan

    Huh, if Fed Ex isn’t really a company doing anything why do the “independent contractors” need them? Sounds to me that they’re eliminating most of, if not all of, their operating cost, putting it on their “independent contractors” and reaping the benefits. Are they a shipping company or another middle man set up like the stock market? Hell, they need to really grease some palms in Washington DC. If they can manage to get the government to allow them to bring in poor workers from third world countries and let them do what they want with them they can really boost their profit margin. Then again, if they wait a little longer we’ll be a third world country they won’t have to go overseas. As a matter of fact maybe that’s what our country needs. Let all the big businesses and corporations pay workers here whatever they want to, eliminate the minimum wage (like it’s realistic anyway), outlaw unionism, flat out deny workers any benefits or retirement and big business and the stock market will go through the roof. Happy days will be here again before you know it, for some. What were we hearing a few years ago when the powers that be were trying to rally everyone around the flag pole while selling a bullshit war? Patriotism, patriotism, patriotism! Boy that tune sure turned fast to US workers don’t deserve a damn thing, they’re a bunch of over paid cry babies, screw them. Meanwhile corporate profits (until the bubble burst, were going through the roof while average workers pay and benefits were going down the drain. No average worker should deserve $20, $30,or $40 an hour but these CEO’s deserve every bit of the millions and tens of millions they get. As much of a joke as that is, the corporate CEO’s earn chump change compared to the hedge fund managers who are earning in the hundreds of millions of dollars up to the multi billions of dollars a year. Last year the average hedge fund declined 19%, even so, after a 48% cut in pay, the highest paid hedge fund manager, James Simons pulled in $2.5 billion. And by god while no everyday worker deserves what they’re being paid I bet he deserves every penny. Are people really so stupid, blind and obsessed with greed that they don’t realize the damage being done to this country by these corporations and the stock market making way over blown and unearned profits? Evidently so.

  • http://inquisitiveaboutfinance.blogspot.com Inq

    Good one. They need to see the real benefits of employees and how much it costs more.

  • http://www.AmicusCapitalServices.com Bill Tilley

    Thanks for the thoughtful analogy. Both models obviously have their pluses and minuses. Both companies thrive with their respective models. Its hard to say one is superior over the other. In general I think American companies and workers have shifted to a more independent model and workers seem ok with it. The worker realizes they have no security anyway being an employee and as described in the article many of the perks are vanishing so you might as well keep the flexibility and opportunity of being self employed.

  • http://AdvancedLifeSkills.com/blog Jonathan – Advanced Life Skills

    I think some services will always be employee based, it

  • jenn c

    You should clarify that it’s FedEx Ground that has an independent contractor model and the logo you’re showing is FedEx Express. Wouldn’t want to mislead your readers by providing the wrong facts.

    Also, it’s not just FedEx Ground that has independent contractors, it’s also Hallmark, nurses, Pastors.

  • http://blog.thinkdiff.net Md. Mahmud Ahsan

    nice article