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How will the new "gig" economy change our world?


“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” As futurist Roy Amara explains people disregard important lessons from the past, and take a narrow view to the latest new and exciting innovations, making it difficult to understand the present and even more difficult to pre­dict the future. The freelance economy is no exception.

More than two-thousand years ago, Plato first described the gig economy when he said, “All things are produced more plentifully and easily and of a better quality when one man does one thing which is natural to him and does it at the right time.” Adam Smith, in his famous book The Wealth of Nations, and later, Fredrick W. Taylor with his princi­ples of scientific management, contin­ued to promote the efficient subdivision of labor leading many to believe it would forever change the world of work. Yet the traditional organization we have known for a long time has persisted. Why is this? Humans derive many bene­fits from belonging to organizations. As the Hawthorne studies and Hackman and Oldham’s Job Characteristics Model showed, meeting the psychological needs of employees through a well-de­signed employer-employee relationship is critical for employee well-being and motivation, and ultimately, organiza­tional performance.

Wide-ranging predictions of the future are often askew because they focus on technological innovations which evolve at a much faster pace than human behavior. According to Rob­ert Hogan, three fundamental needs explain human motivation: the need to get ahead (i.e. competition, status and dominance); the need to get along (i.e. relationships, cooperation and altru­ism); and the need to find meaning (i.e. purpose, identity and life satisfaction). The satisfaction of these needs are provided for, in large part, by the tradi­tional employer–employee relationship. At traditional organizations, employees often feel a strong sense of belonging to their organizations, derive meaning and purpose from the organizational mission, and build a valuable social life with their colleagues. Additionally, many organizations invest in their full-time staff, providing development and guidance to help them progress in their career with the intent of building long­term bench and capability.

In contrast, freelancing is lonely, and often lacks meaning and higher pur­pose for employees. Gig workers have fewer opportunities to see the impact of their work and may not be able to connect to the broader organizational mission, which is critical for engage­ment, motivation, and performance. Beyond the tangible benefits of health insurance and support, the psycholog­ical payback that traditional organiza­tions provide to their employees will remain key to employee well-being and organizational performance, long after advancements in technology unlock the feasibility of alternate models of work.

On the other hand, while traditional organizations will persist, it is likely that individual differences in personality will drive a significant minority toward freelance opportunities as technology lowers the barriers to entry. Research shows that people are drawn to jobs, careers, and organizations that match their personality and values. Accord­ingly, people who value autonomy, get bored easily, and are highly opportu­nistic might do better as a freelancer. Whereas people who uphold traditional values, seek security, and are risk averse will likely struggle to succeed in a predominantly freelance economy and will do better in a traditional organiza­tion. Given that we know personality is coded by our biology, we believe these individual personality differences and vocational preferences will not change even through sweeping technological changes.

The automation of knowledge work and the growth of the freelance economy is very real, yet the science of human behavior suggests that the impact of these changes will not be so draconian. Although organizations may be willing to shift to a freelance model for specific areas of work where capability is commoditized or where there is limited strategic value for the company, they are unlikely to make such trade-offs in areas that are critical to their business competitiveness or their succession plans. Organization­al leaders should provide additional training and professional development to long-term employees who risk being replaced by freelance talent. Organiza­tions who do this successfully will have a significant competitive advantage from the discretionary efforts of a committed and engaged workforce, more deep organizational knowledge, and a strong bench.

Originally appeared in People + Strategy Journal, Summer 2017 (40)3


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