of the economic argument behind Topcoder is that they can find the very best people to do a particular project. A company might have dozens or hundreds of skilled internal programmers to choose from, but that collection of talent pales compared to the 700,000 free agents in Topcoder's network. The second part of the economic argument is that the Topcoder arrangement is cheaper and less risky because coders compete, and the company pays for only the best end product.
The Ion Torrent case leads us to the inevitable question: Are free agents, when organized by a platform like Topcoder, inherently more efficient and effective than regular full-time employees working inside a company or consultancy? Should you ever get computer coding work done by regular full-time employees? The answer, of course, is that it depends on your situation. The fact that it depends means that leaders must make decisions. As a leader, are you confident that you know when to use free agents via a platform like Topcoder? Why was it the right solution for Ion Torrent? Should you make it your strategy? If software coding is pivotal to your strategic success, the answer may determine whether you can compete at all.
It takes about 180,000 workers to run one of Europe's largest energy companies, but the company does it with far fewer regular full-time employees. More than 100,000 of the workers are not employees. Most of the work there has escaped the employment contract, not to freelance platforms like Topcoder, but to contractors.
This case is a vivid example of shifting work from employees to contingent workers. At one time, contingent work was considered suitable only for low-skill jobs, but today contractors can do the work of professionals and even managers. The contingent arrangement has many advantages for firms: It can be less expensive when one considers the total cost of employment (wages, benefits, etc.), in part because it creates a workforce that can shrink and grow as needed. It also helps a company access the skills it requires and get rid of those it does not with fewer costs than if it were hiring and firing employees.
A workforce consisting mainly of contractors presents its own challenges. Will they be as committed as regular employees? Will they be around long enough to develop the depth of knowledge of the company and the operations needed to handle difficult situations? Will the churn of contractors mean that each new worker will require extensive orientation and training? In the case of this energy company, a “beyond-employment” model based largely on contractors proved best. It figured out how to have significant aspects of its work down through a “plug and play” model that optimizes productivity and knowledge transfer.
Your own organization may well use some free agents such as contractors or contingent workers, so you may feel that you have mastered their use. Yet, consider this question: “Why not use mostly free agents the way this company does?” As you lead through the work, are you confident that your organization achieves the right mix of free agents and regular full-time employees?
Dr. David Baker, a biochemist at the University of Washington, had a problem. He studies proteins, which, when stretched out in a line, consist of a long sequence of amino acids. What makes things complicated, though, s that they don't stay in a straight line. They fold back onto themselves, and predicting how exactly they do so is a famously difficult problem.
If Baker had had an unlimited budget, he could work the problem by hiring a large team of regular full-time employees as researchers. However, most universities can't afford such expenditures, and even if his university could, it would have been tough to find just the right researchers for the job. Indeed, university scientists and R&D scientists at biotech companies had used all sorts of methods, including supercomputers, to try to crack this riddle, with little success.
Working on a tip from Mary Poppins, Baker knew that in every job that must be done, there is an element of fun, so he turned the work into a game. His team created a website and software tools so that enthusiastic amateurs could compete to find the best solution to the folding problem. Over time, the game, called Foldit, attracted a pool of talented volunteers who successfully solved protein-folding problems simply for the fun of it.
Using the Foldit game achieved better and quicker results, with no employees, and with no payment whatsoever. As a leader, should you consider this merely an interesting story, or should volunteers playing games be a component in your arsenal of tools to innovate quickly and efficiently? Are you solving your R&D and other creative riddles by hiring R&D scientists and building laboratories, when a crowdsourcing game could engage the best and brightest workers…for free?
As the previous examples have demonstrated, there is an emerging shift in the way companies both large and small are getting work done. In the traditional model for getting work done – such as writing code, solving a research problem, designing products, or creating a TV commercial – you needed regular full-time employees. Traditionally, we organized employees by creating job descriptions, reward structures, systems for recruitment, and so on. It's a bit like building a house out of bricks; it's a lot of effort, but ultimately, you end up with something quite stable and permanent.
The problem with a house of bricks – with all due respect to the fairytale view of these structures – is that they are expensive, slow to build, and hard to change. If you frequently need a bigger or smaller house, or simply a house in a different place, then a brick house is not the way to go.
Emerging approaches allow you to lead through the work, by organizing the work and workers to get exactly the talent you need when you need it. It's like throwing together a high-tech pre-fab structure, snapping the pieces into place for something inexpensive, fast, and disposable.
Yet, it's not as easy as simply shifting away from regular full-time employment as your work model. In a stable environment, the brick house wins. In an environment that is constantly changing, the pre-fab structure can adapt more effectively. As a leader, what environment should you be preparing for? When it comes to getting work done, most organizations are good at building the “brick house” through regular full-time employment. That has its value, but you must also know how to assemble temporary structures suited to a particular need at a particular time.
The employees who live in the brick house can see the need to prepare for a future with multiple temporary work structures. Just turn to LinkedIn and see the jobs people have these days. For example, Graham Donald's profile shows he is VP, Insight & Brand Strategy for Day Communications. But wait – he's also listed as president of his own company, the Brainstorm Strategy Group. How can someone be a VP in a leading communications firm and at the same time president of his own business? Donald's case is not that unusual anymore. Alan Burt, the chief technology officer (CTO) of Ricoh Australia, is simultaneously the CTO of PlanDo, a career management software company. The old tidy boxes are breaking down. Like an electron, people can be in more than one place at once.
What we see from Donald and Burt is that people are adapting to a world where regular full-time employment, what we used to call “permanent employment” is not particularly permanent. They have learned to build their individual brand, often while also working as regular full-time employees. A former free agent like Donald has learned it would be risky to jettison the value he built up in his own company, so he keeps it going part-time – a deal made possible by an employer who is enlightened enough to see that if you want the best people you need to be flexible in the deal you offer.
As layoffs, downsizing, and rightsizing have become frequent management tools, it's only natural that workers would value arrangements that make their movement between jobs easy. Workers may prefer leaving on their own than being pushed out by their employer. Regular employees now live in a world that bears many similarities to a free agent's life beyond employment. Employment and union trends analyzed by the Bureau of Labor Statistics and presented by the Economist validate the shifts we have discussed. Figure 1.1 shows that the proportion of workers protected by union membership has steadily declined by half over the past two decades, while the proportion of temporary workers has doubled.
