And Now, The Just In Time Employee

To cater to the shifts of an expanding and contracting labor force, workers will be auctioning their services

A decade ago, human resource heads never dreamed that the employees they were axing from the rolls would one day return as hot commodities, even earning a snappy new name to go with their new status: free agents. The revenge scenario couldn't have been scripted better: The great economic boom takes off, and once-dissed working stiffs find themselves in extraordinarily short supply. Flush with offers, they begin to act like spoiled celebrities--and worker-starved employers play along. Need a new wardrobe? We'll buy you one. Your options are underwater? Consider them repriced!

The whatever-you-want attitude may seem like a seismic shift. But many labor experts see it as a symptom of a deeper change shaking the old employer-employee paradigm. In the latter half of the 20th century, power flowed to corporations, where bodies were as replaceable as light bulbs. Today, with the transition to a knowledge-based economy and global connectivity, the power is shifting to those with skills.

LABOR AUCTION. Supplies of the talent needed to fuel the New Economy are expected to remain scarce for the next 20 years. At the same time, corporations are finding it beneficial to have fluid, nimble workforces that can grow and shrink according to the demands of the global marketplace. That's why, in place of the 20th century labor model, something new is emerging.

Think of it as the Human Capital Exchange (HCE). Just as Nasdaq and the New York Stock Exchange were the locus of much of the last century's wealth creation, a market for skills and talent will fit the bill in the 21st century. Here, in the HCE, the value of free agents is determined by the open market--lawyers down $2, engineers up a buck--rather than by a hierarchical organization. For a talented free agent, the old salary-plus-benefits structure just doesn't cut it as a way to realize one's true economic value. In an open exchange of human capital, "people are much more likely to get what they are worth--they will participate in the downside and the upside," says Christopher Meyer, director of the Center for Business Innovation at Cap Gemini Ernst & Young.

The legions who keep their resumes permanently posted on Monster.com represent only the first sign of the shift toward skilled New Economy workers day-trading their careers. More and more companies--from job-posting sites to bounty-paying referral services--are popping up on the Web, creating a kind of labor auction where everyone from screenwriters to scientists can sell their skills to the highest bidder.

Look at Andy Abramson. The 40-year-old sports marketing consultant figures he makes 75% more as a gun-for-hire than he would as a traditional head of marketing. The constant influx of new projects keeps work interesting and offers equity stakes in a variety of companies--"like having my own little VC fund." Free agency also offers lifestyle perks, allowing for an annual month in Europe. "I just signed up for wireless ISDN," Abramson gloats. "Now I get to go to work on the beach."

There is a dark side to free agency. Many feel crushed by the law of the jungle and the pressure of hunting for every gig. Late paychecks, costly health insurance, the distractions of a home office--it's not all cushy. "The money's not as good for me online," says Mark Fertig, a professor of graphic design at James Madison University in Virginia who uses job sites to get freelance work. "I've had to cut my prices." Some scholars see the buzz about free agency as hype. James Baron, a professor at the Stanford Business School, thinks the reverse trend--stronger attachments to employers--could re-emerge. "In Silicon Valley, intense labor market competition has already caused some firms like Sun Microsystems to begin thinking about offering not just jobs and stock options, but careers," says Baron. These will look different than before, he adds, consisting of a series of projects rather than a static job.

Still, the ranks of free agents are growing, from 22% of the workforce in 1998 to 26% this year, according to a poll by Lansing (Mich.) market research firm EPIC/MRA. And by 2010, 41% of the workforce will be working on a contract basis, the firm predicts. Career experts believe that, like actors or athletes, talented business superstars will have agents. Groups of workers will come together to tackle projects only to disband when the task is finished, a model already common in Silicon Valley.

TURNCOATS, OR ALUMNI? The old ways won't die immediately, or even completely. But increasingly, companies will keep their most prized employees on site and outsource everything else. When the U.S. computer display unit of Nokia Corp. entered the U.S. market, it did so with only five key employees. Sales, marketing, logistics, and technical support were farmed out.

And just because an employee is on staff doesn't mean she isn't thinking like a free agent. A typical 32-year-old, for example, has already held nine jobs, according to the Labor Dept. Experts predict that these same workers will have as many as 20 different positions in their lifetimes. Unlike those with a lifer ethos, these MVPs will constantly bargain for better deals within their organizations (new projects, Thursdays off, an August sabbatical).

Many human resource heads view free agents as the enemy. But they shouldn't. "The only way employers can get the staffing crisis under control is to abandon the old-fashioned idea of an employee," says Bruce Tulgan, author of the upcoming book Winning the Talent Wars. Organizations will adopt a revolving-door mentality in which former "turncoats" are viewed as "alumni" or "boomerangers" who are asked--and welcomed--back.

In some ways, the free-agent model harkens back to the pre-industrial era. Thomas W. Malone, co-director of Massachusetts Institute of Technology's Initiative on Inventing the Organizations of the 21st Century, likens the e-lance economy to the time when blacksmiths and other tradesmen sold their skills in the village green. The difference is that in the wired world, people can sell their skills around the globe.

But what, then, happens to the workplace? "It could turn into a pretty lonely world for people who are free agents," Malone says--a solipsistic existence with no hallway hellos. He foresees the evolution of organizations like the Screen Actors Guild and the Writers Guild, only, say, for programmers and marketers. Such groups will provide a sense of community and identity, as well as health insurance and other benefits that were once the corporations' responsibilities. Still, says Malone, a pure e-lance economy poses "a real risk that many of those human needs might not be met."

Or it could mean just the opposite. Stephen Barley, co-director of the Center for Work, Technology & Organization at Stanford University has been researching contract employees who work as software and programming engineers in Silicon Valley. Barley says most of these gypsies prefer the free-agent lifestyle because they aren't constrained by organization politics, they have more chances to learn, they have control over their time, and they make more money. "Some of these guys are raking it in," Barley says, making 30% to 200% more than their staff counterparts.

Of course, if the economy sours, free agents could wind up pining for the security they threw away. Or they may weary of the hustle as they age and seek steadier projects, replicating something of the old lifer mentality. But there will be no going back to the old cradle-to-grave cocoon corporations came to provide in the century just past.