Establishing rules for the new workplace - Economics

John A. Challenger

FOR AMERICAN BUSINESSES and their employees, the rules on such basic issues as hiring and layoffs, work schedules, and corporate structure are changing at a rapid pace. They are driven by macro forces such as globalization and the rise of shareholder power, as well as more-personal decisions, like the desire to balance work and family life or to keep on working past traditional retirement age.

For example, there is a fusion going on between home and work. We cannot get away from work when we are at home, and we cannot get away from home when we are at work. I recently visited the Northern Telecom headquarters in Toronto, Canada--an indoor city complete with a main street, cyber cafe, dry cleaners, video rental, exercise studio, museum, pharmacy, bank, kitchens, recreation rooms, and sleeping quarters.

In fact, childcare and eldercare centers in many offices today mean that your offspring and parents are there, too! The only home-oriented things missing from the millennium workplace are churches and synagogues, but I have been heating more and more about spirituality in the workplace.

On the other hand, we cannot get away from work even when we are not there. Since the film "2001: A Space Odyssey" debuted more than three decades ago, we have been wondering when computers would become human or superhuman. What sneaked up behind us was the opposite: Human beings are becoming increasingly electronic. We carry our cell phones, beepers, fax machines, email, portable CD players, and laptops--our office--with us at all times.

Our cell phones are ringing off the hook. Commuting to an office is not downtime because there are customers to be called. On the morning or evening commuter train, there used to be a subtle taboo about talking on a cell phone, but that has disappeared. We can look to Hong Kong for the future. When you go into some restaurants there, you aren't asked about smoking or nonsmoking, but whether you wish to be seated in the section where you can leave your cell phone on. Golf courses around the U.S. are banning the use of cell phones during play.

When you leave for vacation, the office wants to know where you are going to be. One woman executive recently told me that she sat on the beach in the Dominican Republic talking on her cell phone until 3 p.m. Satellite technology and global positioning mean there is no place to hide. The one place and time when you cannot be reached is on a plane during takeoff and landing, and that's only because of Federal regulations.

The global marketplace further erodes our personal time. Three major business zones are forming: the Americas, Europe/Africa, and Asia. If American businesses have customers who need servicing in Asia, it is essential that they work from 5 p.m. to 11 p.m.; for customers in Europe, they better be up at 3 a.m.

All of this technology makes workers highly mobile, and some companies never want them at a central office facility. Consultants today spend their workweeks on the road, in the air, and at the customer site. Four or five days of travel are not unusual. If they do need an office, they are often hoteling, checking in with the receptionist in Dallas, being assigned an office, hooking into the network, and turning on the cell phone so that customers, clients, bosses, colleagues, direct reports, and copier and financial services salesmen can reach them 24 hours a day at any location in the country. Two days later, it may be Pittsburgh, where they greet a new receptionist who assigns a similar-looking office. Bringing their children's pictures in a briefcase to set on the desk helps to personalize the equipment.

The line between work and home, public and private, is increasingly blurry. Multiple e-mail addresses and phone numbers are one way to try to redraw those boundaries. I need an e-mail address that is my personal one for family and friends, a different one for work, and I would love still another one for all the junk e-mail that comes my way. I worry about what happens if too many junk mailers get my personal e-mail. Will I have to keep changing identities? I don't have the time to wade through all of the e-mails I get every day. Now, I have to check two different names several times a day. This change has happened so suddenly that we were not prepared.

The overburdened worker must reclaim some of those boundaries. Tell your employer: I do not want to be called on the weekend or on vacation (except in an emergency). Do not take your cell phone with you when you are in your car; you might get in an accident while concentrating on soothing an irate customer. Don't travel on Saturdays and Sundays.

The problem is, you might lose your job. One side effect of all these technological advances and the rise of a global economy is that no one's job is ever totally secure and no company can remain an industry leader without constant innovation and attention to the bottom line.

How did we get here? Let's take a look back at the ways life has changed for American companies and workers in the last few decades.

