A new breed of employees is emerging in a reaction to the ruthless cost-cutting measures of post-'80s businesses. As loyalty is no longer rewarded, individuals are taking charge of their own destinies and with the breakdown of the old employment relationships, 'Me plc' has become the latest catchword. But how will companies cope with the contract culture they have helped to create?
Meet Don M, Linda G and James S, shock troops of corporate revolution. They don't look scary. They are respectively a 42-year-old senior operations manager at a transport company, a high-achieving systems analyst aged 35, and a 50-something middle manager at the British subsidiary of a US manufacturing firm. But if companies aren't frightened of them now, they soon will be. Don M is part of a whole second tier of management which any day now will walk when his company fails to meet the numbers top management promised the stock exchange after its last restructuring. Linda G recently left her job - and re-contracted herself back to her employer at three times the salary for a three-day week. James S, a grim and cynical survivor of a delayering exercise, is going through the motions of his job, doing little to attract attention and less to make the new lean structure work.
Profiles like these are increasingly familiar to corporate personnel departments and outside experts called in to advise on the obstinate failure of cost-cutting and restructuring exercises to galvanise companies into promised high performance. They recognise in them the advance guard of 'Me plc' - a new breed of employees emerging from the wreckage of the human-resources project and the collapse of career which have reshaped the landscape of managerial work in the 1990s. But some observers also spy Nemesis. As surely as Clint Eastwood returning to avenge the past, the enforcers of Me plc are calling in a debt. Years of corporate lip service to the importance of people are finally catching up. Payment is now due in full, and in kind: for once you have rationalised and reorganised everything else, people really are the only asset.
It takes a while for the implications to sink in. But the slipperiness of the new employment relations aren't just a problem for individuals. In a world where the boundaries of the job are crumbling, where career is self-managed and the individual knows his or her own worth, companies are suddenly finding themselves bereft of much of the management scaffolding that held the edifice together.
Put brutally, individuals are asking themselves: if the company no longer represents a career, a pension or 'a safe job', what am I doing here? If the organisation can't provide a satisfactory answer to this existential question - if it hasn't found a new bonding agent to replace the deferred gratification of the next job or a secure old age - like Don M's transport firm it will fall apart at the first touch of pressure. 'The tools for managing in this age don't yet exist,' admits Robin Linnecar, partner at KPMG Career Consultancy. Adds Eric Burrows of change management consultancy Kinsley Lord: 'It's a time of huge opportunities and huge dangers. We're on a cusp: there are good signs from some of the companies that we work with, but those that don't get it right are going to be in deep trouble.' Many already are. To see why, let's recap. During the 1980s the price of corporate survival was round after round of executive job cuts - one million in the US alone. But unlike in previous cycles, it soon became clear that these jobs weren't coming back. Perhaps they never would. Economic pressures, advancing technology and new management techniques were interacting to bring the nature of the job itself into question. Writers such as William Bridges hypothesised that in the process-driven, delayered organisation, work no longer came in convenient job-sized packages. Jobs, careers and the bureaucratic paraphernalia associated with them just got in the way of continuous change. What the industrial revolution had created, the post-industrial revolution was taking away again. The 200-year age of the job was over.
Many companies embraced these developments with relief. Since they could no longer provide employment security, why should they go to the expense of planning and managing employees' careers? The latter would have to take charge of their own development. 'Most senior managers aren't using the terminology of the "new deal". Their attitude is, "You're lucky to have a job at all",' says Linda Holbeche, author of two reports on the delayered organisation at Roffey Park Management College. To some extent the job implosion turned into self-fulfilling prophecy as companies justified their scramble to jettison the traditional career baggage by reference to competitors who had already done so. They restructured, downsized, re-engineered - and waited for the results.
