Bad: increasingly employees face the same risk to future income as entrepreneurs. Worse: they don't share the same potential for returns.
Entrepreneurs face huge risk. More than half of businesses (about 90% by some estimates) fail. But entrepreneurs face this risk for at least two reasons: if they are successful they have the chance to be very successful AND various kinds of success can mean more autonomy and choice about how to live their lives.
Employees today in any arena face huge risk. Government employees and academia have joined the ranks of employees in the private sector, in small or large companies. Employees are probably as insecure as they've ever been, unsure what combination of demotion, reduction in benefits, or job loss they're likely to face. Or, more accurately, they simply aren't sure when they'll face these changes. But unlike entrepreneurs, employees don't face much of an upside. If the business or organization they're in is successful, they are more likely to be employed. (Even that is dicey, given the penchant for outsourcing.) But organizational success for the employee is as likely to mean more stress from additional work as it is to mean promotions and profit sharing.
I don't think that entrepreneurs and organizations can protect employees from market forces. Employment is simply going to be less secure. That, it seems to me, is a fact of life.
Entrepreneurs and organizations can do more to share success with employees. On the downside, the economy has already made employment more like entrepreneurship in terms of risk. This negative can be more than offset by doing more to include employees in the upside of organizational success, giving them more autonomy and more potential for shared equity and profits as organizations succeed.
Hope for reward can offset some of the stress of dread of risk. Also, employees who can make more than just their salaries can also save a little more in anticipation of the inevitable job dislocations that it seems simply come with a dynamic, global economy.
Finally, as employees are treated more like entrepreneurs they're likely to act more like entrepreneurs, helping organizations to become more responsive to changing markets, adding to organization's ability to provide profits and salaries.
Today's situation could be very different. Good: employees are increasingly treated like entrepreneurs, sharing risks, rewards, and responsibilities. Better: organizations and employees are healthier and feel more in control of their own destinies and economic health.
R World (Ron Davison muses aloud)
Showing posts with label employees. Show all posts
Showing posts with label employees. Show all posts
09 February 2011
07 May 2008
Will the Baby Boomer Retirement Wave Trigger Corporate Transformation?
Already, businesses in Canada are closing – not because they cannot get customers but because they cannot get employees. Meanwhile, the employees inside of corporate America are characteristically bright, articulate, and capable. The US has yet to experience a drought of able employees or figure out how to create – rather than simply employ – productive employees. The projected shortage of employees as baby boomers retire may help to trigger a necessary transformation of the corporation.
A couple of months ago, a friend from Canada told me about the employment problem where he lives – a community about 200 km east of Vancouver, BC. He said that three businesses had recently closed there. Not because of a shortage of customers but because of a shortage of employees. He claimed that throughout all of Canada it is becoming a huge problem to find good employees – or any employees. They appear to be ahead of us on the baby boomer retirement pipeline that is scheduled to reduce the US workforce by millions.
I often get to work inside of large multinationals. What I find most remarkable about the companies is the quality of the people there: organized, smart, personal, and articulate seems to define the norm within these organizations and the longer I work with them, the less surprised I am that organizations able to hire and retain such people are able to generate billions in sales and profits. These are the people who did their homework and took the time to properly format footnotes. It seems to me that these multinationals rely more on the quality of their people than the quality of their systems. But what happens when the supply of quality people begins to drop off?
It may be that companies will succeed by begin to focus on creating great jobs for people who, in turn, can create goods and services. Issues like the design of work to engage people (like the design of video games to draw in players) will become a focus of the companies that succeed in an economy where the supply of employees is shrinking faster than the supply of customers.
To date, the corporation has largely built its success on pleasing customers and putting demands on employees. To turn the corporation into a vehicle for pleasing employees will require massive changes. This will be one element of the transformation of the corporation.
It still baffles me that organizational innovation – the particulars of how to create this new corporation – does not get more attention. This is – like product creation – a design issue, but one that is generally addressed only by exception, and rarely. The transformation of the corporation seems to me necessary: sadly, necessary does not mean inevitable.