The former economic system in the U.S. was characterized by a variety of structures that restricted the flow of people. Lifetime employment was a goal that companies and individuals alike hoped to achieve. When individuals accepted employment offers, they expected, as long as they did not do anything too wrong--like coming in late constantly, embarrassing the boss, or embezzling funds--that their jobs would be safe. The cornerstone of the social contract between the organization and the individual was long-term--even lifetime--employment.

Individual identity was tied in with the company. IBM employees thought themselves privileged because of their identification with the organization. Big Blue hired the best and the brightest. People built their lives around the company. Often, a worker's closest friends came from within it. People closely integrated their working and personal lives. They bore witness to each other's lives, developing deep, solid, secure relationships over a lifetime. It was not unusual for coworkers to be godparents of each other's children.

After God and family, loyalty to the company was at the top of the value scale. The employee trusted the firm would provide job security; the employee returned that loyalty in kind, by pledging not to leave and certainly never thinking seriously about working for the competition. In fact, most workers cultivated an authentic dislike for rival companies. In the 1960s and 1970s, most of our outplacement clients, who had been terminated by their former employers, refused to even consider working for other companies in the same industry, willingly sacrificing organizations that had a special need for their industry knowledge.

There was a balance between shareholders and stakeholders. The latter--in this case meaning employees and communities--were once critical factors in long-term strategic decisions by companies. Moving plants and warehouses and jobs to another area of the country or world was unthinkable because of the damage it would do to the local community.

Hiring by big companies occurred mostly at the entry level. The Fortune 500 did not bring in many people over 40. The primary entry point into the organization occurred soon after graduation. New hires entered onto an upward, progressive career track until they plateaued or "Peter-principled."

CEO power and control were at their zenith, while a rubber-stamp advisory board of directors was not unusual. Often, CEOs handpicked the board members, who might be third- or fourth-generation family members, or the positions were sinecures for VIPs. Many did not serve even in an advisory role; the board membership was largely ceremonial.

The dominant cultural archetype was the Organization Man, who sacrificed his own goals for the good of the company. Refusing to take on an assignment meant the end of one's career growth. A firm could not trust an individual who did not put the organization first, ahead of more-personal and selfish needs like family and friends and roots.

Unions were predominant and effective. It was taken for granted that unions had won the battle for job security, so labor focused on other goals like better wages and working conditions. A company that sought to terminate the employment of a union member needed an ironclad case of wrongful behavior, and still could expect a battle from the union.

U.S. companies focused on domestic labor markets. They did not build plants overseas, especially to manufacture products for domestic markets. A large network of support companies spread out around a region--e.g., in the Midwest, suppliers and original equipment manufacturers burgeoned and eventually surrounded the auto industry in Detroit. Shipping and logistics costs were prohibitive and effectively prevented companies from locating operations in other parts of the world.

The forces of change

Several primary forces brought about systemic change in the economy in the 1980s and 1990s. The American economic system, which had come of age after World War II and grew unchecked until the Vietnam War, was beset by economic and social crises.

Globalization forced the U.S. out of its isolation. Companies began to look for new markets overseas. Coca-Cola and McDonald's spread throughout the world. NAFTA, GATT, and free trade brought down barriers that had once prevented a more-open flow of goods and services and human resources around the world. Inevitably, the law of unintended consequences took effect on the American economy. Protected industries like automakers faced serious competition from overseas for the first time, with devastating consequences. Chrysler came within a hair's breadth of closing down, and General Motors announced it was cutting 74,000 jobs in December, 1991, the single-largest downsizing of the 1990--and perhaps ever.

Technology and automation transformed the way companies operated. The PC revolution brought power to the desktop that was unimaginable a few decades before. Enterprise software programs, laptops, cell phones, e-mail and the Internet, e-commerce, business-to-business exchanges/alliances, and supply chain destruction and reformulation--these technological phenomena have emerged in rapid succession.

Big computer makers like IBM lost their dominant position because of an onslaught of competition from Apple and other companies making PC clones. IBM announced the second-largest downsizing of the 1990s, with 63,000 job cuts in July, 1993.

