Get ready for a fractional economy

October 21, 2022 – 3:25 in the afternoon

(Credit: Shuttestock)

As a child, I remember living with many adults who saw a “good job” as synonymous with stability, few challenges, and the expectation of a comfortable life. “Making a career” in a bank or in the public service was the dream of several generations, but this way of thinking has been shaken up in recent years.

In an increasingly complex world, companies from all sectors must face the challenge of remaining competitive even as innovations emerge. And this challenge spills over to the company’s employees, who in many cases have abandoned the idea of ​​building a career in one place and increasingly create fluid life projects. For these people, it is worth engaging in an interesting and challenging activity, and not “locking” in the company.

In the United States as of 2020, there is an intense movement away from traditional work models. Last year alone, 48 million people quit their jobs (an average of 4 million people per month), much of it without considering another position. This represents a radical change in the way people see themselves in the work structure: no longer as market professionals looking for a position, but as entrepreneurs ready to seek an equation that balances personal and professional life.

Problem or solution?

This change in the labor market can be seen as a problem – or as a solution. If on the one hand it is increasingly difficult to keep teams together for a long time, on the other hand it is possible to speed up innovation in companies. In the not-so-distant past, the greatest flexibility companies had was hiring consultants. Today it is possible to assemble highly qualified teams for specific projects, including freelancersexperts, consultants and permanent team of the company.

This is a possibility brought about by the fractional economy, which provides new possibilities for forming teams in a networked architecture. Instead of vertical architectures, these are flexible models that enable companies to quickly adapt to the needs of the moment.

Why is this happening?

A Deloitte report published in 2013 already pointed to Open Talent (framework more open and flexible working relationships, which is the basis of the fractional economy concept) as the main trend for 2020. Of course, they did not expect that the pandemic would accelerate this process, but ten years ago, the consultancy already saw 4 big factors driving this movement:

  • Globalization: The emergence of a global market for talent in many fields (IT is a great example of this) is creating new ways of acquiring, developing and managing talent in companies.
  • Technology: wide availability of video conferences and audio calls via the Internet, growth in computing speed and cloud computing enable joint work to take place anywhere in the world. And with technological advances, real-time communication options are becoming more and more available.
  • Mobility: Technological and social mobility means that talent no longer has to be in the same place as companies. Our work organization comes from the industrial revolution, when people had to go to factories. Today, in an increasing number of activities, this is no longer necessary.
  • Social work: Open Talent is first and foremost a human movement, in which people connect in new ways and look for a different work dynamic.

The main consequence of these factors is the flexibility of work, which actually becomes “as a service“.

This new reality applies to almost every market segment – ​​and to any position in the business hierarchy. According to a survey conducted by Harvard Business School, 60% of C-level executives interviewed said that they would increasingly prefer to share talent with other companies – either to reduce costs or to increase the “pollination” of the business with new ideas.

Partnerships instead of employment

In a fractional economy, labor relations change completely. Every professional becomes an entrepreneur, develops his network of clients anywhere in the world, either in specific industries or in stable and long-term situations.

This is a sustainable and practical way to access talent that would otherwise be unavailable. Bill Joy, co-founder of Sun Microsystems, once said that “no matter where you are, the best people will always work for another company.” In a fractional economy, a company begins to approach a swimming pool talents, for one-time or periodic projects.

In these times when we are so concerned about the best way to use natural resources, it is also time to think about how to make better use of human resources. Why have people in the team who will not be used all the time? Why underutilize these talents? If people want to make better use of their time, it is natural for companies to look for ways to optimize their time and the time of professionals.

In the fractional economy, companies gain additional access to talent. Certainly, this possibility generates interesting situations: as a board member can work in several companies from his own professionalism, the CEO can manage more than one business at the same time. For some companies, this is certainly a tempting possibility.

Fractional economy is primarily an additional path. No company will be 100% in this model, and that is not even the goal. The most important thing is to gain the flexibility to deal with new things on the market and to react quickly to changes. We will see that this movement will make a lot of progress in the coming years, especially from industries that have very specific knowledge and that today are not adaptable to the conventional business structure.

My suggestion for companies is to bet on experimentation, with specific requirements, on specific projects. And little by little expand the implementation of this model to all competencies that do not require 24/7 presence in the business. Many companies will find that it is possible to have a much more flexible, easier and more adaptable structure.

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