Friday, July 10, 2020

Differences between Professional, Self-employed and Entrepreneur

Professionals, Freelancers and Entrepreneurs have a different economic role. The differences and their impact on organizational and economic life are gathered here. The idea is to gain more consciousness about the various roles in the organizational or market environment.

The topics in this discussion are as follows.

1. Space. Space occupation of productivity role in internal (organizational) versus external (business) market.

The professional occupies a space within the organization, being physical (room, ICT capacity, etc.) or psychological. The Self/Employed occupies either space in the internal organization or a separate place in the external market. The entrepreneur only occupies place in the external market by selling a product or a service.

2.  Growth. Growth in relation with organization and or market.

The professional grows within the organization. This can be either promotion in depth and vertical ways or in a broader sense, horizontally. Growth in this sense is compared to the growth of the organization or smaller group in which the professional operates. He or she can grow more or less than its peers in the group. The Self-employed will grow professionally by means of organizational standards and opportunities, and by growing towards more external and entrepreneurial roles. The entrepreneur can only grow as a business, but will grow also in terms of experience.

3. Internal employee versus external networker.

The professional is - for as long as his or hers career is concerned - always an internal employee. The laws of Coase transaction theory apply where internal employees transact within the organization because of a common trust. The Self Employed can choose to be either internal (substitute, representative) or an external networker. The entrepreneur is more an external networker, meaning he has to gain trust by doing his own marketing. Self Employed often have agencies working for them to find new assignments.

4. Rules. Organizational rules versus market rules.

The professional is bound by organizational rules. The Freelancer is bound by either organizational or market rules, and the entrepreneur is dealing with market rules only.

5. Scalability. 

The work of the professional is limited scalable. The Freelancer's work is limited as for his organizational role, but more scalable for his role in the marketplace. The entrepreneur has a scalable role by being in business, which are in general scalable.

6. Organizational Role: expert, manager or leader.

The professional is most likely to be either an expert or a manager, and in a few cases a leader, for example of a new business unit. The Self-Employed is more often an expert, which he can lease to more than one organization, the entrepreneur is more often a leader, by doing and developing new innovative businesses or by instructing others to follow him or her.

7. User, Flexible or Owner.

The professional is a user of an organization. The Freelancer is either User of Owner, and the entrepreneur is Owner of the organization.

In the area of investments...

8. Return type

The professional is in general focused on relative returns. The Freelancer is either focused on relative return of absolute return and the Entrepreneur is also both focused on either absolute or relative returns.

9. Style. More uniform and formal or more creative and informal

Organizational life requires professionals to be more formal and uniform. Compare this with professional sportsmen where they have to comply with f.e. 50m swimming pools. The entrepreneur could design a swimming contest of 75 meters free style.

Professionals must exchange material, services and such within a company and in order to do so, the exchange must be formalized. Entrepreneurs have more liberty to come up with creative solutions as long as clients can accept these.

Dress code. For professionals this is more often formal code, f.e. when dealing with clients, but also within the organization. Entrepreneurs can be more informal (wearing a T-shirt). Or are inclined to wear more casual clothes.

10. Risk.

The risk of the professional is bounded by the rules of the organization. The Self-Employed takes more risk, but depending on either the rules of the hiring organization or the market. The Entrepreneur is the most risk-prone, having the image of having a larger risk appetite (skin in the game).

11. Structure.

Professionals have a fixed (income) structure. The Entrepreneur is completely variable in his structure, or more variable. The Self-Employed is somewhere in between, being more flexible and less fixed to structures.

12. Behavior.

The professional is in practice more loyal to the organization for which he works. Image is important. When a professional switches easily between jobs and companies this will reflect on his image, and weakens his loyalty. A voracious job-hopper is in fact a Freelancer. The Self-Employed / Freelancer is limited loyal to a certain organization and more loyal to his own practices and professionalism. The Freelancer can change more easily when market condition require. The entrepreneur is the most pragmatic. Meaning that he adapts his focus and organization to the needs of the moment.

13. Opportunism.

The professional can only be opportunistic in a limited way. When opportunities arise within the company / organization the professional can behave like an (internal !) entrepreneur, but the same as the job-hopper, this can be only the case, when there are opportunities (the organization is growing) or by weakening the professional image. The Self-Employed can be more opportunistic, but depending on the relations with offering organizations. The more flexible and opportunistic, the less loyal. Ina certain extent, the Entrepreneur can be more opportunistic and seen as a profiteer, benefitting from the often opportunistic problems that arise.

14. Knowledge and expertise

The professional is the most knowledgeable in his or her field. Professional means that there is a well-defined profession that does not change all the time. The freelancer is perhaps less professional in the technical sense are he or her is more flexible to do work that is beyond the organizational standard. The entrepreneur is engaged in a field where the knowledge is often less clear and open for scrutiny. In order to find new innovative business the entrepreneur need competences from professionals (Freelancers for a start, often), that are not too well defined, or new in that (geographical are, for example). The entrepreneur has to find out new professions that will be become more professional shaped when the organization of the Enterprise starts growing and formalizing.

15. Investment Style.

Professionals play defense, Freelancers are more "offensive" and Entrepreneurs are offensive. 

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