The collapse of traditional firms
Knowledge workers will increasingly work for themselves and not as an employee for a traditional company. The reasons are legion, but among them are flexibility, focus, and finances. One company making a big bet on this future is A.Team, a marketplace of high-caliber talent tackling big, complex problems for companies large and small.
A.Team’s website headline reads, “Build great things with great teams.” Hundreds of companies have used its talent pool to build apps and other digital products from scratch for half the cost of hiring a full-time team. Companies like Johnson & Johnson, McGraw Hill, and Lyft count themselves as customers. According to a profile about the company in The Generalist, the company aims to be an operating system for teams to disrupt both the traditional company as well as management consultancies like McKinsey.
As I see it, this trend is a win-win for talent and for brands. Talent gains flexibility in the sense that they choose the amount of work they want to accomplish, averaging about twenty hours per week. They can work on the kinds of projects that interest them or pay the most, or both. They get to work with the kind of people they want to work with, even joining the platform as a team, say, with a group of friends.
Top talent like these workers—what A.Team calls builders—also get to focus on the kind of work they want to do without all the bureaucratic nonsense that comes from many traditional employers. They sign up for so-called missions that last anywhere from three to twenty months with a small team averaging just three people. For high-performance people in their twenties and thirties who want to move a thousand miles an hour, this sounds like a dream.
Finally, they also get an increase in pay per hour worked. They set the rate they want, say $150 per hour, and the admin is handled by A.Team’s tech behind the scenes, with the workers keeping their full rate. Contrast this with a set salary from traditional employers: The firm could make more money per engagement, but the worker’s salary remains the same, regardless of productivity. Some economic theories, however, argue that this type of relationship is beneficial, since a lot of work and the worker’s responsibilities are often complex and ambiguous. Maybe.
For the companies who hire these teams, they get faster, better-quality work at a cheaper price. Instead of waiting months to hire new folks or weeks to spin up an internal team, they can onboard a vetted group of experts on a new project in days. “It’s hard to scale and bring together a team with different capabilities in a short period of time,” said Justin Singh, McGraw Hill’s Chief Transformation and Strategy Officer. “From the start, A.Team enabled us to prototype and iterate more efficiently. Then ultimately, at the product development stage, they gave us the agility to quickly scale up and down with the resources needed to get to market sooner.” Again, the bureaucratic nonsense is eliminated, making everyone better off.
In 1937, British economist Ronald Coase published a paper about why organizations exist in the first place. To sum it up, firms exist because they can complete work faster and at a larger scale than if that work were performed by an individual. “It is often cheaper,” according to a description of Coase’s theory in The Economist, “to direct tasks by fiat than to negotiate and enforce separate contracts for every transaction.” This makes sense. At a certain size, however, the costs imposed by bureaucracy start to slow down that economic calculation. These are “transaction costs.”
What’s interesting about A.Team is that, by establishing a marketplace of white-collar workers whose job it is to tackle complex tasks, transaction costs can be drastically reduced thanks to some clever technology and project management processes. Add to that the ability of white-collar workers to work anywhere they want, invoicing for projects in whatever currency they want, and our economy will soon find a way to reduce the burden imposed by bureaucracy in myriad ways. The traditional firm need no longer exist.
One of the challenges with this model is the free-rider problem. How do you know that each member of the team is putting in their fair share of effort? Perhaps that would quickly become apparent if the project fell off the rails, but how can you avoid it before then? “There is no set-up in which the incentives of firm and agent can be perfectly aligned,” the Economist article continues.
Another challenge is that, no matter how great the economic incentives or the technology facilitating the work, all problems are ultimately people problems. Deadlines will be missed, emotions will run high, and communication can break down. There’s no getting around this fact, and a new way to work won’t absolve those sins any better than previous ways of working.
Still, I’m looking forward to the kinds of organizations and projects that will come from trends like A.Team and other ways to get the job done.