Digital media is transforming how organizations work. The twin factors of technology empowerment and the democratization of work is enabling companies to deconstruct, disperse and detach work from employment. This is in turn transforming how companies organize and reward employees.
“Outside the firm, price movements direct production, which is co-ordinated through a series of exchange transactions in the market. Within a firm, these market transactions are eliminated and, in place of the complicated market structure with exchange transactions, is substituted the entrepreneur co-ordinator, who directs production“ – Ronald Coase, The Nature of The Firm, 1937
The above quote underpins much of what we believe as being the primary reason for work being done within the bounds of the organization. Yet, the rapid changes in the aforementioned factors are bringing into question this fundamental belief. Consider for example that Topcoder, one of the foremost providers of technology talent in the world, has 700 employees and over 700,000 free agents available to provide solutions to its clients. Or that Uber has in excess of 160,000 drivers in the US but only about 1000 employees.
We can choose to see these examples as interesting anecdotes that are only relevant to specific types of work or we can seek to understand them better for what they really are – markers for a fundamental change that is transforming much of what we know about work, the organization and rewards. By some estimates, 22% of the global workforce is classified as contingent (i.e., they are not employees in the traditional sense). So the evidence would suggest that it is far from an isolated phenomenon.
Talent platforms like Topcoder, Upwork and Tongal are transforming work by affording companies access to the most capable free agents and in return providing this talent with opportunities and rewards that far exceed anything that might be possible through traditional employment. A recent analysis by McKinsey and Company suggests that such talent platforms could add $2.7 trillion to global GDP by 2025. As you will see in the chart below, much of these gains come from eliminating the friction points created by traditional employment.
But does this shift away from traditional employment portend the demise of the middle class and the end of meaningful and well-paying work, as many have claimed. Not necessarily. The following chart details the horrible and wonderful aspects of the “new work”. As with any change, there will always be winners and losers.
So how do we navigate this world beyond employment? Do these changes mean that we should look to resource all our work with free agents? Should we disaggregate our companies into flexible networks of skilled talent? Or do we cling doggedly to the tried and true notion of employment for our most pivotal work? The answer, as it always is, is that it depends. What we need is a framework that helps us understand the choices available to us for the various types of work that need to be done in our organizations. The framework below provides us with a map for navigating these choices.
On the left, we see traditional employment. Work is constructed into jobs, collected in one time and a singular space, and executed through an employment relationship. The organization is self-contained, detached, insular, protective, and has a rigid shape. The reward package is permanent, collectively consistent, and uses traditional elements (money, hours, working conditions, etc.).
On the right, we see a world beyond employment. Work is deconstructed into tasks, dispersed in time and space, and executed through many virtual and market relationships other than traditional employment. The organization is permeable, interconnected, collaborative and can change in shape. The reward is impermanent, individually defined, and uses imaginative elements (game points, reputation, mission, etc.).
The success of our organizations and the global economy hinges on our ability to challenge many of our traditional beliefs about work, the organization and rewards. In the infamous words of Alvin Toffler from his book Future Shock in 1970: “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn”.
Author: Ravin Jesuthasan, Global Practice Leader, Talent Management and Managing Director, Towers Watson
This post is published as part of a blog series by the Human Implications of Digital Media project.
Image: People walk on a street at Tokyo’s business district October 17, 2014. REUTERS/Yuya Shino