A New Model of Employment Is Rising

Think about some of your best and brightest employees—the ones you hope will still be working for you in twenty years. Wouldn’t it be wonderful if you could make every employee perform like these high-potential individuals? The answer might be to let them go—and then bring them back as independent workers instead of as employees.

Obviously that’s a bit tongue-in-cheek, but a recent study by IBM on independent workers, including contractors, freelancers, and consultants, found that these nonemployees were significantly more engaged than average workers, and nearly at the level of companies’ highest performers. On the dimensions of job satisfaction and pride, independent workers actually gave consistently higher ratings than high performers.³

In short, the relationship between organizations and their workers is changing. Increasingly, leaders see the benefit of what has been called the Hollywood model of employment. Taken from the way teams of specialized individuals come together to work on movie productions, the Hollywood model of employment is short-term, project-based work, where each individual is brought on with targeted expertise to fulfill a specific role.

Adam Davidson, who recently visited a movie set to act as a technical adviser, marveled at the way 150 people who had never worked together formed a unit to work on this film like a well-oiled machine.⁴ Costumes, props, lighting, sound, cameras, makeup, hair, acting, directing, design—all worked in complete harmony. It happens on movie sets every day all over the world. Davidson wrote in the New York Times Magazine, “There was no transition time; everybody worked together seamlessly, instantly.”

Here’s Why the Contractor Model Works

Anyone who has worked in the corporate world knows how difficult it is to take a project from inception to implementation. Even the simplest undertakings somehow become epic battles against corporate dragons, such as competing interests, organizational politics, budget constraints, and plain old inertia. Remarkably, though, a group of independent contractors can sometimes come together efficiently to complete a complex project that an organization might struggle with for years. The Hollywood model, for example, benefits from clear expectations for each role, workers who have specialized expertise, and recurring project opportunities.

It used to be difficult to find available independent workers with the right skills for a particular need, but online networks such as Linked-In, Upwork, and Guru have dramatically reduced the friction in the contract labor market. Contract workers bring many advantages to an organization. They are flexible resources that can be employed when needed and cost nothing when not being utilized, and they let you try out their skill sets without committing. On top of that, they can actually be more effective than employees in many situations. Here are some of the common reasons.

THEY PROMPT ORGANIZATIONAL CLARITY AND COMMITMENT. You usually exercise more organization oversight when you hire an external worker than when you allocate an employee to a project. An employee is a cost the organization is already expecting to pay, but an independent worker requires an additional financial commitment that usually must be approved. This additional process and scrutiny usually mean that contractors are brought on board only after a specific scope of work has been clarified and deemed important. Once the contractor begins work, the organization will make sure he has everything he needs to be successful so that the extra expense isn’t wasted.

WORKERS ARE FOCUSED. With a clear scope of work, an independent worker can bring laser focus to her allocated tasks. Although full-time employees frequently have competing (sometimes contradictory) projects, multiple reporting relationships, and changing corporate agendas to deal with, independent workers can stay focused on fulfilling their scope of work.

THEY BRING UNIQUE EXPERTISE. In most circumstances, independent workers are brought in because their specific capabilities are uniquely suited to a task. In contrast, when projects are staffed with employees, the project manager usually must select from those with bandwidth, rather than those with the perfect skill sets—and we all know how competitive it is to gain the time of the best performers.

THEY HAVE A SENSE OF OWNERSHIP. Compared with employees, contract workers feel more ownership over their work product, often resulting in greater commitment and engagement, per the IBM study cited earlier. For contract workers, both their brand and their future employment are directly tied to their personal output, and they know that every client is a possible reference for the next one. Because of the interconnected nature of companies and teams, it’s usually harder to tie the work of employees to individual performance, and full-time employees do not expect to need to prove their capability regularly. In short, the contractor’s work builds her own brand; the employee’s work builds the company’s brand.

A CAUTIONARY TALE. We can pull this all together with a story about two people we’ll call contractor Maria and employee John. This may seem like a caricature, but please consider whether you’ve seen something similar happen in your own organization. The answer likely is yes.

