Ed Trevisani hangs with his young sons when they come home from school. He volunteers as a Boy Scout leader, serves on nonprofit boards, and teaches management at Philadelphia-area universities. He’s even been known to sit on the back porch in the middle of the workday. Not bad for a guy who’s still pulling down as much as he did when he was a partner with IBM and PricewaterhouseCoopers.

Trevisani is a Wharton MBA and GE alum who now manages high-powered projects for Fortune 500 companies and advises executives on operational issues, change management, and potential mergers. He does all these assignments on a temporary basis, working as an independent contractor.

Let’s call Trevisani a supertemp. He and others like him belong to the “free agent nation” popularized a decade ago by the author and workplace guru Daniel Pink, but they inhabit its most rarefied precincts. Supertemps are top managers and professionals—from lawyers to CFOs to consultants—who’ve been trained at top schools and companies and choose to pursue project-based careers independent of any major firm. They’re increasingly trusted by corporations to do mission-critical work that in the past would have been done by permanent employees or established outside firms. New intermediaries have sprung up to create a market for such marquee talent. Supertemps are growing in number, and we think they’re on the verge of changing how business works.

Most supertemps are refugees from big corporations and law and consulting firms who value the autonomy and flexibility of temporary or project-based work and find that the compensation is comparable to what they earned in full-time jobs—sometimes even better. They leave behind the endless internal meetings and corporate politics, which Trevisani reckons took 30% to 40% of his time back in the day. Now, a decade into the independent life, he digs deep into challenging assignments that exercise his talents—serving as interim CEO for an international trading company, developing an M&A strategy for a global manufacturer, leading the IT selection process for a global insurance company—and devotes just a little time to the administrative side of running his own show. “I’m independent because it’s fun and I’m able to help executives succeed at what they do,” he says. That he can decide to take two months off to reconnect or travel with his family is gravy.

Because the prevailing media and corporate cultures have been largely blind to what’s happening to high-end work, we don’t hear much about the Ed Trevisanis of the world. Instead we’re assaulted by images of the opposite—think of Newsweek’s 2011 cover story about “beached white males” whose Ivy League degrees and gold-plated résumés couldn’t win them permanent roles in the aftermath of the recession—or by hand-wringing headlines about the rise of “permatemps,” who skate along from one low-paying contract assignment to the next. To be sure, corporate America’s increased use of contract and contingent labor can make it hard for workers on the lower rungs of the employment ladder to earn a decent living. But in the upper echelons, any stigma on temporary jobs—and on the people who choose them—is almost laughably dated.

We should declare right here that we are hardly unbiased observers of this phenomenon. Jody is the CEO of Business Talent Group, a firm she launched five years ago to bring executives and professionals to companies for consulting and temporary work. (Trevisani and several others quoted in this article have worked with BTG.) Matt is typical of the independent professionals in BTG’s talent pool—a consultant turned columnist, author, and radio host who for a decade has earned the bulk of his income from project-based consulting work. Our unique angle of vision convinces us that traditional models of work are being upended by a convergence of the emerging desires of top professionals and the evolving needs of 21st-century organizations. When the dust clears, the way people think about elite careers, the corporation, and the economy will never again be quite the same.

What’s Behind the Shift

The forces driving this convergence are as impersonal as the Great Recession and as individual as a dream. For the talent, project-based work has simply become more attractive than the alternative. Today technology makes it easy to plug in, the corporate social contract guaranteeing job security and plush benefits is dead or dying, and 80-hour weeks are all too common in high-powered full-time jobs. The surprise may be not that top talent is looking for “permanent temp work” but that anyone who has a choice would want a traditional job.

Companies follow the talent. So as growing numbers of professionals decide that they prefer to work on a temporary basis, organizations are finding ways to work with them. The prevalence of lean management teams, the postrecession drive to cap costs, and the accelerating pace of change combine to make temporary solutions compelling. These new arrangements have also spread because the surge in outsourcing and consulting in recent years has accustomed managers to thinking about work, including high-end work, in modular ways. (See “The Age of Hyperspecialization,” HBR July–August 2011.) In a global business climate that’s perpetually ambiguous—and that puts a premium on companies’ ability to test ideas and change course on a dime—knowing how best to engage this lower-risk, flexible, and faster talent model can be a source of competitive advantage.