Diversity and antidiscrimination forces that flowered in the 1960s worked their way into the mainstream. There was a strong push from outsider segments of the population on the moral, legal, and legislative front to repair age, gender, race, and ethnicity discrimination damage. The fact that the dominant social group--white males--could expect to face discrimination once they reached their 50s contributed to a recognition of the fundamental unfairness and the eventual breakdown of the former caste system.

The deregulation of protected industries in the 1980s and 1990s created competition for companies where none had previously existed. The telecom, banking, energy, and aerospace industries were roiled by the change. The big bureaucratic corporations that had dominated these protected industries were forced to compete in an open market and started letting people go in sizable numbers in the early 1990s. It was not surprising that telecom, financial services, and aerospace dominated the list of those experiencing the heaviest downsizing in the early to mid 1990s.

Shareholder activism grew unchecked as more and more people started to invest their savings, IRAs, and 401(k)s. Today, shareholders seat members on boards of directors; they scrutinize and second-guess every decision of the CEO and have access to swaths of information about companies that were once hidden; and they dole out swirl punishment to the share price of companies that underperform.

The forces outlined above combined to create a new set of "roles of the game" in the American workplace. In the 1990s, companies stopped thinking about holding onto steady workforce levels during periods of slowdown. Today, when orders and revenue increase, organizations hire more people; when business drops, they are quick to eliminate idle hands and downsize. Companies constantly scrutinize their operations, jettisoning products and services that are losing market share, becoming marginally profitable, or coming to the end of the product life cycle.

It is no wonder that the term "personnel" gave way in the 1990s to "human resources" which is not a far cry from "human capital" a phrase that is creeping into wider usage today. Companies such as Dell Computer led the movement toward "just-in-time inventory principles," taking the slack out of the supply chain. Now, those principles have filtered into the employment sphere. As leaders of companies began to think of their employees as resources and capital, they realized that people who "sat on the shelf" during periods of order slowdown were an economic liability. The problem was even more apparent to shareholders, who saw that employment costs were the heaviest expense on the balance sheet in a service economy.

In periods of recession, companies do not just shed the bottom performers. They slash and burn. In the recession of 2001, the first one in which the new rules of the game were fully in place, downsizing escalated to nearly 2,000,000 job cuts.

The large number of temporaries, contractors, and consultants at American companies today constitute a "flexible employment system." Not only is a segment of the blue-collar workforce permanently temporary and project-based, but we also have seen the creation and exponential growth of large-scale organizations of highly talented temporary business experts such as Deloitte & Touche, Accenture, and McKinsey. When a downturn hits, companies can immediately cut back on costs by eliminating temporaries, overtime, perks, and various other soft benefits put in place to attract the best workers in times of expansion.

When orders begin to mount, companies can cautiously add man-hours, output, and productivity by hiring the growing army of people who work on a part-time, project basis. As the recovery gets legs, prospering businesses can convert these workers to full-time positions. Business owners can buy time to make sure that another dip is not in the offing as they wind up the recruiting machinery. In past recessions, unemployment continued to worsen as economic recovery began. Enhanced technological ability to detect new orders quickly, combined with flexible workforce options, should act to diminish this traditional unemployment lag.

Entrepreneurialism exploded in the 1990s as a generation of young people lost faith in the large Fortune 500 companies after witnessing the despair and outrage of their downsized parents. Most of the extraordinary job creation of the 1990s--more than 21,000,000 new ones--came from the small-business sector. Workers in the U.S. possess a risky, yet highly viable, option when they are asked to leave an organization. They can start their own business, buy a franchise, or hang out a shingle as a self-employed free agent. Entrepreneurialism thrives in the U.S. to a degree that is not found anywhere else in the world. Bright, highly educated, hard-working, newly discharged managers and non-big company types start up new businesses and avoid the politics and whims of large organizations.

The influence of the stakeholder and the shareholder in corporate decisions and governance that once was evenly balanced has tilted significantly over to the side of the shareholder. In 2002, the shareholder is king. In the bear market of 2001, 50% hits to the stock price were not unusual when a company failed to meet its quarterly numbers. Such organizations must swiftly install cost-cutting programs when problems arise or risk the wrath of Wall Street. They take little account of the concerns of employees or communities--i.e., the stakeholders--when revenues start to fall.

