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Ed Driscoll

To Outsmart ObamaCare, Go Protean

January 28th, 2013 - 7:34 pm

In the Wall Street Journal,  Paul Christiansen suggests, “Don’t fire staff to avoid the 50-employee trigger. Make them corporations:”

We’ve already seen many of America’s biggest companies respond to the new law by laying off employees, putting them on part-time, or raising prices. But those are short-term solutions. Ultimately, these corporations will have to innovate and restructure to thrive in the era of ObamaCare. If small businesses follow their lead, they may even gain an advantage over their big competitors.

In his 2009 book “The Future Arrived Yesterday,” veteran Silicon Valley journalist Michael S. Malone described a new organizational model called a “Protean Corporation.” Like a protozoan single-cell organism, the protean corporation has the ability to “shape shift,” rapidly adapting to internal and external forces in the market and the company. At the heart of a true protean corporation is a tiny number of core employees surrounded by a large cloud of resources, generally contracted or outsourced talent that does most of the work.

While the concept has been used successfully in large corporations like Intel, Microsoft  and IBM, it is bound to appeal to smaller companies now. Such businesses have several ways to get their workforce under the 50-employee limit at which certain ObamaCare rules kick in. These include reducing workers’ hours to move full-time employees to part-time; laying off workers; and either selling the company or closing down.

“Going protean” offers a better strategy for many businesses. Owners of protean companies create a core of strategic employees who manage the big-picture elements of the enterprise—the culture, business model, product mix, vision, strategy, etc. This core then outsources the business tasks to other corporations.

Non-core tasks could include things like accounting, marketing, product development, manufacturing, IT, PR, legal, finance, etc. There is almost nothing that cannot be outsourced—including even the CEO function (which can already happen, e.g., when a company is in turnaround.)

I shot a video interview with Michael when his book originally debuted; you can watch it here:

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As Christiansen warns though, “These new contracts will be a mix of large corporations, small businesses, micro-corporations and even nano-corporations (an individual doing business as a corporation). But to be a protean solution, it must involve a corporation-to-corporation relationship. Any substitute—e.g., a sole proprietorship—is only a time bomb because eventually the government will pressure you to turn any so-called 1099 contractors into employees.”

See also: The California Franchise Tax Board’s rapacious war on independent contractors.

Related: From William A. Jacobson of Legal Insurrection, “Star Wars economics in three easy lessons.”

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