Upwork Agencies in Focus: A New Frontier for Digital Freelancing
With millions of freelancers and clients collaborating on diverse projects remotely, Upwork has become one of the largest digital freelancing platforms. And as the platform continues to grow and evolve, Upwork has introduced Agencies to allow freelancers to scale their operations and be their own boss in a different way.
It is unclear exactly how many freelancers start agencies. Yet, beyond the statistics, it is interesting whether and how Upwork agencies are similar to plain old companies. What might freelancers consider if they want to start a company? Relatedly, what can clients and digital labor platforms learn about this organizational form? In this brief post, I summarize our preliminary findings about Upwork Agencies and discuss some emerging insights.
So, what is an Upwork Agency? An Upwork agency is analogous to a commercial organization on Upwork. It allows multiple teammates to work under a single organizational identity similar to a commercial registered organization.
Why do people start an Upwork Agency? Expanding into and Expanding inside.
Why start an agency when you can be a freelancer? It seems that there are two main categories of freelancers who might want to start Upwork agencies. The first group includes those who already have an existing business prior to joining the platform. This group is likely to start an agency to expand their offline business into Upwork. The second group includes those who have been working on Upwork for a substantial amount of time. They don’t have businesses off platform, but they want to take up more jobs on the Upwork platform. This group seeks to expand inside the platform. In both cases, the aim for creating an Upwork agency seems to be to expand. In other words, agencies might not be the best move for novice freelancers with little to nothing to expand.
What are the affordances of Upwork Agencies?
(1) Easy Set Up: Agencies are easy to set up. Individual freelancers can transfer their individual data to create agencies. Even if they choose to not transfer their data, one can easily set up an agency with a few mouse clicks. Not only that, but agencies do not have to be registered legally. In other words, they do not have the same constraints that real companies have. Finally, an Upwork agency does not need to have a physical location.
(2) Collective Effort: Agencies afford collective effort via teams. Freelancers can always collaborate with others in teams. But, with an agency, that collaboration takes on a recognizable form, making it more legitimate. For example, a freelancer who specializes in graphic design can collaborate with another who specializes in videography to work on a movie project, whereas alone, they are simply not up to the task. In P110’s perspective, when working with a client, it is best to view an Upwork agency as an extended team of the client’s business unit. Importantly, this virtual out-of-house extended team saves the client money because of the collective effort therein.
(3) Organizational Legitimacy: Agencies grant freelancers organizational legitimacy. This legitimacy can be viewed as a form of trust that clients place in freelancers who have agency profiles. One interviewee commented that having an agency creates the illusion that she has more experience than she actually does. It also signals to clients that she has put a high level of seriousness into her work, making her more attractive than she would be with her freelancer profile. This is important because certain existing firms can only work with registered businesses. In other words, freelancers may not always be able to work with such firms. But, agencies, as organizational entities, may be able to work with those firms. As P113 notes, a company that approaches her agency does not see “good old me”, but rather sees a legitimate agency. In other words, a company may not be able to recognize P113, but they can recognize another business.
(4) Off-Platform Work: Agencies allow off-platform work. Agencies enable freelancers to leverage the internal legitimacy from clients to take work off the platform. This is an immense opportunity for the Upwork digital labor ecosystem. Off-platform work represents lost commissions for Upwork. It is therefore important to ascertain whether this off-platform move is client-driven or freelancer-driven.
What challenges do Upwork Agencies face?
Interestingly, despite the many affordances of agency profiles, many freelancers do not update their agency profiles regularly. There are at least two reasons.