As individual identity has become uncoupled from a particular company, people have focused on functional career areas (e.g., law, human resources, financial operations, sales and marketing, and manufacturing professionals). We are returning to an age of guilds, where people organize themselves professionally. In the last decade, professional associations and functional groupings have seen explosive membership gains as more and more individuals seek community, safety, certification, and networking opportunities in the company of likeminded career professionals.

Employers have instituted a wide array of training and development programs in order to equip employees with appropriate technology skills. When companies are unable to find enough skilled workers trained in state-of-the-art technology, they hire people and train them on the job, supplemented with e-learning. Workers are incentivized through tuition reimbursement programs to acquire more training and to view their education as a lifelong process, rather than one ending in their 20s.

Home and family are much more important as people seek out a work/life balance. Women in the workplace, especially, have forced changes in how companies manage the boundary between home and work. Job sharing, telecommuting, sabbaticals, reentry into the workplace after the childbearing years, and transplacement programs to help the trailing spouse find a new job are examples of new initiatives offered to accommodate work/ life needs. The baby boom generation of fathers is no longer happy with long-distance relationships with their young children, turning down jobs and promotions that require too much time away from home.

Discriminatory barriers to entry into the job market are falling. Age, sex, race, religion, and ethnicity biases are slowly being rooted out of the system at the legal, social, and educational levels. During the red-hot job market of the 1990s, when unemployment reached the lowest rate since the Vietnam War, companies had no choice but to hire people who otherwise would have been ignored. Biased managers took chances on individuals they normally would have avoided and were shocked to find that many of these former outsiders became the hardest-working employees in their respective departments. Meritocracy made major gains as the most-productive people became recognized for their achievements in the ultracompetitive, profit-driven economic environment of recent years.

Technological innovation has opened up the potential for enormous changes in the job marketplace. In the early 1990s, the Clinton Administration proposed a national job bank where accessibility to job openings would be coordinated and widely disseminated. The plan was abandoned, but the emergence of the Internet created the beginnings of a national source on the Web.

The Internet job bank facilitates the flow of workers to areas of the country where demand is high. The job-seeker who used to purchase the Boston Globe and the Wall Street Journal can now easily check out the classified ad sections from virtually every city in the country from his or her desktop. Each of these innovations speeds up throughput of workers to hot industries or regions, giving job-seekers and employers more options in times of recession and drying up pockets of unemployment in periods of economic expansion.

Another major innovation transforming how organizations and people come together is through systems like Resumix. These are huge corporate databases of candidates, allowing companies to locate appropriate workers on a scale unimaginable a few years back.

Not just U.S. workers are affected by these changes. We are moving into an era when the labor supply is global. Mexican mequilladoras, American middle managers working in Japanese-owned companies and vice versa, and technology workers from India and New Zealand (sometimes referred to as software factories) attest to the shrinking of the world and the internationalization of an unskilled and highly skilled workforce.

The rules have changed

Over the last decade, people have come to realize that the "rules of the game" have changed and, like Curt Flood, the baseball player who pioneered free agency in Major League Baseball, they must view themselves as free agents, willing to offer their services where and when they want and to the highest bidder. In increasing numbers, people are open to the idea of leaving jobs voluntarily for better ones, rather than waiting passively and reactively for the company to offer them a promotion or a pink slip.

Job boards like Monster have opened up wide possibilities for expansion of worker free agency. The secret and anonymous posting of resumes allows currently employed workers to advertise their skills confidentially to interested employers. The statistics for growth in voluntary job movement are impressive.

The new environment of just-in-time employment policies and no-fault job loss is truly democratic in that everyone from the CEO to the assembler on the third shift is vulnerable. The boss who terminates 10% of his workforce knows that he or she could easily be next. No matter the position and level, all jobs are precarious.

