The Project Economy - Industry Trend or Event

Industry Standard, The, August 14, 2000 by Craig D. Norris

The rise in temporary and contract workers is reshaping the workplace. Is your company ready?

Time was, ambitious staffers were marked by a burning desire for a corner office and a key to the executive washroom. Today, some top employees have never stepped foot in corporate headquarters, and the executives who manage them wouldn't recognize them if they passed on the street.

Welcome to the strange new world of project-based work, where independent professionals coalesce around a design challenge or product launch and disband once the work is done.

Project work is not new: In Hollywood, members of the "cast of thousands" that make a film may never find themselves together until the premiere. What is new is the growing pervasiveness of project-to-project employment in an economy where a product's shelf life is shrinking by the month, and firms are finding it necessary to reinvent themselves at regular intervals.

Thomas Barhold, a manager at IBM's Global Services unit, notes the project-centered culture in high tech has necessitated a more "elastic" workforce: "Employees today look at the career path as something they own. They're mobile in their careers, and want education and mentoring. They look to spend x period of time in a place and move on."

In the bigger picture, employees don't have the same loyalty to employers as did workers of their parents' generation. Consider that the average 32-year-old has worked for nine different companies, and 17 million Americans voluntarily quit their jobs to find better ones in 1999, according to a 1999 career survey by the Economist. Just five years ago, that number was 6 million. In such an environment, companies are realizing it's more efficient and more effective to hire workers a la carte, matching the right talent to the right task, right now.

As with any economic trend, some sectors get to the future first. Silicon Valley has long fostered a workplace in which teams move quickly from one venture to the next. Every major venture capital firm has its list of favored senior executives and marketing support teams to whom it entrusts new companies. But the trend is moving beyond floating teams as online recruitment tools become widely available, making it easier for companies to conduct global talent searches and easier for people to sell their skills worldwide.

Like the typical Silicon Valley startup, companies are learning to value the freedom and flexibility that comes from a lean corporate core overseeing an outsourced workforce. Consider Vertical Network, a 3-year-old Sunnyvale, Calif.-based upstart that makes networking gear and out-sources 100 percent of its production. Says Vertical Network's CEO Alan Fraser: "It's all about R&D and marketing these days. I wanted someone else to handle all the rest."

But outsourcing wouldn't be on the upswing if workers did not want greater freedom and flexibility themselves. Technology is driving down the transaction costs of linking skilled workers with mission-critical projects, which means that independent workers will find their compensation rising above that of salaried employees. Even better, with more interesting work at hand, their "psychic" compensation soars too.

This new breed is not driven by a matching 401(k) or comprehensive dental coverage, but by the search for cutting-edge work that provides meaning as well as material reward. [See sidebar for a discussion of how managers can lead this new workforce.]

As with many trends in the Internet Economy, it's hard to measure the magnitude of this shift. Still there are some signs, such as the 8.2 million "independents" and 10.3 million self-employed workers tracked by the Bureau of Labor Statistics in a 1999 report. Other estimates put the number of independent workers as high as one-fifth of all employed Americans. It's clear that the freelance economy is here to stay.

The advantages of a project-based workforce are clear and compelling: an ability to adapt quickly to changing competitive circumstances without an obsolete business unit's drag on productivity, performance and profits. Large, bureaucratic companies as we've known them will cease to exist. They will be replaced by smaller, more fluid versions of their former selves, staffed by professional nomads who migrate to wherever the employment market promises the greatest personal and financial return.

The onus now is on employers. If they can begin to think like the new generation of employees, they will discover that there are far more imaginative ways for the work to get done.

Craig D. Norris (cnorris@work exchange.cam) is chairman and CEO of Santa Clara, Calif.-based WorkExchange.

THE "PROJECT" MANAGER

TIPS FOR MANAGING CONTRACTORS

1) HERD CATS.

At a recent Silicon Valley CEO gathering, I conducted an unscientific poll of 70 fellow chief executives. Everyone indicated they had projects founded that were not going forward because they could not find the necessary resources. In an environment where project teams include staff workers as well as consultants spread across the globe, virtual managing will become a critical skill. Independent professionals aren't the kind you can cajole into weekend trust- building retreats for a quick infusion of corporate camaraderie. Managers must instill a sense of mission and team spirit in people who may never meet face to face. It is the manager's job to frequently and clearly communicate corporate goals to an ever-changing cast of free lancers. A manager's cast of freelancers. A manager's ability to quickly cobble together a "virtual staff" around a project idea will become a competitive advantage in an economy with shrinking product cycles.