Instead, enter the avengers. Companies thought they had just made themselves lean and mean, point out Peter Herriot and Carole Pemberton, authors of New Deals, a powerful critique of company behaviour in the last decade. In fact, by ending the old employment relationship they had violated a deeply-felt unspoken contract, undermining not only career but societal status and identity. In its place there was a void, plus a lot of despair and anger. This is the space that the new employees are beginning to fill, with consequences that are profound, hard to foresee and only just beginning.
It is already clear, however, that some of them are not what companies intended. At the level of the grand design, cost-cutting as a strategy doesn't work. Research in the US shows that companies which choose this route as their main focus are still cost-cutting years later. Low morale is not a good platform for high productivity. At the level of daily management, the attempt by human resources departments to rationalise the developments of the 1980s as 'employability' has also had mixed results. The idea of a new contract based not on employment security but on employer-aided self development (an adult-adult relationship rather than the parent-child relationship of the past), has obvious attractions for employers. But on closer inspection it's not clear how much this desire for a happy ending is shared by employees.
For a start, only a minority of managers are psychologically ready to accept the reality of the arm's-length employment relationships. In recent research, career counselling consultancy GHN was astonished to find that most managers polled clung to the belief that their organisations were committed to their development and career despite explicit declarations to the contrary. Likewise, although nearly half were aware of the precariousness of their jobs, they were totally unprepared to take charge of their careers. Only 11% had plans for self-development, 12% the information to construct a cv and just 19% bothered to take up company courses in professional and management skills. 'To say that we were surprised is an understatement,' admits Susan Bloch, psychologist and GHN senior consultant. 'There's quite a build-up of pressure on motivation as disappointed and disillusioned individuals complain about things the company never said it would do.' At least for the moment, people like these, far from being energised by their good fortune in avoiding the chop are consumed by feelings of guilt, disappointment and powerlessness. Not surprisingly, they have little to contribute to the high-performance workplace. At the other polarity are the more adaptable individuals who are beginning to understand exactly what 'jobshift' could mean for them. Reversing the 'employability' coin, they have discovered Me plc engraved on the other side. But for employers it may not provide complacent viewing.
Modelling the individual's career as balance sheet and profit and loss account is a seductively suggestive exercise. In the Me plc accounts, assets are skills, liabilities are debts or contracts on those skills. Learning is investment, and those who have equity in your progress are shareholders. Like a company, Me plc has debtors and creditors. Experience represents retained earnings, and skills which have passed their shelf-life must be depreciated. There's just one snag: the individual's bottom line is not the same as the company's.
Consider, for instance, the version of Me plc brutally traced by Reggie von Zugbach, professor of management at Paisley University, in his recent book The Winning Manager. Zugbach's simple thesis: the course of the 1980s shows you're right to be paranoid, the bastards are out to get you. Companies are not impersonal, altruistic entities but 'enemies to be despised rather than respected'. Since the winning agenda is to take charge of your own destiny, beware of training which fills your mind with stupid and irrelevant company and professional rules; play for yourself alone; cultivate cynicism and selfishness; in short, screw your boss before he screws you. Zugbach ends by claiming that a company run by self-interested winners will be more successful than one run by losers. Even so, this is probably not what company champions of 'the new contract' had in mind.
The second strand of Me plcs may turn out to be differently intractable. As Roffey Park's Holbeche has discovered, it is increasingly the people with the qualifications to succeed inside the organisation who are moving outside, leaving the cynics, the traumatised survivors and the clock-watchers behind. 'There's immense dissatisfaction and frustration, and a potentially very mobile workforce just waiting to walk,' she warns. Companies are already losing people they need to hang on to. In her research Holbeche found a pattern of high-flyers who had used their new-found marketability to leverage their position inside the company to dramatic effect. She also cites 'at least a dozen' cases of organisations being obliged to re-layer their management ranks in order to keep their existing talent. Mobility is being held back by perception, but 'talented people with skills in line management are being snapped up for silly money for significant roles', she says.
