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How Millennials, labor market dynamics and the purpose economy will disrupt employment!

In a few years time, you will no longer work for a company. You will own it! In fact, we bet you will own over 20 companies! Why? Because the way companies and employees work together is about to get disrupted. Here’s a way to organize companies that fits this transformed way of employment.

Entrepreneurability: skill to be an entrepreneur in company formats

Ideas need skills, talent and expertise to come to life. If a company no longer has employees, but employees with those skills, talents and expertise, own the company, the ideas become the asset base of all involved. The ideas can then be realized by a set of owners that have the fitted skills and knowledge for the idea and an equal benefit to get the best possible value out of it. In exchange for their contribution, these contributors become co-owner of the company with equal shares. Regardless of the amount of effort invested. If the product or service provided is valuable to the market targeted, everybody benefits. If not, no harm done you only spent a few hove it’s already happening and it will become a common way of doing business. Here’s why:

Purpose economy

Why do you do what you do? Why do you do this type of work, what makes you get out of bed in the morning and get to work? Let’s look at the four generations that we have in our labor force now and their drive to work. The baby boomers were looking for a job for life, making sure their families were able to survive, generation X was working on their work-life-balance and they are motivated by the ability to do so within a career and generation Y (also known as Millennials) rather work for a purpose and they need to be flexible and free. Their focus is to work with a company not for a company. So gradually the prehistoric driver of work to earn the money to buy food, living and education (eg.survival), to a profit maximization will disappear. And in it’s place we find: having a purpose for the work that you do. Not just our personal purpose, doing the things we love, picking up new challenges and expressing ourselves. Also a purpose that includes a contribution to others and to the world around us. Making money and doing this is widely accepted as the new way of working.

The purpose economy is mostly a primary driver for Millennials. “While many generations have sought out purpose, Millennials make it a greater priority than ever before, in everything from their consumption to their work to their communities to their relationships” says Aaron Hurst in his book The Purpose Economy, Expanded and Updated: How Your Desire for Impact, Personal Growth and Community Is Changing the World Paperback (2016).The purpose economy is a new context and a set of ways in which people and organizations are focused on creating value, and it defines the organizing principle for innovation and growth. (1)

Over 76% of people participating in the Great Place to Work surveys acknowledge they feel good about the contribution to society they make as a company.(2) It is an important factor in people’s choice to join an organization.

Trend number 1: Entrepreneurial abilities facilitate maximizing purpose. Not only does this work-life-model provide you with the freedom to choose which ideas create value or meaning to you and thus identify you. You have control over the amount of time spent and which benefits it generates.

Labor market development

change_work_population Millennials are tough to manage! Says Simon Sinek.(3) The generation that was raised with the ‘anything-is-possible-concept’ needs a different approach to those raised with limits or with working conditions as the baby Boomers or generation X. Millennials use technology as a mean – not as a purpose – to connect to each other and to anything that maximizes the purpose as mentioned before.  Combined with an enormous amount of information accessible and the ability to change industries by intelligent utilization of technological developments, makes this group very skilled disruptors, even without them realizing it, mostly.  They enter the labor force from a different starting point.

These dynamics change the labor force. And with the baby boomer generation leaving the in the upcoming years, it puts a challenge on how we do our work. The number of jobs keeps on growing while the number of members of the workforce decline.(4) So not only do we have a changed labor force, we also have a lot of pressure on its efficiency and effectiveness.

Trend number 2: Entrepreneurs skill create an opportunity for professionals to more be more efficient and effective in the utilization of their skills and knowledge by adding value to multiple organizations instead of being part of a single organization.

The Gig Economy – Independent Professionals  

iprofs_leaving_companiesThe trend of approaching the markets has already been set. The way employment is organized is changing already.  Younger people do not tend to stick around too long at a single company any longer. We all know that’ lifetime employment’ is a thing of the past. In the 1980’s over 50% of American employees were in their job over 10 years. (5)

The Generation X thrived on the ‘job hopping’ phenomena covering on average 7 jobs throughout their career, Millennials are expect to stay at an organization for less than 3 years.(6) But next to switching jobs there is an even more disruptive change happening..

The number of independent professionals (iPros) has been growing rapidly over the past couple of years.  Where in 1996 roughly 5% of the workforce  in The Netherlands where self employed, in 2014 this was already roughly 10 percent. Although the trend is flattening out (7), more and more highly educated professionals are still making this transition. Research done by Intuit states that in 2020 40% of the workforce will be work on a freelance basis.(8) Why do people take this step? What makes them move away from a sense of security, stability? Especially now the economy is recovering?  

From the Zelfstandigen Enquete Arbeid 2015 three reasons for starting to work as an iPro stand out:

  • Looking for a new challenge (34,4% of total respondents),
  • Autonomy. Making your own decision when and how much you want to work. (25,7% of total respondents)
  • No longer willing to work for a boss (20% of total respondents)(9)

This trend is being referred to as the Gig economy.(10) In this approach to economy temporary positions are very common and organizations collaborate with independent professionals for short engagement.(11) This tendency is the third trend on which Entrepreneurial concepts are built.

It already happens in the current concept of the flexible layer of independent professionals which many organisations use. This benefits both the organizations – who can use skills and knowledge as they need it, and the independent professionals, that can work for multiple companies.

The biggest risk organisations encounter in this rapid changing world, dominated by small start-ups, is employing people. Mitigating this risk by employing people on a need-basis is extremely tempting. You pay for what you use. For the independent professional benefits are rich as well. They are able to share and develop their expertise by applying it in different environments, only adding value when being present and charge accordingly. Like a playing a gig!

