UK: HARD TIMES - CONTRACTS.

UK: HARD TIMES - CONTRACTS. - A new reality has seized business by the throat giving rise to an employment charter where the relationship is a contractor one with a short-term feel to it.

by Gerard Egan.
Last Updated: 31 Aug 2010

A new reality has seized business by the throat giving rise to an employment charter where the relationship is a contractor one with a short-term feel to it.

I'm staring at two different headlines. One from the front page of the Financial Times reads: 'Threat to 400,000 jobs in EC auto sector'. The second preceded the first by about 10 days. It reads: 'Ford workers seek jobs for life'. Are we all living in the same world?

'Terms of employment' can mean two different things. It can refer to the stuff in the personnel manual, to what you need to do to remain employed: you know the sort of thing - don't get caught stealing, keep your hands off other employees in the workplace, don't strike the boss, and the like. But 'terms of employment' can also refer to the underlying employment charter that is not ordinarily published. Although in recent years this charter has changed dramatically, few can name its current provisions. For those who believe in the adage, 'If you are not in charge of your career, then no one is', it is time to bring it out of the closet.

The old charter, though itself unpublished, was simple and clear: 'If you put in a decent day's work and keep your nose clean, then you can expect to stay with us either until you want to leave or until you retire.' Now, however, a new and more complicated - and for many, more ominous - charter is emerging. The reasons for the new charter are clear. The 'global village' that Canadian guru Marshall McLuhan talked about years ago has become the global economy and marketplace, both battered by global forces. Global competition and fast-changing global marketplaces have sent rigid, slow-responding players such as GM and IBM reeling.

In more tranquil days, there was a certain disconnect between the covert terms-of-employment charter and the business itself. The environmental soup in which both floated provided enough slack to allow for it. Many companies could laze along and their employees with them. Those days are gone. 'Getting by' is just a step away from 'going down the tubes'.

But a new reality has seized businesses by the throat: 'We might not survive and we certainly won't thrive unless we are lean, flexible, and responsive to the realities of the marketplace'. And thus the current tide of closings, downsizings, permanent rightsizings, restructurings, and re-engineerings we read of in the business press every day. The employment consequences have been grim for many. Companies like Delta Airlines and IBM used to pride themselves on their unofficial no-layoff policies. In one downturn Delta's employees, even though working shorter weeks, chipped in and gave the airline a new Boeing jet as a sign of their appreciation. But now we have layoffs at Delta and massive downsizing at IBM with more to come.

These new economic forces have given rise to the 'contingent employee' phenomenon: the part-timer; the forced entrepreneur - employee turned self-employed worker; and a new breed of migrant worker, now white-collar and managerial. These phenomena tell us a great deal about the emerging employment charter. There is a movement from an implicit longer-term employment relationship to an implicit 'contractor' relationship with a shorter-term feel to it.

While some companies such as Johnson and Johnson still prefer a longer-term employment contract, others such as Apple Computer and General Electric seem to have moved toward contractor charters - some call these 'social contracts' - which have provisions like the following:

- Since we now live in a global, highly competitive, fast-moving, and uncertain environment, we must move from a longer-term employment to a contractor contract.

- We will contract for your services and you will commit yourself to give your best for as long as that relationship is mutually beneficial.

- When the economy and competition and other forces outside the control of the company get tough, then your job might well be in jeopardy because the business itself might well be in jeopardy.

- While you are here, it is not enough to do what is required. You must keep finding ways to add value to the business. To stay with us, you must be a contributor rather than a mere player.

- To remain a contributor you must grow and develop. You must become a 'learning person' just as the company or institution becomes a 'learning organisation'. While we will provide opportunities, you must be in charge of your own development.

- Your tenure with us will probably be longer if you keep developing competencies that relate to our sometimes changing core businesses.

- Keep an eye on how we are changing and what we are outsourcing. If we outsource a function, that means that we will probably outsource you.

- Promotions, which might have been assured in the past, will be very scarce. We are now by necessity a flatter organisation. In fact, expect to see more flexible structures take the place of hierarchy around here. Also expect to be paid for performance rather than for being 'in place'.

- Therefore, expect lateral moves into positions that at the time add value to the business and through which you can develop. 'Lateral' no longer automatically means 'dead-end'. When it does, see the handwriting on the wall.

- Lifetime careers are no longer the norm. There might well come a time when you will want to leave us. It is also probable that there will come a time when we will want you to leave, most likely through no fault of your own. In either case, the 'fit' will no longer be right.

- As different as this contract is from the 'traditional' one, it can be a good deal for us and a good deal for you. It depends on how well we mutually execute it.