How big is the phenomenon today? McKinsey research in 2011 found that 58% of U.S. companies expect to use more temporary arrangements at all levels in the years ahead (nearly triple the number that plan to offshore more jobs). And although good data about independent workers are hard to come by (the government is curiously uninterested in tracking this trend), some estimates are instructive. Sixteen million Americans are working independently today, according to research by MBO Partners, which manages back-office infrastructure for independent workers. That figure is expected to rise to 20 million over the next two years. There’s no easy way to separate out highly paid managers and professionals, but if we assume that they account for just 10% of the total (the share of American adults with graduate degrees), the day may soon come when the U.S. has 3 million high-end temps—the 1% of the population that the pollster Mark Penn says can create a “microtrend” with the power to change the culture.

This is not just an American phenomenon. In Europe, where onerous labor laws make it difficult and costly to fire anyone—thus discouraging companies from taking on permanent hires—temporary work is even better established than it is in the United States. The vast majority of this work is in the middle tier or below, but it is spreading in the high end. According to Booz Allen Hamilton, the UK market for interim managers is one of the best developed, accounting for as much as $1.8 billion in revenue in 2009; and across Europe, annual growth in the market for interim executives has been over 20%.

Emerging markets are at an earlier stage of development. China granted its first licenses for temporary-staffing companies at the end of 2007. Manpower, the first multinational to enter the Chinese market, tells us its ranks have grown from 20,000 temps on the job in 2007 to 125,000 in 2012. These jobs tend to be in the less-skilled manufacturing sector, but that’s changing. Carl Camden, the CEO of Kelly Services, says that although the “professional and technical” side of Kelly’s business accounts for only about 15% of revenue in Asia and Latin America today, it’s the fastest-growing area of the business.

Several successful new companies focus exclusively on high-end temporary talent. Axiom, backed by the venture firm Benchmark Capital, today supplies 650 temp lawyers to nearly half the Fortune 100; the firm will garner revenue of more than $100 million in 2012, almost tripling its size since 2008. London-based Eden McCallum has built a $40 million firm in recent years by placing 400 independent consultants with global Fortune 500 and private equity firms. Traditional executive recruiters are getting into the act, too: Lauren Doliva, the managing partner of Heidrick & Struggles’s new Chief Advisor Network, says that baby boomers’ retirement will shrink the supply of executives even as demand holds steady—increasing the need for temporary talent and senior advisory resources.

In other words, a lot of signs point to a niche market on the verge of breaking into the mainstream. That means you can’t run a company or deal with sophisticated talent today without understanding the rise of supertemps. Powerful forces are driving talent and companies to engage in this new way, and both sides are overcoming the operational challenges that once frustrated temporary arrangements. A few simple changes—making health coverage portable, rewriting tax rules that hurt independent contractors, and rethinking talent management—would free the market for “professional temporaries” to explode.

A Brief History of Temporary Work

The idea that long-term corporate jobs are the norm is deeply ingrained, but in reality these jobs arose in the past 60 or 70 years. Even in the manufacturing era that began in the late 19th century, employment was initially casual, with annual turnover around 300%. Big companies outsourced virtually everything. One analysis around 1910 found that half the workers in production jobs were independent contractors. But as assembly lines burgeoned and industrial machinery grew more complicated, employers saw the need for a stable trained workforce to control quality and maximize production, while the concentration of workers in cities and industrial hubs led to unions and advocacy for better pay, benefits, and rights.

During World War II, wage controls in the U.S. limited employers’ ability to woo workers with higher pay, so companies developed generous benefits and pension packages. The modern model of full-time, lifetime employment was born, and it offered great advantages to both workers and employers. Workers got security, benefits, and steady wage gains; companies got labor peace and the certainty of a return on hefty investments in firm-specific training.