A couple of months ago, a friend from Canada told me about the employment problem where he lives – a community about 200 km east of Vancouver, BC. He said that three businesses had recently closed there. Not because of a shortage of customers but because of a shortage of employees. He claimed that throughout all of Canada it is becoming a huge problem to find good employees – or any employees. They appear to be ahead of us on the baby boomer retirement pipeline that is scheduled to reduce the US workforce by millions.
I often get to work inside of large multinationals. What I find most remarkable about the companies is the quality of the people there: organized, smart, personal, and articulate seems to define the norm within these organizations and the longer I work with them, the less surprised I am that organizations able to hire and retain such people are able to generate billions in sales and profits. These are the people who did their homework and took the time to properly format footnotes. It seems to me that these multinationals rely more on the quality of their people than the quality of their systems. But what happens when the supply of quality people begins to drop off?
It may be that companies will succeed by begin to focus on creating great jobs for people who, in turn, can create goods and services. Issues like the design of work to engage people (like the design of video games to draw in players) will become a focus of the companies that succeed in an economy where the supply of employees is shrinking faster than the supply of customers.
To date, the corporation has largely built its success on pleasing customers and putting demands on employees. To turn the corporation into a vehicle for pleasing employees will require massive changes. This will be one element of the transformation of the corporation.
It still baffles me that organizational innovation – the particulars of how to create this new corporation – does not get more attention. This is – like product creation – a design issue, but one that is generally addressed only by exception, and rarely. The transformation of the corporation seems to me necessary: sadly, necessary does not mean inevitable.
25 January 2008
Riding the Wave of Globalization
I recently found this globalization gone wrong joke in my email:
That night in the hotel, I get an email from my buddy Jeff. He’s getting laid off from his job in database design, along with 40 coworkers. The positions are being outsourced to a contractor in the Philippines.
Every color collar jobs – from blue to white – are being exported.
Globalization is not going to be stopped by legislation. It is not going to slow. It is not going to reverse. It is a reality for which politicians have given two very unsatisfactory solutions: either they tell constituents suck it up and deal with it; or they promise to stop it through legislation, a plan about as likely to work as outlawing lust.
It took us decades to adapt our school system to the creation of knowledge workers who could thrive in corporations and succeed in the information economy. Now, policy makers need to begin finding ways to prepare the next generation of workers to compete and thrive in a period of globalization.
It seems to me that a strategy for successful globalization would rest on at least three things:
1. Changing our attitude towards all things foreign. There is this odd tendency to think that foreigners have to learn English to talk to us. They do. And then they sell to us. We, by contrast, refuse to learn their languages, their cultures, etc. And we can't sell to them. The result? Huge trade deficits even when the dollar falls.
2. Dedicating our education more towards entrepreneurship. Low cost labor represents a threat to someone who is working and a great opportunity to an entrepreneur.
3. Give employees who own stock more say in company policy. Pension funds are the biggest owners of stock. It’s not obvious that they would chose to up their returns to capital by 5% if it meant that they would see their salaries fall by 50%. Employees own these companies. Let them have a say in how work is allocated and contracted.
Bucky Fuller said, “Use forces, don’t fight them.” Globalization is too big to fight, but it can be harnessed. I've ridden waves and been ridden by waves. I know for a fact that it is much better to ride them.
I was depressed last night so I called Lifeline.Monday, on my flight up from Dallas to Indianapolis, I rode by a woman who worked for Delphi, the auto parts manufacturer. She’s managing a project to move a factory from a rural area of Indiana to Mexico. “I can’t stay in the town,” she said. “The locals are pretty angry about losing their jobs.” This factory is one of the main sources of employment, and now it is gone. I’m not sure what’ll happen to the town, but I’m sure about why it is happening. “Machine operators here in the US cost $40 an hour. In Chihuahua,” she said, “they cost $70 a week.”
I got a call center in Pakistan. I told them I was suicidal.
They got all excited and asked if I could drive a truck.
That night in the hotel, I get an email from my buddy Jeff. He’s getting laid off from his job in database design, along with 40 coworkers. The positions are being outsourced to a contractor in the Philippines.
Every color collar jobs – from blue to white – are being exported.
Globalization is not going to be stopped by legislation. It is not going to slow. It is not going to reverse. It is a reality for which politicians have given two very unsatisfactory solutions: either they tell constituents suck it up and deal with it; or they promise to stop it through legislation, a plan about as likely to work as outlawing lust.