Trend number 3:

  • As an idea owner in the a Company of Owners, one of the formats in which to optimize effectiveness, you host gigs for people who can contribute, without the risk of having to employ them on a fulltime basis. You can pull knowledge and skills from a large pool of professionals in the subject area;
  • And as an independent professional you are facilitated in your need to show your purpose and skill in any challenging area and add value without having to work for a boss. You are in control how much and when you will invest your time.

Liberty?

One more thing: why the equal share? Isn’t that a bit too socialistic in the way you’d like to work the market liberation? It certainly looks like it and might be a bit new. Like the story on the right (12). It has it’s roots in the value added base of rewards. Where in marketing it’s fully accepted to have value based pricing, somehow within awarding people’s skills we still value them differently. We base this reward on experience, education, location and some personality aspects but do not take into account the value added to the idea. Anyone contributing to the result is perceived to add value and without their contribution the value will assumably be less.

companies_billing

On the contrary, the current compensation scheme used in organisations is out of balance as well. Over the last couple of decades the compensation of top management has grown completely out of proportion compared to the average production worker. In between 1978 and 2014, inflation-adjusted CEO pay increased by almost 1.000%. Meanwhile, typical workers in the U.S. saw a pay raise of just 11% during that same period.(13)  This has been heavily debated in several countries and attempts are made to regulate this. In addition, more companies look into decoupling the performance review and the any raise in pay. Organisations are discovering new ways to tap into compensation.(14) A Dutch IT company, Incentro, let’s their own employees determine their raises among their peers.(15) These experiments and trends in HR shows that organizations and professionals are ready to reopen the discussion on compensation.

What about the amount of time involved? What if the contributors have a difference in the amount of time they put in. So what? We think it’s up to contributors to organize their way of working. Bottom line is: the result is what counts. And that will be addressed by the idea-holder and the rest of the team. It doesn’t matter if you spent 5 minutes adding value or 5 days. If the idea cannot be created without those 5 minutes of expertise the 5 days invested is useless, same goes the other way around. Think for a minute about the effect it has. What if you organize your work exactly the way you’d like and put in the amount of time and effort you think is necessary, within a time frame that you have influence on as well? How does that make you feel? Exactly: it’s means the liberty to do things your way! Ask Daniel H. Pink, the author of Drive. What motivates people more than anything? The autonomy to do things how they’d like to, develop mastery over their work tasks and do them with a purpose.

Trend 4: So to bring back balance in the rewarding of labor. The Company of Owners values the input of all contributors alike and therefore gives equal shares of awards to the input and skills. This way the process provides a very strong motivator for all – also alike: autonomy.  Furthermore it takes away the discussion about giving a raise based on performance. Performance in The Company of Owners-format is determined by value added of the whole team.

Entrepreneurability: concluding remarks

The above demographic and labor market trends combined, as well as the readiness for disruption for the labor markets thus gives us reasons to believe we are well on our way to optimize Entrepreneurability. This model provides instant feedback on the anticipated added value to the market by facilitating in maximizing purpose. It provides the freedom to choose which ideas to create value or meaning for independent professionals as well as employees that would rather work with a company instead of for a company.  Additionally it gives flexibility over the amount of time spent on each idea or value creation. This makes it more efficient and effective in the utilization of skills and knowledge for both the idea-holder (company) and the professional contributors (owners). The latter get to add value to multiple organizations instead of being part of a single organization and the first are able to realize more ideas. It values the input of all contributors alike and therefore gives equal shares of awards to the input and skills. This way the process provides a very strong motivator for all alike: autonomy. Furthermore it takes away the discussion about giving a raise based on performance. Performance in the format of The Company of Owners is determined by value added of the whole team. And it has a low threshold to contribute or start-up. If you have an idea but no funding or you have a little time to spare you can easily apply this model.  The format of the Company of Owners host gigs for people who contribute, without the risks of employment on a fulltime basis. You can pull knowledge and skills from a large pool of professionals in the subject area. And independent professionals are facilitated the need to work for a purpose and use their skills in a challenging area, staying flexible and developing skills and knowledge along the way.

Sources:

  1. The Purpose Economy, Expanded and Updated – Aaron Hurst
  2. https://agconnect.nl/artikel/it-bedrijven-behoren-tot-de-beste-werkgevers
  3. https://www.youtube.com/watch?v=QXWNChoIluo
  4. https://futurehrtrends.eiu.com/report-2015/profile-of-the-global-workforce-present-and-future/
  5. https://www.fastcompany.com/1802731/four-year-career
  6. https://www.forbes.com/sites/jeannemeister/2012/08/14/the-future-of-work-job-hopping-is-the-new-normal-for-millennials/#2e7078ed13b8
  7. https://www.cbs.nl/nl-nl/nieuws/2016/46/toename-aantal-zzp-ers-stokt
  8. https://http-download.intuit.com/http.intuit/CMO/intuit/futureofsmallbusiness/intuit_2020_report.pdf
  9. Zelfstandigen Enquete Arbeid 2015, ministerie van Sociale Zaken en Werkgelegenheid, TNO, CBS (2015), http://www.monitorarbeid.tno.nl/databronnen/zea
  10. https://youtu.be/bhm2fdQg_Aw
  11. https://whatis.techtarget.com/definition/gig-economy
  12. https://www.smithsonianmag.com/history/charles-proteus-steinmetz-the-wizard-of-schenectady-51912022/
  13. https://fortune.com/2015/06/22/ceo-vs-worker-pay/
  14. https://hbr.org/2015/09/why-more-and-more-companies-are-ditching-performance-ratings
  15. https://www.mt.nl/business/zo-bepalen-incentro-medewerkers-hun-eigen-loon/87810 – Dutch

 

Stephan van Rooden