Report about Umbrella companies

This is my MBA thesis from Henley Business School about the drivers and growth of Umbrella companies in Europe by Fredrik Arvas.

Umbrella Companies offer Employment Services for individuals who would like to invoice a customer but who currently do not have their own company. The service has been in commercial practice for more than twenty years in UK, France, Sweden and Holland but is still relatively unknown.

This Management Challenge Project and its dissertation report aims to describe and quantify these companies in terms of growth and their impact on job-creation, primarily for unemployed people. A research stand point is taken from the Corporate Growth literature to investigate the different growth related behaviors practiced by different companies. The aim with this perspective is to find meaningful behaviors that can be copied by other companies. Hopefully the industry can grow and thereby create more jobs and simpler ways to run micro companies.

The result from the study lists the current 294 Umbrella Companies for the first time (appendix 11). UK has more, older and larger Umbrella Companies followed by France and then Sweden.

The persons who work through Umbrella companies can be divided into two groups: Agency-workers (who have been hired by a Contracting agency and are collectively employed through an Umbrella Company) and Consultants (who individually invoice their own client through the Umbrella Company) see section 1.1 for terminology.

The dissertation has tested a framework for Exponential Growth developed by David Thomson in the USA. The framework lists 7 Essentials for Exponential growth. It is based on the behaviors of the 400 fastest growing companies in USA, as they exhibit high scores on five out of seven of these Essentials. Questions regarding ambition and outcomeof growth and scoring on the 7 Essentials have been analyzed. Significant correlations have been found between the intention to grow and the ability to grow measured with these 7 Essentials. Significant lower scores on growth behavior have been found for the Umbrella groups and the Reference group compared with the US companies at the 95% alpha-level. Both groups are also growing slower than the US group.

Figure1_ThompsonTurnover

The figure illustrates the turnover mapping of the “average company” going public between 1980 and 2005 compared to the 364 companies who reached 1 billion USD in turnover within the same period.

Figure2_Arvas_UmbrellaCompanies_Turnover

Figure3_Arvas_UmbrellaCompanies_TurnoverDetail

The results indicate variation in growth speed for the most companies, while a few, 2 percent, indicate exponential growth. Most of these fast growing Umbrella Companies service Contracting agencies for large scale outsourcing projects and are not part of this dissertations main research focus. Companies who indicated faster growth correlates significantly with higher scores on the 7 Essentials. (See section 4.11).

For a complete listing of Hypothesis’s see Appendix for a summary.

The other question in this dissertation was how many new jobscan be created through this employment form. An indication has been found of approximately 30 percent of the total jobs. The total number of responses on this question is low (14 responses) and conclusions should be made with caution. The estimation is based on the Umbrella Company owners’ estimation of their staff’s alternative to the Umbrella Employment. The question in itself is difficult to answer because the definition of jobs is not the same between companies.

The response rate from the Umbrella Companies has been less than 5 percent, despite three reminder emails and phone-follow-ups. See the section 3.2 for research procedure.

Recommendations are given for Umbrella Company Mangers and Governmental bodies. Umbrella Owners are recommended to (1) include agency clients to increase profitability and to (2) focus on growth strategies to enhance chances for growth outcome. The industry is recommended to (3) differentiate the reporting of employed staff and external staff to facilitate further studies of the number of jobs.

Key words: SME, growth strategies, Umbrella Employment, Self-Employment, Job-creation,

This is my MBA thesis from Henley Business School about the drivers and growth of Umbrella companies in Europe by Fredrik Arvas.

Umbrella Companies offer Employment Services for individuals who would like to invoice a customer but who currently do not have their own company. The service has been in commercial practice for more than twenty years in UK, France, Sweden and Holland but is still relatively unknown.

This Management Challenge Project and its dissertation report aims to describe and quantify these companies in terms of growth and their impact on job-creation, primarily for unemployed people. A research stand point is taken from the Corporate Growth literature to investigate the different growth related behaviors practiced by different companies. The aim with this perspective is to find meaningful behaviors that can be copied by other companies. Hopefully the industry can grow and thereby create more jobs and simpler ways to run micro companies.

The result from the study lists the current 294 Umbrella Companies for the first time (appendix 11). UK has more, older and larger Umbrella Companies followed by France and then Sweden.

The persons who work through Umbrella companies can be divided into two groups: Agency-workers (who have been hired by a Contracting agency and are collectively employed through an Umbrella Company) and Consultants (who individually invoice their own client through the Umbrella Company) see section 1.1 for terminology.

The dissertation has tested a framework for Exponential Growth developed by David Thomson in the USA. The framework lists 7 Essentials for Exponential growth. It is based on the behaviors of the 400 fastest growing companies in USA, as they exhibit high scores on five out of seven of these Essentials. Questions regarding ambition and outcomeof growth and scoring on the 7 Essentials have been analyzed. Significant correlations have been found between the intention to grow and the ability to grow measured with these 7 Essentials. Significant lower scores on growth behavior have been found for the Umbrella groups and the Reference group compared with the US companies at the 95% alpha-level. Both groups are also growing slower than the US group.

Figure1_ThompsonTurnover

The figure illustrates the turnover mapping of the “average company” going public between 1980 and 2005 compared to the 364 companies who reached 1 billion USD in turnover within the same period.

Figure2_Arvas_UmbrellaCompanies_Turnover

Figure3_Arvas_UmbrellaCompanies_TurnoverDetail

The results indicate variation in growth speed for the most companies, while a few, 2 percent, indicate exponential growth. Most of these fast growing Umbrella Companies service Contracting agencies for large scale outsourcing projects and are not part of this dissertations main research focus. Companies who indicated faster growth correlates significantly with higher scores on the 7 Essentials. (See section 4.11).

For a complete listing of Hypothesis’s see Appendix for a summary.

The other question in this dissertation was how many new jobscan be created through this employment form. An indication has been found of approximately 30 percent of the total jobs. The total number of responses on this question is low (14 responses) and conclusions should be made with caution. The estimation is based on the Umbrella Company owners’ estimation of their staff’s alternative to the Umbrella Employment. The question in itself is difficult to answer because the definition of jobs is not the same between companies.

The response rate from the Umbrella Companies has been less than 5 percent, despite three reminder emails and phone-follow-ups. See the section 3.2 for research procedure.

Recommendations are given for Umbrella Company Mangers and Governmental bodies. Umbrella Owners are recommended to (1) include agency clients to increase profitability and to (2) focus on growth strategies to enhance chances for growth outcome. The industry is recommended to (3) differentiate the reporting of employed staff and external staff to facilitate further studies of the number of jobs.

Key words: SME, growth strategies, Umbrella Employment, Self-Employment, Job-creation,

 

 

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