Article: The GIGantic opportunity of the shrinking corporation

#GigEconomy

The GIGantic opportunity of the shrinking corporation

Can we predict all the opportunities the gig organization of work will throw up?
The GIGantic opportunity of the shrinking corporation

After more than four hundred years of evolution into increasingly large and complex forms, the modern corporation is moving in the reverse direction in front of our eyes. Over eighty years ago, Ronald Coase enunciated the principle that "a firm will tend to expand until the costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange on the open market..."1 A combination of factors, including rapid developments in remote working technologies, perceived costs of durable employment by employers and changing attitudes to job security on the part of the workforce, have shifted the Coase boundary sharply inwards. We are seeing an upending of Arrow’s concept2 of the firm being a mechanism for dealing with market failures and reverting to the market for replacing the seeming inefficiencies of the firm. As a result, there is a trend towards an ever-larger number of organizations first experimenting with and then handing over an increasing share of work transactions from permanent employees to a 'GIG' workforce.

According to the Financial Times, "The phrase 'Gig economy' was coined at the height of the financial crisis in early 2009 when the unemployed made a living by gigging or working several part-time jobs, wherever they could… In its earliest usage, gig work referred to jazz club musicians in the 1920s. Some features, such as the fact that workers do not get healthcare, pensions or paid holiday, have hardly changed since." As readers of my columns will know, I am not a great fan of GIG employment for precisely these reasons as well as for the limitations this form of workplaces on commitment, cooperation, and capability-building.3 For the moment, I will resist my Canutian cravings to turn the GIG clock back and focus on the opportunities and challenges that this way of organizing productive effort brings. Structural change of this magnitude invariably throws up myriad opportunities for nimble entrepreneurs even as it relegates others to the dust-heap of history. As Muthusamy and Dass point out, "There are several ways advantages emerge from disaggregating and dispersing the value chain of an organization".4 And these changes can have a tectonic impact on industries, just as the vertical disaggregation of the IBM PC had for the computer industry and for the fortunes of the then relatively obscure ventures such as Intel and Microsoft. 

GIG employees who don't work in teams must develop the capability to realistically evaluate and improve themselves. Self-criticism must, therefore, be accompanied by self-learning and self-healing for intellectual and emotional renewal and repair

I cannot claim to predict all the opportunities the GIG organization of work will throw up but their broad directions are becoming discernible. The rest of this column will attempt the risky task of sketching some of these and how GIG Employees (GIGEs) and the firms that use them can prepare for these changes.

Re-creating the organizational cocoon 

Employees within the boundaries of a corporation are cocooned from the demands an independent entrepreneur has to face. This is what permits them to specialize and become more efficient, much like cells within the human body which can carry out their functions without having to worry about obtaining nutrients, disposing of waste or doing any of the other activities that themselves have specialized cells in other parts of the body. The GIG relationship, whatever its other benefits, removes the corporate umbrella of business support services from the individual. Each of these, to the extent it was an essential requirement, provides business opportunities for new classes of service providers. I will limit this exposition to relatively bluer ocean opportunities and will, therefore, leave out those (like shared workspaces5) that are already crowded with providers. 

Regular corporates wanting to use GIG employees will have to recast the ways they manage work and motivate people who are cut off from most of the blandishments and brickbats available for managing regular employees

Three obvious support requirements for GIGEs (and, hence, service provider opportunities) lie in:

  • Positioning, review and repositioning of the GIGE offering.
  • Client acquisition on a regular and reliable basis.
  • Accounting and taxation management. 

None of these can be automated beyond a point (even GIGEs who develop chatbots, prefer not to be serviced by them!) and neither can GIGEs pay the fees that even small enterprises cough up. The new class of service providers who step into this breach will require disruptive models for customized yet low-cost delivery.

Each GIGE’s own output (depending, of course, on the type of GIG work in question) may also require technology support of the following kinds:

  • Specialized software which is not provided by the client and which is not needed frequently enough to be owned.
  • Scheduling and other operations management tools (including an extra-lite enterprise management platform which includes or links seamlessly with an accounting package) for ensuring complex tasks are managed and billed on time.
  • Sophisticated communication and coordination networks.

In most of these cases, conventional corporates treat rarely or partially used software as a BAHU (Bought And Hardly Used). GIGEs cannot afford this luxury and will usually prefer the SAAS (Software As A Service) approach. But these SAAS providers are unlikely to be the large-scale product majors making their own products available with limited features. It will probably be small integrators and re-packagers who provide a one-stop-software-shop for GIGEs, somewhat on the lines cable/DTH operators buy licenses in bulk from broadcasters and parcel them out to consumers in individually tailored packages.

