oConomy
March 30, 2009 by James Waters

In the good old days, landing a job with a big, stable company and riding that horse to retirement was the way to go.  Employees’ lifelong loyalty was rewarded with generous pensions.  But that, as they say, was then and this is now.  Employee perks of the previous century, including holiday parties, company cars, and 401(k) matching are vanishing.  In fact, companies that were assumed to be unshakable and supposed to endure for generations are being absorbed and brought to their knees.  Both sides – companies and employees – have begun to question the assumptions of previous generations.

One of the great things about capitalism is that it allows companies and individuals to experiment with new ways.  Take UPS and FedEx for example.  While both of their services may appear similar to the casual observer, their business models are as different as day and night.  UPS delivery personnel – the folks in the brown uniforms driving the brown trucks – are full-time employees.  The trucks they drive are provided, gassed, and serviced for them by UPS.  The drivers are unionized and their performance is carefully scrutinized by the company.  The company pays attention to every little detail of their activities to shave off even the smallest inefficiencies.

FedEx drivers, on the other hand, are independent contractors.  They get no benefits, no overtime, no sick leave, and no insurance.  They pay for and maintain their own vehicles.  However, they are given independence in how they operate.  A successful independent contractor can even hire their own drivers and manage multiple routes, allowing them to grow their delivery business.  And FedEx provides very little oversight; so long as the customers are happy, FedEx is happy.

FedEx is neither a young company nor a small one, but it has embraced a new model of doing business.  By utilizing independent contractors for their delivery fleet, they’ve both decreased their own costs and created opportunities for others to run their own businesses.  The independent contractors are now incented to make smart business decisions because of their impact to their own bottom lines – for them, “raises” come from their own ingenuity, efficiency, and hustle – not their bosses.

It’s not yet clear to what extent America is ready to shift to independent contractors over full-time employees.  What is clear is that American businesses are more willing then ever to experiment with ways to increase their own efficiencies and decrease their expenses.  At oDesk, we’re certainly seeing an increase in outsourcing and homeshoring, as more small businesses discover the value of contractors.  Only time can tell how far this trend will take us.