All this, she points out, represents huge add-on costs for what companies are doing already. If companies don't do more to bridge the gap between walk and talk, she warns, the outcome will be the worst of both worlds: an exodus of bright people leaving to give their own meaning to empowerment while internally the company presents the deadly symptoms of 'presenteeism': people like James S determined to hang in as long as possible, but present only in body rather than mind.
Employers should beware. Just when the terms of trade in employment seemed most in their favour, the balance is beginning to shift back towards the individual. Straws in the wind: employment researchers are already signalling skills shortages in some areas, and the buzz on the milkround grapevine is that companies which aren't explicitly offering development opportunities aren't getting recruits. More of a haystack than a straw is the current turmoil in pay systems, always a sensitive indicator of changing climate. As job boundaries blur, traditional pay grading systems are breaking down, too. 'Companies are beginning to realise the world's changed, but we've still got the reward systems of the 1950s and 1960s,' notes Stephen Perkins, director of the Strategic Remuneration Research Centre (SRRC). Not to put too fine a point on it: no one knows what to pay anyone any more. In areas like financial services, which have handled the human issues of change with the delicacy of Vinnie Jones, 'organisations are having to reinvent their reward systems every week just to stop their people leaving. They're saying, "We're out of control".' Testimony to this concern is the alacrity with which 30 blue-chip companies have lined up to sponsor the SRRC to conduct back-to-basics research in remuneration theory: what motivates people and how rewards can be used strategically to get ahead of the game. They know, says Perkins, that real talent is in increasingly short supply: 'Young people have seen what happened to their parents - they don't want the things that go with big companies.' He adds: 'In the past, the employer set the terms of the deal. In future the employee will be bargaining on much more equal terms.' He or she will be aided by the steady development of the brokers and intermediary organisations that Charles Handy reckoned were the essential missing elements which would enable a system based on portfolio careers to function smoothly. Emerging support mechanisms for Me plc include professional bodies such as the Institution of Chemical Engineers, sometimes with employer support, which are taking a lead with self-development 'reality checks' for their members, not just in technical but also in personal and management areas. Says Dr Henry Ratter, ICI's north-west training and development officer: 'Highly qualified professionals are still to some extent cushioned, but we want to be proactive - don't wait till the worst happens.' An exception to trade union inertia, the hitherto marginal freelance organisation of the National Union of Journalists has become a clearing house for information on rates paid by publishing houses, a focus for discussion of issues such as electronic copyright and, perhaps most significantly, an Internet service-provider for members. (Not a factor when these debates started, the Internet could yet become the most important intermediary of all).
Mobile workers in IT, offshore oil and engineering design have long had job-finding networks for short-term projects. Similar arrangements are emerging in other sectors. LabStaff has 8,000 qualified scientific temps on its books. Executives on Assignment, Skillbase (originally consisting of contracted-out IBM managers) and similar organisations match steady growth of demand and supply for interim managers. And let's not forget that Manpower, once thought of as a temp agency, is now the second-largest, full-time employer in the country after the NHS.
The real question is not whether individuals can function as Me plc, it's whether the company is equipped to manage what it has created. This is more than a superficial question. At heart the fragmentation of traditional employment relationships is part of the same loss of faith in large-scale enterprise which has been gouging at corporate integrity throughout the last decade. Outsourcing, spinning off of peripheral activities and outright auto-dismemberment are all variations on a similar theme. For most things, the market simply does it better. With the organisation of Me plcs, aka the virtual organisation, this tendency reaches its logical conclusion: a collection of free agents held together only by the sale of their services to the highest bidder.
Such an organisation has obvious potential for short-term projects. It is less well equipped, however, for the most important corporate function of the 1990s, innovation. Innovation is difficult, fuzzy and energy-intensive. Depending on jointly developed properties such as teamwork, willingness to take risks, problem-solving and ideas generation, innovation needs binding agents - notably trust and commitment - which aren't accessible through market transactions alone.