Even more than the business-related support, what GIGEs may miss most (and will, therefore, be willing to pay for) are vital people-related services, such as: 

  • Health cover
  • Technical and other obsolescence-retarding training
  • Career guidance and counseling

Probably the biggest business opportunity to emerge from the GIG form of employment will be in satisfying the need for medical cover. It is also one that requires no major rehaul of the business model currently in use by health insurance providers. Even today, health insurers give much better terms to corporate clients than to individual purchasers and could offer the same favorable terms to any aggregator of GIGE demand for health cover. All it requires is an association of GIGEs to take on the procurement role. Whether such an association arises sui generis as a result of the initiative taken by far-thinking GIGEs or whether it comes from progressive trade unions looking to diversify and enhance their appeal, I cannot predict. I can only say that these Guilds Of Gig Employees (or GOGIGEs) could be fairly profitable, especially if they take the next logical step of providing other essential services to their members such as cooperative credit, social security plans, purchasing leverage (for both goods and services) and support when a GIGE is unfairly treated by her or his clients. The culminating step in GOGIGE evolution could be when they also provide GIGE certification and placement services. In doing so they would have an advantage over other service providers because of the large basket of essential support services they would offer to members and improve the employment security of GIGEs – which is abysmally low today. Of course, since several GOGIGEs would compete with each other, both to attract GIGEs and clients, they are unlikely to develop the closed shop burdens that medieval guilds imposed on those economies and employers.

Whether negotiated through GOGIGEs or not, the training service providers who can keep GIGEs current will be assured of regular business. Especially if the GIGE is operating in the tech sector, the desire to forestall knowledge aging will be no less fierce than Dorian Gray’s. And since corporates will no longer share the responsibility for keeping the individual current, it will be up to the individual GIGE to do so. While one should see an unquenchable thirst for training in technical competencies and skills that are immediately usable, the kind of training corporates impose because the Jones’ are doing so, may find relatively few individually paying takers.

While organizations have had decades to perfect people policies for durable employment, they will now have to craft separate ones that are optimal for GIGEs. Both sets will need to fit into a meta-framework without contradiction and neither should be dissonant with the core values of the enterprise

There will be occasions when GIGEs who are faced with difficult project, people and proficiency challenges, will need guidance or at least a sympathetic shoulder. Moreover, as individuals take full ownership for their careers, they will see value in paying for professional expertise in charting their future course. They will do so especially because mistakes in future-readiness will not be underwritten by some large company. GIGEs will, therefore be eager for guidance that prevents them from acquiring skills in low demand or ones they do no not enjoy practicing. 

Crusoe or Band of Brothers

Among the greatest services career counsellors can provide to GIGEs is to give them a heads-up on whether they have temperaments suited to the open sea of a GIG-life for the long term or whether they should slip into a regular corporate employment harbour as soon as one hoves into sight. The question arises, of course, only if GIGEs have such a choice but it is vital for them to know whether they should divert energy from GIG assignment hunting or delivery to seeking permanent jobs. Or, if such opportunities come their way fortuitously, they need to have thought through whether to forgo the option without regrets or to leap into regular employment without agonizing over the choice till it disappears.

To help answer this question, I find it useful to position people’s temperaments in a triangular space. Your memories of school geometry will tell you the vertices of a self-respecting triangle have to be A, B and C and so we call these temperaments:

  1. The Admirable Crichton
  2. The Band of Brothers
  3. The Crusoe

The quintessential GIGE should be comfortable in a Robinson Crusoe situation. Not that s/he should be averse to human contact in a non-work setting but s/he should be able to deliver peak performance without having a 'best friend at work' to sustain engagement. The other end of the continuum, of course, is the person who performs best in a band (don’t call me sexist, Shakespeare used 'brothers' to follow 'band'). The corporate milieu is the obvious choice for such a person. But these are not the only options on the table. There are individuals (like the main character from James Barrie’s play, 'The Admirable Crichton'), who, when freed from the constraints of organizational convention, display their true leadership flair and become entrepreneurs in their own right. A small but significant number of GIGEs can move from freelancing to business ownership and an astute counselor will encourage those few to do so. There are a variety of psychometric and other techniques to establish where an individual will be most comfortable on this triangular spread. Having made the choice, while those opting for corporate careers can seek guidance from the organizations they join, cost effective (sometimes pro bono) mentoring support is increasingly becoming available for both Crichtons and Crusoes.

Since our present concern is with GIGEs, let us explore in a little more detail, the characteristics of the Crusoe temperament. As already explained, a person who will be happy as a GIGE is likely to have a relatively low need for affiliation – at least at the workplace. On the other hand, s/he will possess a high need for achievement. While both of these are relatively stable behavior patterns, other capabilities that make for a successful GIGE can be strengthened consciously over the years. For GIGEs, all of these have to be self-originated and self-sustained.

Both the desirability7 and the significance8 of self-discipline have been questioned in recent years but I think it is safe to list it together with self-starting (which uses will power to prompt action rather than prevent it, as discipline does) as hallmarks of the successful GIGE. In fact, the critiques of Walter Mischel’s Marshmallow Test, as well as his own latest work9, further confirm the possibility of developing skills for delaying gratification. Self-starters also need to acquire self-organizing skills so that the drive to action is harnessed efficiently. Moreover, GIGEs who don’t work in teams must develop the capability to realistically evaluate and improve themselves. Self-criticism must, therefore, be accompanied by self-learning and self-healing for intellectual and emotional renewal and repair. All of these can be enhanced by practice as well as guidance – the latter opening up opportunities for those who can actually transfer these vital effectiveness enhancers.