The recognition on the part of all individuals of common and shared job security/insecurity has led to the development of programs aimed at helping people bridge to their next job, and to the tacit expectation that all companies must provide a secure safety net to terminated individuals. The safety net that each individual has come to expect and feel entitled to in the case of job loss includes three primary components: severance, health insurance continuation, and outplacement services--job-seeking support to reduce the duration of unemployment and improve the quality of the worker's next position. Most organizations used to throw their people out on the street with no help at all, assuming that the termination was entirely the worker's fault and not the firm's. Today, ethical companies realize that the blame must be shared.

Despite our current troubles, it seems the government and Federal Reserve have used monetary and fiscal tools to smooth out the highs and lows of the economic cycle. It is also possible that the economy itself is more resilient, better able to weather the economic storms because of deregulation domestically, free trade internationally, and the demise of other artificial constraints. If enhanced economic resiliency turns out to be true, then shorter, V-shaped recessions may be in our future--steep, short slowdowns with equally quick returns to periods of growth and long-term stability. Perhaps companies really are less flabby and more agile. Such freedom of movement may create an environment in which companies swiftly recognize upturns and invest in new areas of growth when the economy perks up.

For the moment, downsizing is still rampant. Companies must swiftly pare costs because of the profit recession. Shareholders insist that expenses fall in proportion to revenue declines to ensure that earnings remain steady. However, downsizing damages the organization in the long term as morale is irreparably harmed, corporate memory is lost, and continuity of decisionmaking is broken.

The forces of technology, globalization, deregulation, shareholder power, and free agency have combined to change the social contract between the individual and the organization. For workplace designers and suppliers, the new roles pose new challenges. How do you design space for a worker who is much more mobile?

Wireless technology is unchaining the worker from his or her desk or cubicle. In fact, it may have been the electrical and phone cables that tethered workers to their desks and offices in the first place. Fixed equipment is disappearing. Batteries are replacing cables and power supplies. Workers are carrying their offices on their backs and to their homes. For these "road warriors," the workplace is sometimes the car, airport, ballpark/golf course, or garden.

Employees who are telecommuting or constantly on the road can become isolated from the company and their fellow workers. In the free agent economy, people are changing jobs so often that it is hard really to get to know your coworkers over the long term. This creates more potential for isolation.

Corporate spending on training and development is up 25% in the last five years. Skills constantly need to be updated. The half-life of knowledge is decreasing. Companies are entering into more partnerships with community colleges and other educational institutions.

The workforce is aging. Each age group has its preferred method of working; young and old have different workstyles. At the same time, mentoring between young and old is very important to business continuity, corporate memory, and skills development. For women, the glass ceiling is breaking apart because young females are achieving many more advanced degrees than their male counterparts. These degrees are the keys to economic and social advancement. The new meritocracy of the educated elite is replacing the establishment that ruled in the U.S. through much of the 20th century.

The ultimate workplace tragedy--the terrorist attacks of Sept. 11--prompted concern about safety as well as a desire for more meaning from work and a stronger emphasis on community outside of the workplace, reinforcing many of the work/life issues already gaining prominence there.

Redesigning the workplace

Companies must take into account a separate, but related, set of issues in order to design a workplace that accommodates the new rules:

* Constantly changing size of the workforce

* Frequent strategic adjustments to maximize profit areas

* Unrelenting pressure to-control fixed costs

* Customers, suppliers, and employees located around the world.

Given the issues racing workers and companies in this new era, the value of any workplace design will be measured by how well it addresses the needs of a business in four broad areas:

Flexibility. Companies are leasing less space and making greater use of it. Space and furniture must be multifunctional so that it can be used alternately for training, hoteling, conferencing, individualized offices, team projects, and big and small meetings. It must set up and dismantle quickly. Smart buildings will feature movable walls and adjustable lighting. Employees who are in the office only part time will share space, which can be converted easily into two or more private offices if circumstances change.

The global economy forces companies to be agile, building up and cutting back the workforce quickly in response to circumstances, altering products and services to meet changing demands. Office design and equipment must enable, not hinder, those moves if a company is to survive in the ultracompetitive economy.