The Acme Company needs to redesign its website. The web team decides to put employee John on the project. Web design is not John’s specialty, but his last project recently ended and he has some bandwidth. When the work begins, John struggles to update his knowledge of web design and manage his other ongoing responsibilities. One month in, the inventory management system goes down and John refocuses his effort on fixing it, delaying the web design project by three weeks. Two months in, the project leader quits, and a new leader comes on board with a different vision, requiring a month of rework. John has trouble getting the access he needs from the IT department to properly test the new site, and he’s told to wait his turn as IT has a huge backlog. After six long months the project wraps up. John is not proud of the website, but he is glad it is finished.

Now let’s roll back the clock and consider a different scenario. This time the Acme Company decides to use contractor Maria. Web design is Maria’s specialty and passion. She and the web team collaborate to create a specific scope of work that Maria then focuses on completing, with little competing for her attention. When the new project leader comes on board, Maria quotes him the increased cost of her time for rework; he decides not to change the scope of the project. When Maria needs access from the IT department, her request is expedited because slowing her down costs the company money. The project is completed in three months. Maria is proud to add it to her portfolio and share it with her next potential client. The new project leader is happy to be a reference for her stellar work.

We have seen these scenarios play out over and over again. Although the answer is not as simple as “switch your employment model to 100 percent independent workers,” independent relationships offer many attributes that benefit both the organization and the worker.

What Do Workers Want?

We’ve documented how independent workers (partners, rather than employees) can be good for employers, but this working arrangement also proves to be good for the workers themselves. New generations of workers, as expected, have different wants and needs from those of earlier workers. Millennials entering the workforce, and many of us a bit older, have become accustomed to autonomy, choice, and influence. The same networks that reduce friction for recruiting companies also reduce friction for workers looking for their next great role. Individuals can interact with and influence their favorite brands through Facebook and Twitter, so why wouldn’t they expect to be influencers at work as well? They do—but only a few enlightened employers are providing what employees need to feel empowered, developed, and influential in their jobs.

A recent Gallup poll found that more than 70 percent of US employees are not engaged in their jobs—meaning that they are not “involved in, enthusiastic about, and committed to their work and workplace.”⁵ Ouch. And it’s not only employees. Research by Rosalind Bergemann found that 74 percent of workers who voluntarily chose to become independent cited a lack of employer engagement as their principal reason for leaving.⁶ Reinforcing this point, Mike Myatt, author of Hacking Leadership, found that more than 70 percent of employees don’t feel valued or appreciated by their employers.⁷

Add to this dysfunctional relationship a few more facts. What millennials want most for their careers is meaningful work, and the two benefits millennials most value are (1) training and development and (2) flexible working hours. Common benefits of employment, such as health care, vacation, and child care, trail far behind in desirability.⁸ No wonder 34 percent of the American workforce has already shifted to independent work; they want to serve themselves, develop themselves, control themselves, and ultimately find the work that makes them happy.

The burgeoning independent workforce changes things for organizations and for employees. Some of these changes are tactical, such as finding new ways for workers to get health care, and others are relational, such as figuring out how to help your workers find fulfillment. But there is a great win-win possible. In the best of all worlds, workers find fulfilling work that provides the control, development, and meaning they desire, and employers benefit from an efficient and engaged workforce.

Principle 7, Employees: From Employees to Partners

The seventh principle of creating network value is to shift at least a portion of your workers from employees to partners. On the left side of the scale are traditional organizations that rely primarily on long-term, full-time employees who are managed in the customary way, with relatively little autonomy. On the right side of the spectrum are companies that rely heavily on partnering with an independent workforce or that create a culture of empowered autonomy within a traditional workforce.

Many of the partnering firms employ new business models that leverage a network to source their primary workforce. Airbnb, Uber, Etsy, and eBay are examples of companies in which nonemployees are the essential value creators. Although we don’t usually think of it this way, most of us Facebook and LinkedIn users are also nonemployees, trading our content for access to the platforms.