But a scant few decades after corporate America had bulked up on cradle-to-grave employees, the pendulum began to swing the other way. Recessions in the 1970s and 1980s led to the downsizing of bloated corporate bureaucracies and helped brand temporary work as a sign of executive desperation. Then came globalization. Technology and cheaper transportation made it easy to offshore production and even knowledge work to China or India, and the status of temp jobs as the last refuge of discarded managers was cemented.

There is, however, a far more positive way to frame the rise of high-end temp work. The “theory of the firm”—expounded by the economists Ronald Coase, Oliver Williamson, and Oliver Hart—is built around transaction costs. High transaction costs explain the existence of large corporations: It’s cheaper to keep resources and talent in-house than to transact for them in the open market. But new technologies and a developing spot market for high-end talent are driving transaction costs down and challenging assumptions about which management skills and professional talent belong inside versus outside the organization. We may not reach the logical extreme captured by the New Yorker cartoon in which a CEO seated in a large empty office says to a friend: “All I need is a chair. I delegate everything.” But when modular white-collar capabilities for which demand ebbs and flows—from strategy to innovation to product launches to contract negotiations to clinical trials—can become variable costs, and when those capabilities are sometimes as vital to a company’s success as specific knowledge of internal processes, the boundaries of organizational design may well shift.

The implications for talented professionals are profound. The way things are headed, says the Harvard labor economist Lawrence Katz, “you could have a new workforce that’s a lot more like the artisans of the 19th century.” What we’re seeing today, then, isn’t so much the emergence as a resurgence of the independent professional—thanks to the mix of market dynamism, technological advance, and human aspiration that drives every innovation.

The New Market for Independent Professionals

What should executives and entrepreneurs know about the dynamics of this segment of the labor market? First, it’s important to grasp what drives people to work this way, how valuable they can be, and what challenges independent work still imposes. Executives need to learn how companies are engaging with this talent pool and how they address the operational challenges that professional temps can bring. Further, it’s important to understand how supertemps can both spur the innovative capacity of companies and offer broader social benefits.

The talent. At the luxury end of the market, independent talent is defined by special skills, and professionals start to behave as if they were George Clooney: Given a choice, they pursue their own stream of interesting projects. Though it may seem strange to compare independent lawyers, marketing gurus, CFOs, engineers, and consultants to a movie star, talented people are going independent because they can choose what to work on and with whom to work.

Once they take the leap, they have a hard time imagining going back. The only comprehensive survey of U.S. independent professionals to date, conducted in September 2011 for MBO Partners, found that close to 80% of independent workers are satisfied with their situation, including 58% who are highly satisfied. A sizable minority do appear to have been forced into the role (only 55% said they had chosen to be independent workers), but few are looking for a way out. Only 19% said they planned to seek a traditional job.

It’s common for people in the United States to assume that someone who isn’t in a traditional full-time job must not be any good. But look at the résumés of Axiom’s lawyers, nearly 75% of whom came from a top-25 school, or at the roster of Eden McCallum’s independent consultants, 60% of whom are alums of Bain, McKinsey, and BCG. “Corporate leaders need to recognize that in many cases the very, very best talent is in this piece of the population,” Daniel Pink told us. “It isn’t a bunch of people who are flaky. It isn’t a bunch of people who couldn’t get a job anywhere. It used to be that someone who was out on their own was ‘between jobs.’ Now it’s the people who have the power in the talent market who are going that way.”

Consider Roger Corson (not his real name), a graduate of Stanford’s business school, who was a partner at a leading strategy consulting firm when he decided to go independent, 18 months ago. His wife and he had recently had their first child, and her corporate job required extensive travel. The industry in which Roger had mostly worked had cut back on outside consultants. If he was going to have to reinvent his client base, he recalls thinking, he might as well do it on his own: He’d have more flexibility to go after the clients he truly wanted and to set limits on how hard he worked (80-hour weeks had been his norm for years, something he felt was “literally unsustainable”).