Technology. Buildings must have the electronic infrastructure, including fiber-optic lines and routers, to support cutting-edge technology. Furniture must mold itself to the technology and increasingly smart buildings. Power is being "batteryized" or wireless. How do you design space and furniture for people who carry their offices with them?

Again, flexibility is key because not all employees will be wireless road warriors. In fact, the multigenerational workplace means that technology comfort and adaptability run a wide spectrum. Each age group has a preferred method of working. You may need telephones and full-sized PCs in some offices, while other employees carry in and take home their cell phone and battery-powered flat-screen laptop.

If younger recruits don't see that the workplace is outfitted with the latest technology, or at least has the capability to "plug and play" they will assume the company is out of date. On the other hand, an aging workforce is not going to want to be overwhelmed by new technology. So, adaptable work stations that allow different age groups a way to connect become vital.

Community. Common and open or public areas are more important at companies increasingly populated by free agents and others who have little or no corporate loyalty or memory. The same technology that gives people the freedom to change jobs frequently and set their own schedules at work also leaves them isolated. Today, we see people coming together who have little mutual history individually or with the company. They have not developed the rapport that comes from working together for many years.

Spaces should be designed with common areas that force people together, such as war rooms to encourage strategic collaboration and teamwork, and areas that create water-cooler conversations, enhance productivity and make people want to stay. Post-Sept. 11, security-conscious companies will have less-conspicuous entrances and public areas for nonemployees, but public areas inside the workplace will be a vital design feature.

The changing roles of the workplace make the large corner office and its "aircraft-carrier" desk obsolete, an overt display of power and status within the workplace. Private offices will become smaller, accommodating hoteling salesmen, consultants, and temporary workers as well as those who spend hours in the office each day. Private space will be in the middle of the building and public rooms on the perimeter, with windows and lots of natural light. To maintain costs, some space could flip between public and private, with furniture that adapts to multiple purposes.

Work/life balance. Even if they share space with others or push a "personalized pedestal" with their files in it to a temporary office, workers need to express their identity with personal touches. Small shelves or other design features could make it easier to place family photos and other items that maintain a connection to home in the office. People want to feel they have their own identity within an organization. They do not want to be nameless or detached from their life outside of the workplace.

Flex-time, telecommuting, and the demands of the global, 24/7 economy stretch out the workweek, requiring that offices be functional at odd hours and weekends. For many companies, this means support staff cannot always be on hand, and supplies and tools must be readily available and usable by employees at all levels. Firms might also invest in small satellite offices that are closer to some workers' homes and available for most functions.

A number of companies are bringing elements of the home into the workspace. The home-workplace fusion means sleeping quarters for a global workforce, living rooms, music, kitchen tables, couches, fishbowls, TVs, game rooms, fireplaces, coffeehouses, washing rooms, concierges, and cubbyholes. Many workers live in other areas of the country and may come to a city constantly or actually move there on a project basis for several months. Companies are providing the living and workspace for these people. Will organizations devote certain floors or areas to living space?

Finally, there is the issue of home offices. Are companies going to be forced at some point to start building home offices for their people? How will they manage the liability issues? What about personal design considerations?

Obviously, design makes a difference in how workers do their jobs and live their lives. Earlier, I mentioned that the telephone and its cable were important to the creation of office work. So were elevators and file cabinets. Technology will keep changing, and office design will evolve with it. More importantly, the structure of business organizations and the relationship between workers and companies has undergone a profound shift. A good deal of the future will be spent working on ways to improve the work environment to reflect this new reality.

There will be successes and failures. Think of the dot.com revolution and the changes it brought--open teaming, more color and edgy materials, and raw ceilings and floors. There was a backlash as well. Things became too loose. The time has come to bring back traditions and more professionalism.

No matter the era, the bottom line is always productivity. People need to come into an environment that is conducive to focusing and working hard, but also makes them comfortable. Like most good ideas, it sounds simple. The difficulty will be in the execution.

John A. Challenger is CEO of Challenger, Gray & Christmas, Inc., Chicago, Ill.

COPYRIGHT 2002 Society for the Advancement of Education
COPYRIGHT 2002 Gale Group