Evidence for this view comes from the recent experience of creative organisations, often held up as the prototype of the knowledge-based organisation. At a management seminar conducted among 50 of the UK's best-known creative outfits, consultants Kinsley Lord detected an encouraging tendency among creatives to co-opt the techniques of management for artistic ends. But, a report of the seminar concluded, all the participants believed that 'the contract culture had gone too far. There were warnings that organisations were losing core skills, core staff, a common institutional memory and the ability to pass on valuable experience through training. No one believed that a truly creative organisation could be built or run on an army of creative mercenaries, whatever the management orthodoxy.' In practice, then, look for prudent companies to start backing off the Me plc model before their best employees adopt it too enthusiastically. What should they do instead? The simple answer is to recognise the limitations of 'employability' and start paying those debts to the years of lip service. It's not rocket science. Years ago Abraham Maslow in his hierarchy of needs posited that not until requirements for food, shelter and basic security were satisfied would people motivate themselves with loftier ambitions. Since, as KPMG's Linnecar points out, most current change hits squarely at security, it is not surprising that so much of the employment superstructure is wobbly.
To stop people wasting energy on the things they can no longer control (the job, the company) and focus them on the one thing that they can (themselves), the most important (and cheapest) ingredient is information. At its most basic, Holbeche notes that where people understand the reasons for change, they view it much less negatively than if they believe it is just cost-cutting - even when their own jobs are at risk. Better still, get them to plan the changes themselves. At Thresher, she reports, 'trials of involving teams in the restructuring process ... have proved the positive effect on business results of improved staff morale. This has been achieved by helping the teams to make all the key decisions about how the new structure should be organised.' Other companies overtly address the individual career. Inspired by Silicon Valley companies such as Apple and Sun Microsystems, Cable & Wireless last October set up a Career Action Centre in London to provide a focus for some of these issues. The original impetus was the need to equip expatriate managers with information to manage their international careers, but demand has been so great that the company has since set up a centre in Ireland and plans further facilities in the Caribbean and Hong Kong. The centres provide help with assessment, career planning and development. Emphasises Sue Tomlinson, C&W director of international resourcing and development: 'This is very much within the focus of business needs, particularly motivating and retaining good people.' She recognises that the counterpart to developing people's marketability and sense of their own worth is giving them the opportunity to use it. Informing people of vacancies and upcoming projects within the business units is a key part of the centres' function. The payoff: it's early days, says Tomlinson, but the centres do follow-ups to check outcomes such as satisfaction and retentions. A key control, though, is that the centres are self-funding - they would not have been developed, or rolled out at this rate, if demand, or willingness to pay, had been lacking.
The other side of information is learning what employees want. Herriot and Pemberton recount that when Hewlett-Packard UK last year uncovered evidence of employee concern over career issues in its annual employee satisfaction survey, it elevated the topic to a 'break-through issue', instituted swifter feedback mechanisms and revisited its self-development programmes. Some companies are responding to people's dissatisfaction with the lack of promotion prospects by experimenting with secondments of managers to jobs in the community or voluntary sector, sometimes with outstanding results. More daringly, others (including KPMG) encourage promising talent to leave and broaden their experience elsewhere on the understanding that they will be looked on favourably if any suitable jobs come up in the future. (If they don't, KMPG still wins by building up a network of well-disposed contacts in companies all over the country.) Until now, employment contracts have been drawn up entirely to suit the employer, on the assumption that employees were white middle-class males, wedded to a full-time job. That is about to change, for ever. The future is female, multicultural and flexible; a core skill of the company of the 21st century will be devising and administering a range of flexible contracts which will persuade budding Me plcs of the advantages of remaining a subsidiary. This is hardly what companies were thinking about when they so enthusiastically culled their management workforce in the 1980s. But the children they fired are returning as adults, and as in any process of growing up, 'The only way to keep them is to risk losing them. You have to give them room to develop, which at the same time makes them marketable. But ironically that's how you create loyalty,' says Linnecar. True, it's a gamble. But there isn't much choice. It's a game with high stakes, and the enforcers are at the door.
Simon Caulkin edits the management page of the Observer.