It took us decades to adapt our school system to the creation of knowledge workers who could thrive in corporations and succeed in the information economy. Now, policy makers need to begin finding ways to prepare the next generation of workers to compete and thrive in a period of globalization.
It seems to me that a strategy for successful globalization would rest on at least three things:
1. Changing our attitude towards all things foreign. There is this odd tendency to think that foreigners have to learn English to talk to us. They do. And then they sell to us. We, by contrast, refuse to learn their languages, their cultures, etc. And we can't sell to them. The result? Huge trade deficits even when the dollar falls.
2. Dedicating our education more towards entrepreneurship. Low cost labor represents a threat to someone who is working and a great opportunity to an entrepreneur.
3. Give employees who own stock more say in company policy. Pension funds are the biggest owners of stock. It’s not obvious that they would chose to up their returns to capital by 5% if it meant that they would see their salaries fall by 50%. Employees own these companies. Let them have a say in how work is allocated and contracted.
Bucky Fuller said, “Use forces, don’t fight them.” Globalization is too big to fight, but it can be harnessed. I've ridden waves and been ridden by waves. I know for a fact that it is much better to ride them.
23 January 2007
Employees Becoming Entrepreneurs
If anything has defined the great institutions of Western Civilization, it is their eventual adoption of a model that allows individuals greater freedom and autonomy. We’ve seen this in the church, in the state, and even in financial markets. I suspect that we’re about to see it in the corporation. Popularizing entrepreneurship within corporations will inevitably spill into other sectors as well. As we do, the impact will be a century in which social innovation will become as common as technological innovation has become in the last century. The consequences of this can hardly be imagined.
Entrepreneurs typically start businesses. More broadly, entrepreneurship refers to creating some kind of social construct, institutionalizing a solution to some need that was previously not met or not met as well. There are, in my mind, layers to this. The first guy to start a drive-through hamburger stand was a pioneering entrepreneur; the guys who imitated him were also entrepreneurs, but of a lesser kind; the guys who franchised from those imitators were entrepreneurs as well, but, once again, of an even lesser kind. All accept variability in their income – variability that is ultimately a function of how well they’ve put together an operation that meets market demand. This is in contrast to the employee who accepts little variability in income. Additionally, entrepreneurs almost invariably risk not just their income but their capital. But the lesson of the pioneer with the concept, the imitators who follow, and the franchisees who follow the imitators, points out that there is not simply one level of entrepreneurship.
So let’s look at a traditional company, using an example from 50 years ago. An entrepreneur starts it. One of his acts is to hire employees. If the company does well, those employees have “job security,” but it is only the entrepreneur who sees increase in his wealth because of increases in company equity.
Now, let’s take an example from 7 years ago. An entrepreneur not only starts a business, but he makes his employees a part of it through stock or stock options. Now, if the business increases in value, the employees see their net worth rise as well. They have capital in the game as well as their efforts.
Finally, let’s take an example 5 years from now. A traditional entrepreneur starts a business and in the course of the business has to establish legal, accounting, IT, finance (etc.) infrastructure. He has employees. Once the business is underway, a subset of the employees sees an opportunity to create a new market or to patent a new product.
At this point the company can handle it one of two ways. The traditional way would be for these employees to undertake the project and enjoy whatever rewards the company has – promotions, stock sharing, a bonus.
If the company were more entrepreneurial, the original entrepreneur would see this as an opportunity to become a venture capitalists of sorts. He would potentially finance this new venture and the employees who came up with the inner-business plan might even put some of their own money into the venture. They would now make the same or less than before, they would have invested their own money, they would be using the existing infrastructure for its expertise (the patent attorney, the accountants, the IT guys, etc.). They would be able to focus on developing the product and market (or perhaps only the product, using the existing marketing group).
If the product takes off, the original entrepreneur does really well – better than those venture capitalists who do so well. Why does he do so well? Because he’s not just got a piece of the venture, as a venture capitalist would, but his piece is bigger because he has basically provided these employee-entrepreneurs with an incubator, providing them with the core elements of the business that they might not have the capital, inclination, or expertise to provide.