Becoming a great place to GIG

It’s not as if GIG work only creates opportunities for entrepreneurs and new development directions for GIGEs. It also demands changes from employers and HR practitioners if they are to get the best from these transient contributors.

In an earlier column, I have written about some of the HR challenges faced by aggregators.10 But the Ubers of the world will only be a small part of a fully realized GIG economy. Regular corporates wanting to use GIGEs will have to recast the ways they manage work and motivate people who are cut off from most of the blandishments and brickbats available for managing regular employees. While organizations have had decades to perfect people policies for durable employment, they will now have to craft separate ones that are optimal for GIGEs. Both sets will need to fit into a meta-framework without contradiction and neither should be dissonant with the core values of the enterprise.

There will be some brand promises that are likely to be extremely attractive in a GIG Employer Value Proposition (GEVP). These could include:

  • A publicly declared code of fairness in dealing with GIGEs, with a non-taxing means of seeking redressal when the code is infringed. Of course, individual organizations will choose how extensive and GIGE-friendly their codes are and differentiate themselves from others on that basis.
  • Verifiable certifications of the work done by the GIGE for the organization. This could be framed in competency-based terminology that can be easily incorporated into a CV and improve the chances of the GIGE getting other assignments in future.
  • A loyalty benefit for those who perform well during their GIG assignments. Organizations could innovate on what form the benefit could take, ranging from premium payment rates to participation in welfare schemes (either designed especially for GIGEs or with other regular employees) or even some form of equity sharing.
  • A path for the best performing GIGEs to become permanent employees. Obviously, this will be an attraction only for those who see GIG work as a temporary stopgap (see previous section for more on the 'Band of Brothers' type).

Finally, there is one critical conundrum that companies opting for GIG work will have to solve: that of cooperation. John Roberts explains it well: "Generally, two broad sorts of behaviour might be desired from people in an organization: Call them 'initiative' and 'cooperation'... Arm’s length market dealings typically give the maximal incentive to pursue own goals and so the most initiative, but they provide little incentive for cooperation."11 This is fine for the individual-contributor-type aggregator GIG enterprises and goes some way to explaining their success. Most businesses clearly have more complex operational demands. As Roberts goes on to write: "Of course, real companies need more cooperation than arm’s length dealings would induce because interdependencies abound."11 There have been no large-scale solutions to this problem yet. As such, exciting as its potential is, GIG work currently just occupies a beachhead where aggregators thrive. Depending on whether corporates can solve the cooperation challenge outside the entity’s boundaries, the beachhead will resemble the beaches at Normandy or the ones at Gallipoli! 

 

Notes:

  1. R H Coase, The Nature of the Firm, Economica, First published: November 1937.
  2. Kenneth J Arrow, The Limits of Organization, W. W. Norton & Company, 1974.
  3. Visty Banaji, The Future of Work Requires Work- And Tech is Part of the Problem, People Matters, 5th Nov 2018.
  4. Senthil Muthusamy and Parshotam Dass, Toward a smarter enterprise: Disaggregation and dispersion for innovation and excellence, Competitiveness Review, Vol. 24 No. 3, 2014.
  5. Anshul Dhamija, India's informal gig economy turns mainstream, Forbes India, 8 August 2018.
  6. Sheilagh Ogilvie, The European Guilds: An Economic Analysis (The Princeton Economic History of the Western World), Princeton University Press, 2019.
  7. Alfie Kohn, Why Self-Discipline Is Overrated: The (Troubling) Theory and Practice of Control from Within, PHI DELTA KAPPAN, November 2008.
  8. Jacoba Urist, What the Marshmallow Test Really Teaches About Self-Control: One of the most influential modern psychologists, Walter Mischel, addresses misconceptions about his study, and discusses how both adults and kids can master willpower, The Atlantic, 24 Sep 2014.
  9. Walter Mischel, The Marshmallow Test: Mastering Self-Control, Bantam Press, 2014.
  10. Visty Banaji, Minimal HR for maximal effect: Hyper-frugal Resourceful HR in the age of aggregators, People Matters, 12th Jan 2017.
  11. John Roberts, The Modern Firm: Organizational Design for Performance and Growth, OUP, 2007.

Topics: #GigEconomy, Life @ Work

Did you find this story helpful?

Author

QUICK POLL

Is India Inc ready to support the gig economy?

On News Stands Now
q_auto,f_auto/v1573046219/mag-november-2019.jpg

Subscribe now to the All New People Matters in both Print and Digital for 3 years.

.

Subscribe
And Save 59%

Subscribe now

How likely are you to recommend our content to a friend or colleague?

01
10
Selected Score :