Roland Coase, the brilliant British economist, had a simple and
yet profound insight on the nature of firms. He
recognised that the reason firms exist is mainly to reduce the
transaction costs of going to the market for every single input
they needed for production. It is simply too costly to identify the
right supplier, negotiate a price and sign a contract for every nut
and bolt needed. It makes sense for the entrepreneur to hire people
and bring things in-house. However, Coase also recognised that as
entrepreneurs create and grow their companies, they will create
their own internal transaction costs. The bureaucracy needed to
organise and allocate resources will become less efficient as the
When I first read Coase's theory in business school, I was
very sceptical of how much value these rather philosophical
observations on the nature of companies would add to my career. So
the irony was not lost on me when I first began to build
Forefront and connected its success to his theory. Borne out of
Deloitte's Innovation Investment's scheme, an initiative to
encourage its entrepreneurial employees to turn their ideas into
Forefront is an online marketplace that connects a curated
community of independent consultants to project opportunities.
For the better part of the 20th century, modern management
systems and communication technologies led to a continuous decline
in internal transaction costs of companies, and enabled the
creation of global enterprises with ever expanding boundaries. This
is now about to change.
Competition is intensifying. The average lifespan of Fortune 500
companies today is approximately 15 years and declining. In
the 1950s, their life expectancy was 75 years. Rigid and
bureaucratic organisations who fail to adapt to the rapidly
evolving market will be left behind. This potential to lose out on
market opportunities is increasing the internal transaction
costs of companies. Most executives recognise this and aim to
build more agility in their organisations as a whole, and their
workforce in particular. Roughly half of the global executives surveyed by Deloitte expressed their intention
to increase their use of freelancers.
On the other hand, online talent marketplaces and
crowdsourcing platforms are attempting to bring more
transparency to the labour market and reduce the time, effort, and
risk associated with engaging external talent. It started with more
general platforms like Upwork (formerly elance-Odesk) and Freelancer
who connect organisations with a cost-effective, remote freelance
workforce for low-value work. It is now evolving to specialised
marketplaces connecting organisations with more professional
expertise. Toptal connects CTOs to top-tier freelance
software developers and most recently CFOs to finance
professionals. Axiom, Peerpoint, and Lexoo connect
the General Council to freelance Magic Circle lawyers. At
Forefront, we are striving to eliminate the transaction costs
of finding external talent in the particularly opaque market of
freelance management consultants. We help our clients connect with
a community of freelancers that have been curated for the needs of
The continued growth and improved efficacy of these talent
marketplaces in the coming years will continue to reduce the
transaction costs associated with identification and pricing of
expertise. Concurrently, over the coming years, smart contracts
Blockchain will drive these transaction costs down even
further. As the opportunity cost of bureaucracy grows and as
creating temporary teams from external networks becomes easier, the
nature of the firm will evolve. Organisations will have to
adopt a borderless policy for their workforce. In specific cases,
we could see categories of services delivered end to end by a
distributed syndicate of self-organising freelancers. To remain
competitive, now is the time to consider how online talent
marketplaces can influence the shape of your workforce.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Up until the recent decision of the Inner House of the Court of Session in Hoe International Limited v Anderson & Aykroyd  CSIH 9 if a contract set out strict conditions on how a notice should be served...
An assignment of rights under a contract is normally restricted to the benefit of the contract. Where a party wishes to transfer both the benefit and burden of the contract this generally needs to be done by way of a novation.
The amount of information contained in arbitration clauses varies greatly from contract to contract. Some parties, in their arbitration clauses, specifically state the rules to be applied, the number of arbitrators (and sometimes the requisite qualification and experience of these arbitrators), the language of the arbitration proceedings, the location of hearings and the seat of arbitration.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).