The employee-entrepreneurs make more money as well. Whether the venture is actually spun off or merely valued by an outside agency, it will have some equity value. As the “entrepreneurs,” the guys who started this venture will have a chunk of this. That chunk they have may actually generate more money for them than what is paid to the CEO.
What this suggests is that the corporation slowly changes over. It started as a bureaucracy that employees you in a function and is beginning to transition into a project-centric company that puts more emphasis on regularly creating new products or services than in maintaining the bureaucracy. Finally, I predict that the evolution will continue until you have a created a place where innovation within the corporation has echoes of innovation within a country. This is possible in part because of the transformation of financial markets – corporations have access to capital and the capital investment tools that previously only banks had.
I see this transformation as a means to stimulate an enormous amount of innovation and equity creation. And, of course, provide more autonomy to the individual. In my mind, the employee would not be required to become an entrepreneur, but would have the opportunity to become one without risking everything to do it.
Entrepreneurs typically start businesses. More broadly, entrepreneurship refers to creating some kind of social construct, institutionalizing a solution to some need that was previously not met or not met as well. There are, in my mind, layers to this. The first guy to start a drive-through hamburger stand was a pioneering entrepreneur; the guys who imitated him were also entrepreneurs, but of a lesser kind; the guys who franchised from those imitators were entrepreneurs as well, but, once again, of an even lesser kind. All accept variability in their income – variability that is ultimately a function of how well they’ve put together an operation that meets market demand. This is in contrast to the employee who accepts little variability in income. Additionally, entrepreneurs almost invariably risk not just their income but their capital. But the lesson of the pioneer with the concept, the imitators who follow, and the franchisees who follow the imitators, points out that there is not simply one level of entrepreneurship.
So let’s look at a traditional company, using an example from 50 years ago. An entrepreneur starts it. One of his acts is to hire employees. If the company does well, those employees have “job security,” but it is only the entrepreneur who sees increase in his wealth because of increases in company equity.
Now, let’s take an example from 7 years ago. An entrepreneur not only starts a business, but he makes his employees a part of it through stock or stock options. Now, if the business increases in value, the employees see their net worth rise as well. They have capital in the game as well as their efforts.
Finally, let’s take an example 5 years from now. A traditional entrepreneur starts a business and in the course of the business has to establish legal, accounting, IT, finance (etc.) infrastructure. He has employees. Once the business is underway, a subset of the employees sees an opportunity to create a new market or to patent a new product.
At this point the company can handle it one of two ways. The traditional way would be for these employees to undertake the project and enjoy whatever rewards the company has – promotions, stock sharing, a bonus.
If the company were more entrepreneurial, the original entrepreneur would see this as an opportunity to become a venture capitalists of sorts. He would potentially finance this new venture and the employees who came up with the inner-business plan might even put some of their own money into the venture. They would now make the same or less than before, they would have invested their own money, they would be using the existing infrastructure for its expertise (the patent attorney, the accountants, the IT guys, etc.). They would be able to focus on developing the product and market (or perhaps only the product, using the existing marketing group).
If the product takes off, the original entrepreneur does really well – better than those venture capitalists who do so well. Why does he do so well? Because he’s not just got a piece of the venture, as a venture capitalist would, but his piece is bigger because he has basically provided these employee-entrepreneurs with an incubator, providing them with the core elements of the business that they might not have the capital, inclination, or expertise to provide.
The employee-entrepreneurs make more money as well. Whether the venture is actually spun off or merely valued by an outside agency, it will have some equity value. As the “entrepreneurs,” the guys who started this venture will have a chunk of this. That chunk they have may actually generate more money for them than what is paid to the CEO.
What this suggests is that the corporation slowly changes over. It started as a bureaucracy that employees you in a function and is beginning to transition into a project-centric company that puts more emphasis on regularly creating new products or services than in maintaining the bureaucracy. Finally, I predict that the evolution will continue until you have a created a place where innovation within the corporation has echoes of innovation within a country. This is possible in part because of the transformation of financial markets – corporations have access to capital and the capital investment tools that previously only banks had.
I see this transformation as a means to stimulate an enormous amount of innovation and equity creation. And, of course, provide more autonomy to the individual. In my mind, the employee would not be required to become an entrepreneur, but would have the opportunity to become one without risking everything to do it.
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