Now, Roger says, “I am continually surprised at how easy it is to do this kind of work without all of the resources of a big consulting firm behind you.” He reports being “amazed at the amount of bandwidth that I have to really focus on the client,” free of the administrative chores that big-firm partnership entails. “I feel so much fresher in terms of being able to be present, to be there and help solve the problem,” he says. Roger works 80% of his former hours and earns 80% of his former pay—a trade he says is ideal.

Or take Ann Klein, a Princeton graduate and Dartmouth MBA who’d risen to senior roles at Siebel Systems before going independent five years ago. “When I was working full-time as a general manager and as manager of a product group, it was very intense and it never ended,” she says. “The advantage of being an independent consultant is to come in and work for six to nine months and then take that breather. The people that work full-time never get it. So it really prevents the burnout. I’m an endurance athlete. A lot of full-time work is like running a marathon and never taking a break or a day off.”

If the positive aspects of high-end independent work seem clear, what are the challenges? As the professionals we spoke with explain—and as surveys conducted by MBO and by M Squared, another provider of project experts and consultants, confirm—the chief downside of the independent life is, not surprisingly, worry about project flow. That’s where the intermediary firms come in. The founders of Eden McCallum tell us it can generally keep its professionals as busy as they want to be—whether 12 months a year or six. Axiom achieves the same thing for its lawyers. These firms’ leaders say that the limiting factor is not client demand but the availability of independent talent. And as more talented people are drawn to this career path, more companies will want to tap them.

Another concern is professional growth. Big professional firms tend to have knowledge initiatives that keep their employees on the cutting edge of a field, along with clearly defined paths to promotion. Some independents worry that it will be harder to increase their skills (and daily rates) on their own. But other executives, who previously had experience with only one company, tell us that going in and out of many keeps their knowledge more current and varied. In addition, we believe that new modes of professional training will evolve over time to serve this growing market. But today the independent life is best suited to people whose professional skills are already at a high level.

There’s also the social side of independent work. Supertemps sometimes feel lonely. They don’t have easily accessible colleagues or peers off whom to bounce ideas. Without the ability to build teams, they can’t tackle bigger assignments. And no one tells an independent what to do, which makes it essential to be a self-starter. We believe that in the years ahead supertemps will form new communities, augmented by social networks, to remedy these concerns. Meanwhile, some intermediary firms are building teams of independent professionals to meet clients’ needs.

Finally, in the U.S. especially, health care and tax systems can make life extremely difficult for independent workers. We’ll address those policy issues in a moment.

The corporation. As talented people continue to choose careers built on project work, companies are finding innovative ways to use their skills. In some cases the independents are doing work that would otherwise have been assigned to a big consulting or law firm: One Fortune 100 bank asked supertemp lawyers to handle a series of national contract negotiations. In others they’re filling roles traditionally held by permanent employees: A leading consumer packaged goods company tapped a supertemp to define a major new initiative in the health and wellness space, and a global software giant asked a supertemp to manage a joint venture with a Chinese hardware manufacturer. In yet other cases they’re taking on tasks that might never have been attempted if high-end project workers weren’t available.

Daniel Lee, a Pfizer vice president, runs a group that leads operational improvement initiatives across the drug giant’s far-flung global divisions. He first tapped independent talent a year ago, to get an extra pair of experienced hands on an ad hoc basis. His colleagues soon realized they could use such talent more strategically. They say that an experienced senior professional is sometimes easier to bring in than the traditional consulting team of a partner supported by junior associates who do much of the actual work. Lee and his team now consider including independent professionals in most project-planning conversations. “Once you see the talent base that’s out there,” he explains, “it’s almost a no-brainer that you would try and tap into it.”

When Broadridge Financial Solutions—an outsourcing provider to the financial industry—recently revamped its marketing efforts, it went with an interim executive rather than a permanent chief marketing officer, because the direction the company would take was unclear at the outset. “As we began to write the spec for a CMO, we couldn’t answer the first four things that anyone who was any good would want to know,” recalls Tim Gokey, the chief corporate development officer. Using a temporary executive “dramatically lowers risk on both sides,” he says. “If you can better understand the organization and how you fit in, it really lowers the barrier to saying yes.”