(1) Growing a freelancing company sustainably: Upwork agencies rely on teams of freelancers to sustain their operations. Yet, to grow their agencies, they need to take on new projects which in turn require more freelancers. The challenge exists in ensuring that there is enough work for new hires to complete in the future. In other words, agencies face a trade off between growth and sustainability. The relationship between growth and earning is an interesting one for agencies. On one hand, agencies have the structure to attract new clients and therefore grow. To meet the growing demand for work, agencies need to enroll more on-demand labor or even salaried workers. On the other hand, for Upwork agencies, this may not be economically feasible since they cannot guarantee freelance work for employees. Participant 12 describes the challenge this way:
“I actually have a client right now that wants me to focus on the agency, because I’ve been doing projects for him for over a year now. He needs more people for his projects, and they’ve been expanding, so right now he doesn’t have enough people to do the projects that he wants to do in the timeline that he wants to do it on, and we talked about my agency. Unfortunately, my agency members are already busy with other projects, but what I’m going to try to do in the next couple of weeks is probably recruit some more people for my agency and have them work on this client, but I’m trying to figure out if it’s sustainable. Because I don’t want to recruit people and then after a couple of weeks they don’t have a job.”
(2) Competition and Traction: The second challenge is that of competition and traction. Whether freelancers create agencies or not, they exist within the Upwork platform, which is predominantly client-driven. As such, the competition to acquire jobs is still high for many Upwork agencies. Against this backdrop, Upwork agencies have to constantly differentiate themselves. These actions are however constrained by platform features as well as limited labor force as alluded to in the first challenge.
(3) Organizational design: Another challenge that Upwork agencies face is one of organizational design. As noted, agencies enable freelancers to either expand into or expand in Upwork. Particularly for those who expand into, an Upwork agency could become redundant as it simply replicates the existing firm. While this redundancy may serve as a new client recruitment channel, the extra demands needed to maintain it may not always be worth it. Perhaps, this explains why many do not update their agency profiles. Indeed, P110 was contemplating deleting their agency profile in the future.
(4) Finding good candidates: The last challenge we find has to do with finding and retaining good candidates for agencies. Upwork agencies enable freelancers to take on more complex tasks for more financial rewards. While some freelancers can develop the skills needed to complete said complex tasks, the Upwork agency form allows freelancers to enroll teammates to collaborate on the tasks. The process of creating a team on Upwork can be as complex as the process of creating a team in a firm. Perhaps, it is even more challenging when one considers organizational design. For example, for a firm that expands into Upwork, should they hire freelancers on Upwork or bring freelancers into Upwork? Similarly, for an agency that is expanding inside Upwork, should it hire only Upwork freelancers? Furthermore, agencies that seek to persist and survive may also need to maintain an organizational culture of collaboration and support. Given that Upwork is a global platform, this means that virtual teams are highly likely. Indeed, Cherie M. employs a globally distributed team and describes hosting team building activities to keep the agency going.
Are there any opportunities that come with Upwork agencies?
The challenges that Upwork agencies surface also signal opportunities.
(1) Facilitate cross-platform integration: The first opportunity we see for Upwork agencies is to integrate platform-specific team management tools. Upwork was initially developed with the solopreneur in mind. As the platform expands to include agencies, i.e. organizations, it is important to provide tools to support them as well. It seems that most of our agency owners rely on off-platform tools to convene meetings, communicate with clients, etc. Even more beneficial and efficient would be for Upwork to integrate with those tools that agencies use. For example, Slack, Zoom, etc.
(2) Enable landing page customization: The second opportunity is to enable customization of Agency landing pages. One way that agencies can confront the immense competition they face is by differentiating themselves. This is however hampered by standardized templates and such. Upwork could enable agencies to customize their landing pages and offerings.
Key insights
Upwork agencies afford Upwork freelancers more organizational capacity. This capacity is mainly in the form of enrolling team mates with complementary skills. Upwork agencies also afford Upwork freelancers legitimacy and trust. Yet, this recognizability is likely outside the Upwork platform. This begs the question: does a firm in the wild perform better than an Upwork agency?
Upwork agencies require significant work to maintain and derive benefits. It is easy to start (and kill), yet it is difficult to grow. In other words, its immense capacity can only be derived through immense entrepreneurial and organizational effort (e.g. team building, hiring, etc.).
