Thank You Microsoft…Term Limits & the Creative Leader
Yes, from my MacBook Pro loaded with the Creative Suite, I typed “Thank you Microsoft.” What likely failed to come through was my sarcasm. Microsoft Millionaires and the resulting practice of term limits have lead to what one creative leader has termed “where Legal crushes creativity, collaboration and engagement in one fell swoop.”
I know this may sound harsh, but it’s a reality facing many creative leaders today. Eighty percent of creative leaders whose companies enforce term limits agree or strongly agree that “Term limits are disruptive and create challenges such as lower institutional knowledge and too much time spent recruiting and onboarding.”  Across the past four years I have heard creative leaders speak about “term limits” at almost every event Cella has hosted, and never has it been an endorsement speech. Let me step back…
In the late 1990s, several thousand independent contractors and contingent workers sued Microsoft, claiming that because Microsoft exercised the right to control their work, they were de facto Microsoft employees—and therefore entitled to be “Microsoft Millionaires” by participating in Microsoft’s employee benefits plans. The contractors at Microsoft won their suits and set off a rush by employers to adopt term limits on contingent workers providing services on their premises.
The logic behind term limits was this: by restricting the time a contingent worker could be on the client’s premises, and by requiring a waiting period for any employee to participate in the client’s benefits plans, the contingent worker—even if the worker was found to be a co-employee of the client—would never become eligible for the client’s employee benefits.
The Pain Point
Contingent labor is a valuable asset for in-house creative leaders. Using freelancers allows teams to grow and shrink based on volume or skill set requirements. It also allows managers to test-drive talent—some call it the “try-before-you-buy plan.” In addition, many organizations are approving the hiring of contractors but not full-time employees, which has created a significant dependency on these team members.
The challenge that term limits create is that by the time you select, on-board and bring a contractor to full strength performance, it could be time for them go; 17% of teams with term limits have a maximum term of 6 months or less.1
When you couple the company mandates to minimize fixed costs leading to a higher percentage of the creative team comprised of contingent labor WITH term limits, you get more churn and disruption in the creative team—which I am sure we all agree can lead to slower cycle times and increased errors, which in turn can result in lower client satisfaction and more fires for you to fight.
Minimizing the Pain
The pain is highest in organizations with high dependencies on contingent labor—in almost one out of five creative teams contingent labor makes up more than 25% of the team. If 25% or more of your team members were turning over every 12 months, imagine the disruption and inability to evolve as an organization.
Longer term limits are certainly helpful in minimizing the pain, though it’s unlikely the Legal department will adjust the policy—but worth a shot, so don’t ignore that avenue.
- Spreading out your turnover dates is helpful too—don’t hire so that everyone’s “expiration date” is at the same time AND definitely make sure term limit dates don’t overlap with critical business periods.
- Make the business case to convert “permalancers” to full-time employees—if the position is needed 52 weeks/year, every year—you have a case. Though, again if the company is in a freeze, it may not matter.
- Consider alternatives to traditional contingent labor models, such as on-site outsourcing and production house support.
- Points of Interest from the Term Limits Pulse Survey
- 52% of respondents indicated their company has term limit policies (n=116)
- As company size increases, so does the likelihood term limits exist; 74% of respondents from Fortune 500 companies have term limits (n=33)
- The length of term limits varies greatly, but typically fall between 6 months and two years.
- The majority of companies (81%) allow contractors to return after a break in service (n=53).
Read more about term limits in Cella’s whitepaper: Can Term Limits Be Avoided?
 Cella, Pulse Survey Results: Term Limits, 18 July 2014.
 Hankey, David (partner and practicing attorney at employment law specialists Gohn, Hankey & Stichel, LLP), Can Term Limits Be Avoided, Cella 2014.
 The BOSS Group, Cella Consulting, LLC and InSource, 2014 In-House Creative Services Industry Report, April 2014, p 22.