SanDisk, a Silicon Valley Fortune 500 company that specializes in flash memory storage, uses high-end temps to look at potential business opportunities. “You make a small bet in the beginning to explore something and see if you want to take it to the next level,” says Robert Khedouri, a vice president who has overseen innovation at the company. “You’re able to bring someone on with a clean sheet and task them on things that would likely be second or third priorities for other people.” Sumit Sadana, a senior vice president and the chief strategy officer at SanDisk, adds that using senior project talent to explore growth opportunities lets the company preserve flexibility in ambiguous situations. “As the project moves on and we make some decisions about permanent investments, we can choose to bring on permanent employees,” he explains. The model lets the company quickly start new initiatives and easily dial the size of projects up or down.

Of course, this model presents some operational challenges. For example, managers worry that screening and interviewing independent professionals may take extra effort—at least until companies have gained experience in identifying them—and that not enough supertemps will be available to make this a strategy they can rely on. As more talent is drawn to project work, both concerns should abate.

Trust and confidentiality present another challenge. Companies must feel comfortable having an outsider work on high-level projects involving sensitive information. Even after signing a confidentiality agreement, an independent worker may appear riskier than a permanent professional or a well-known firm. And a professional temp may be reluctant to sign a restrictive noncompete clause unless the project is substantial.

Then there is what we think of as “internal readiness.” Because the market for supertemps is just emerging, most companies aren’t prepared to take advantage of it. They don’t have the budget for temporary talent, they don’t think systematically about how to divide work into projects, and they don’t know how to successfully integrate temp talent into the organization. But they can learn rapidly. At Pfizer, Lee is in regular touch with intermediary firms around the world about their talent pools’ skills and experience, and he works with Pfizer executives to be sure they’re comfortable with the model. His team members help external professionals navigate the company.

Society. The rise of supertemps has the potential to help the broader economy and society as well as individuals and companies. For one thing, innovation drives productivity and growth, and the degree of private sector innovation is largely a function of how many affordable “at bats” companies get. Tom Staggs, who is now the chairman of Walt Disney Parks and Resorts, told us when he was Disney’s CFO that if companies knew they could bring on talent quickly and flexibly, they’d try more things. Being able to test a new business idea with a $500,000 “get it going fast and let’s see” model, rather than a fully drawn $5 million business plan with commitments to permanent staff, would ultimately enable them to find more promising opportunities. Sadana of SanDisk agrees. “If there is that capability to quickly tap into a pool of talent that you can trust is high quality, it would help the entire industry,” he says. “It would help the economy to have new ideas vetted at a faster pace and would increase the pace of innovation.” 

Social benefits include an alternative career path for lawyers, MBAs, doctors, and engineers who no longer have to sign on 24/7 if they want to exercise their skills at a high level. As the supertemp market grows, it will offer a viable platform for all talented people, including retirees and new parents, who crave flexibility but want to stay in the game. (However, men who want to work full-time or nearly full-time represent the majority of the talent pool at the intermediary firms we examined.) We’re convinced that as some of the most talented people in the country demand accommodation to this new vision of work, the benefits will spread throughout the workforce. But for all the traction independent work has gotten to date, bias against it is still deep-seated in our laws, institutions, and habits of mind.

Making the World Safe for Supertemps

To get to something like a true spot market for senior talent in the United States, a few critical changes will be needed in the health care system, the tax code, and the way we think about managing talent.

Health care. Those who step outside traditional employment settings in the U.S. risk losing access to affordable health care. (This isn’t an abstract issue for us; we discovered we were uninsurable in the individual market for health coverage in 2003.) The employer-based health care system thus discourages entrepreneurship and offers an unfair advantage to large employers in the war for talent. The result is a phenomenon known as “job lock,” in which an unknowable number of Americans stay in jobs they don’t like solely for the health insurance.

