A Smart Balance of Staff and Contractors

How the fast-growing food company integrates its small permanent staff with a sizable contractor workforce

By Rebecca Reisner

When Smart Balance (SMBL) decided to treat its workers to a cruise around New York Harbor, it made some of them a little sad. "They wanted to know why contractors weren't invited since 'they work so hard,' " recalls Bob Gluck, chief operating officer of Smart Balance, maker of a buttery spread by the same name, as well as all-natural peanut butter and nutrient-enhanced milk.

The Paramus (N.J.) company extended invitations to the event to permanent employees only, and according to Gluck, the requests to include the contractors were a testament to the close relationship between its two sets of workers: a permanent staff of 67 people based in its Paramus and Boulder (Colo.) offices and a virtual workforce of some 300 contractors, based in other locations throughout the U.S. The company says it has achieved something like the best of both worlds, using contractors to save money and boost productivity while instilling in them the same vision and enthusiasm—and to a great degree the same sense of camaraderie—as permanent employees.

A Contractor-Intensive Business Model

Robert Labick, senior managing director of research for CJS Securities, says Smart Balance's large virtual, mobile workforce of contractors is the reason his firm got interested in the company in the first place. "They're avoiding overcapacity of workers," says Labick, who's based in White Plains, N.Y. "The company is expected to grow quickly. It turned a profit in the fourth quarter, and its margins are expected to grow this year." He also says that "functional foods," those formulated as healthful alternatives to staples, are on the rise within the food industry.

With its potential for growth, Smart Balance makes for a particularly interesting case study of the contractor-intensive business model. Jessica Lipnack, chief executive of Net Age, a consultancy specializing in networked organizations, says the high ratio of Smart Balance's contractors to permanent employees is "surprising" even in the food industry, which tends to hire large numbers of contract workers.

So how does a business that grossed $222 million in 2008 make this equation work? "We're a marketing-driven company so we have all the marketing people in-house," says Gluck. Senior executives and administrative and clerical workers are permanent employees, too. But all manufacturing, distribution, sales, and IT workers are outsourced via flat-rate, "per job" contracts as well as some hourly agreements. For the most part, these workers receive no standard benefits.

Gluck, a 35-year veteran of the food industry, says he and Smart Balance CEO Stephen Hughes choose mostly contractors they have had working relationships with at other jobs.

Unifying Staff and Contractors

To keep everyone immersed in the corporate culture, Smart Balance twice a year holds all-company meetings that include permanent staff and contractors. At one of the meetings, senior executives from each area of the company make formal presentations, which the company uses to update its business plan. Gluck believes divulging this type of information to contractors is necessary to give a sense of unity to its contractors and permanent employees.

They celebrate successes with the virtual workforce via simple "atta-boy" e-mails, and during presentations at the biannual meetings, the company's executives make a point of recognizing and praising contractors' various accomplishments. But Smart Balance spreads around other kinds of rewards, too: It cuts certain contractors in on stock options and bonuses.

On a day-to-day basis, communication is all about e-mail. Flurries of messages go back and forth every morning from 7 a.m. to 10 a.m. as the virtual contracted employees and permanent employees update each other on what took place the day before, and what needs doing today.

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