In the middle sit companies who still mostly have employees but are working to treat them as independent partners. And we don’t mean by cutting employee benefits. We mean by giving their employees a greater degree of autonomy, flexibility, development, and overall a greater degree of control and influence. Here is where the co-creator leader lets go a little more.

There are many ways to begin shifting your organization to the right end of the spectrum. Google’s 20 percent time policy (or 3M’s 15 percent time, if you’d like to go back further)—where workers are encouraged to invest the allotted percentage of their time in their own projects and ideas that they think will be most valuable to the company—are wonderful examples. AT&T has an internal idea stock market called the Innovation Pipeline (TIP), where employees can pitch and vote on ideas, choosing the best to be presented to senior leaders. Deloitte has developed a new approach to human resources that it calls mass career customization, with the goal of giving employees more control over their career progress, letting them ramp up or ramp down and make moves as needed to fit their current life situation.

Companies that treat their employees as independent, skilled, valuable partners are actually practicing network orchestration with an internal network—their workforce. Promoting greater ownership and independence by your employees allows them to operate as partners who contribute rather than subordinates who do what they’re told. If employees feel that their work contributes to their personal brand and esteem, on top of their bank accounts, they will act differently.

There are many ways to create a relationship with your workforce that enables rather than controls. Most companies fall in the middle of the spectrum. To help pinpoint where your organization sits between employee (1) and partner (10), consider these questions:

• How much worker development do you offer (training, tuition reimbursement, etc.), and how much control does the worker have over the training he receives?
• How flexible are your career paths? Can a worker easily move from one division or role to another? Who controls his career path—the worker or the organization?
• Do workers have flexibility in the hours or locations of their work? Does your organization have a culture of face time? (If workers are regularly in the office after working hours, the answer is yes.)
• If a worker has a great idea for the firm, even in an area where he doesn’t work, how much support is he given? How likely is it that the idea will reach the attention of upper management?
• Do your workers have a mission that they can find meaning in? (Not every company can feed the world’s children, but every company can create a mission that people can understand, relate to, and espouse.)

If you want to know how to create a workforce with a more independent culture, simply revisit each of the foregoing questions and think about what would work in your organization to deliver more development, flexibility, influence, and inspiration to your employees.

Here’s another idea as well: ask your employees to tell you what would make their work experience better for them. Their answers might surprise you.

One Person Performs Many Roles

One of the themes of the network world is that roles of all kinds are merging. Customers, employees, partners, and owners used to be distinct groups. But now we’re beginning to recognize that each individual—each of us—can play all of these roles, and sometimes for the same company.

We’ve discussed the blurred lines between customers and employees that arise through co-creation, and between employees and partners through the independent workforce. But employees can also be owners. Of course, contract workers own their own work and personal brand, but your employees can also be made to feel and behave like owners, and the benefits can be significant. How many times have we all heard executives lament a lack of employee buy-in? A sense of ownership solves that problem.

Frank Budwey owns a grocery store in North Tonawanda, New York. Or should we say co-owns? After the untimely death of his son, Budwey decided to give the store’s thirty-three full-time employees just shy of 50 percent ownership in the supermarket, allowing each employee to begin pocketing a share of the store’s profit. As you might expect, employee morale soared, and sales took the same path—rising as much as 20 percent year over year.

Of course they did. Budwey couldn’t have done much more to align the interests of his employees with the success of the store. Their brands are now the same, and the benefits are shared. It’s a wonderful model.

Now Don’t Fire Everybody

It’s important to emphasize that an independent partner workforce is not a one-size-fits-all solution. Some workers will always want the stability of a full-time, long-term position, and some roles will always need to be filled by those who hold the long-term well-being of the organization as the priority. You may never convert to a fully contract workforce, but you may find an unexpected way to align your interests with those of an external network, resulting in a new, independent source of value for your company.

Please don’t ignore the fundamental changes that are affecting the relationship between workers and organizations. Workers have new needs—and new capability to move around until they find an employment arrangement that suits them. Companies that meet these new needs will find that they, too, benefit from an inspired, happy, contributing workforce. Those that fail to meet worker needs will see their best and brightest head off in search of their next great role.