Partial solutions exist today for some groups of independent workers: The Screen Actors Guild and the Writers Guild offer famously good coverage for those Hollywood types fortunate enough to qualify, and the New York–based Freelancers Union has in recent years organized innovative group coverage for more than 23,000 of its members in New York. But the real answer is to reform the system so that every individual has access to group coverage. The health insurance exchanges set up by President Obama’s Affordable Care Act would provide some people with such access in 2014—that is, if the Supreme Court doesn’t toss them out when it rules in June. But even access to these nascent exchanges will be sharply limited, because big business and big labor joined in Washington’s back rooms to preserve a competitive advantage for large employers on health care. As more affluent and influential professionals demand the ability to go independent, the politics of this issue will surely shift. Until then it’s a real barrier.

In other developed countries, health insurance is much less of an issue, but benefits systems still often discourage career flexibility. In Italy, for example, permanent employees and contract employees participate in different retirement-savings pools, and in order to collect, a retiree must have contributed to a pool for at least five years. Testing the waters as a contract worker thus means potentially forfeiting some retirement savings.

Tax reform. Every country has its own way of classifying and treating taxpayers according to how they’re working, which adds enormous complexity for independent professionals who take on assignments across borders. The U.S. tax situation is particularly fraught. The Internal Revenue Service’s definition of independent contractors leaves companies at risk of having to treat them retroactively as full-time workers. The current rules determine contractor status on a case-by-case basis and are subject to variations in state law. That makes risk-averse personnel departments wary of hiring temporary professionals for fear that they might later be reclassified as employees, saddling the company with liabilities. Anyone involved with today’s independent contractor laws can attest that they drive people mad—in some cases literally, as happened with the independent software engineer who intentionally crashed a plane into an IRS office in Austin, Texas, in February 2010. The rambling suicide note this man left behind claimed that IRS treatment of independents had rendered him a “criminal and non-citizen slave.” We shouldn’t push the rest of independent America to the edge before enacting reforms that let companies tap temps without fear. 

Talent management. Finally, every country and culture needs new ways of thinking about talent management both inside and outside traditional organizations. If the archetype of a great manager in the 20th century was GE’s Jack Welch, who grew talent internally, the great 21st-century manager will be someone who also understands how to tap the external talent pool. Organizations will start to look less like a pyramid and more like a jigsaw puzzle.

Big consulting, law, accounting, engineering, and other firms composed of permanent professionals will continue to be with us. They will always be better positioned to handle certain kinds of work—in particular, high-stakes projects that require the comfort, confidence, and proprietary methodologies that come with a respected brand; projects that rely on large, complex, coordinated global resources; and work that requires long-term management continuity.

These firms are also an indispensable breeding and training ground for the professionals who are now trading in their permanent jobs for project-based careers. But our experience suggests that if talented people knew they could leave their permanent posts and get both a reliable flow of interesting, challenging, well-paid projects andgroup health coverage, traditional firms would see a mass exodus. Chances are good that those two aspirations will be widely achievable in the U.S. within a decade. Companies may find that they need to create internal versions of project-based careers to retain their high performers. Many of them have experimented with flexible work arrangements, but mostly at the margins; the prevailing mind-set is still that high-end professionals must be permanent full-time employees.

In the broadest sense, the rise of the supertemp in the years ahead will mark the latest accommodation of business organization to the human spirit. When Don Murray, the founder and CEO of Resources Global Professionals, a $550 million company that offers access to career project professionals in a number of fields, was shopping his business plan in 1995, a friend shared it with Peter Drucker. “This is the future of outsourcing,” Drucker said. A lot of companies need intellectual skill sets, but they don’t always need them permanently. Yet, Drucker said, they commonly made the mistake of hiring people with those skills full-time. Drucker realized he was looking at a blueprint for contract work at the upper level. “Intellectual capital on demand,” he called it. 

The nascent state of the market for senior independent talent is somewhat analogous to the market for electric cars. Electric may offer a better mousetrap for the long term, but it can’t flourish without an infrastructure of home- and road-based battery chargers and certain policies in place—such as a higher price on carbon. We have little doubt, however, that professional life is moving inexorably in this new direction, because a desire to live and work more autonomously is the driving force behind this change. As we’ve long argued to anyone who will listen, why should this era’s managers and professionals be the only elites in human history who don’t set things up to get what they want?