In many companies, some version of this contract is an emerging reality. And it applies as much to the executive suite as it does to the ranks of middle managers. 'Good-bye, Mr Jobs. Good-bye, Mr Sculley. Apple has moved on and out, needs have changed, so it is time for you to move on. Thanks for what you did for us, but the fit is no longer right.' When those who are crafting the charter suggest that it can be a 'good deal' for both company and manager, they are talking to the venturesome, the entrepreneurial, the adaptable, the self-starters. But what about the rest?

How are we to reconcile concepts like 'contractor' and 'contingency' with terms like 'a committed and productive workforce', 'commitment', 'stability,' 'teamwork', and 'loyalty'?

First of all, just because workers are part-time, this does not mean that the company is automatically exploiting them just as much as it does not mean that the workers are not putting in a good day's work. Or, as Jack Gordon, editor of Training magazine, puts it: 'Let's assert with confidence that if you are going to do a job anyway, then it is better to be engaged by it than bored, better to find price and meaning in it than absurdity.' But, he cautions, in the contingent workplace do not oversell work, TQM, and re-engineering as builders of soul and spirit.

Well, then, what is the brave new world to look like? To cope with the work charter problem, we need a different playing field and a different game. 'Alliances' may be the name of the game. And a hint of what the playing field should look like is found in what is now being called 'evolutionary economics'. One of the assumptions of evolutionary economics is that competition need not be the zero-sum game that players make it out to be. Competitors can prosper, not by beating one another's brains out, but by entering into win/win alliances. Working together, they increase the size of the pie and both benefit. And so the IBMs of the world are lying down with the Apples, the Rovers with the Hondas. For mutual benefit, they rise to a different plane. There is a rising tide of these kinds of alliances.

How do we craft a new employment charter that makes economic, human, and ethical sense? We can't do it without the equivalent of evolutionary economics within companies. After all, there are competitors within the company orbit - employees, shareholders, managers, customers, vendors, and the like. Customers want service and value and all the others want their fair share of the pie. All are bound by a common fate. The central reality, then, is the institution, now no longer an 'us and them' entity, but a company whose purpose is not so much to make a profit as to create wealth in which all stakeholders can share. Without a sense of 'shared destiny' that promotes collaboration rather than self-interest, it is impossible to formulate an employment charter that factors in both stakeholders needs and the realities of the environment and the marketplace. In this broader sense, then, the employment charter needs to be institution-focused and institution-enhancing because the institution is its stakeholders.

What would an ethical charter look like? This is the wrong question. What are the conditions under which it is possible to formulate a charter that is both ethical and realistic at the same time? If the charter is not realistic, then it cannot be ethical except in some fanciful sense of that term.

Here is a stab at the principles or dynamics underlying the formulation of a realistic charter. It is impossible to talk about the charter without talking about what key stakeholders, in alliance with one another, need to do.

- The charter must be based first on the creation of wealth and then on its distribution.

- The 'loyalty' thing - a paternalistic term that may often have been a fiction anyway - must be replaced with a mutual commitment to the creation of wealth.

- The charter must take into account the legitimate needs of all stakeholders.

- If all stakeholders are to benefit from the creation of wealth, they must play an active part in its creation. The day of freeloaders is gone.

- Shareholders must demand that the company invest in its own future in terms of such things as technology and employee development. Self-serving bosses without guts and vision are an intolerable burden. Poorly-run companies can never have a proper social charter.

- The company must offer opportunities for the development of skills and employees must seize these opportunities.

- All stakeholders must realise that economic downturns have always demanded sacrifice. The charter must take account of the realities of the economy and the marketplace.

- All stakeholders should be involved in economic early-warning systems. 'Head in the sand', 'digging in one's heels' and 'resistance to change' - these attitudes are the death knell.

- All stakeholders should work at creating innovative buffer systems to manage workforce disruption when business goes sour. Minimally, it means that employees will go back into the marketplace with state-of-the-art skills.

- A charter that emphasises entitlement over self-responsibility is naive.

- Not government, but society, in which government is but one player, should craft contingency systems capable of providing assistance for those who have been marginalised by economic gyrations.

- The new charter, tailored to the circumstances of this company in this industry, should be published. But, given the constancy of change, it needs to remain evergreen.

In many companies this set of norms constitutes a paradigm shift. It demands culture change on the part of each set of stakeholders. How realistic is this? What are the alternatives?

Even the best and most realistic of charters is but one piece of the puzzle. Asking individual companies to remedy the country's economic problems is naive. Expecting market forces to take care of all economic problems is also naive. Asking the workforce to bear all the burdens of a twisting economy is cynical. Blaming economic victims for their plight is just as cynical. Expecting government to solve all problems is madness. Beyond naivete, cynicism, and madness lies reality. Reality may lie in alliances among stakeholders, alliances characterised by creative contention.

Gerard Egan is professor of organisation studies and psychology at Loyola University, Chicago.

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