We are approaching an historic transformation of what for thousands of years we have considered work: scavenging, hunting, laboring in fields, and later offices. Today we are seeing a punctuated equilibrium, a radical rethinking of what it means to be an employer or employed. Whichever you are now, your future is about to change.
Three drivers are pushing us toward a radical employment transformation:
Change is now accelerating beyond the ability of formal organizational structures to adapt. Innovation guru Gary Hamel says, “The organizations that survive in the coming decades will be those that are capable of change as fast as change itself.”
While Eric Pearson, CIO of InterContinental Hotels Group, agrees that speed is becoming the most critical characteristic of success, Wharton Professor George Day says that the key to growth is the ability to turn uncertainty into opportunity.
Though size was once an advantage, in fast-paced environments it becomes a tax. As companies grow, “the ratio of managers to front-line employees goes up, decision cycles get longer, and decision become more political,” Hamel says.
The shift from a manufacturing to a knowledge economy has lasted two decades. Now the next shift is coming: from knowledge to creativity. We no longer need to hire knowledge. It’s nearly all at our digital fingertips. What matters now is creativity, the ability to devise innovative solutions from knowledge. This is something technology still cannot emulate.
Uber, Airbnb, OpenTable, and innumerable disruptive innovations all play on the fact that industries are disaggregating. Anyone can plug into Alibaba.com and “turn on” the production capacity that 20 years ago only large, rich companies could access. The winners today, as Hamel says, think about “their share of advantage and their share of cost. Turn over an Apple product and you will see ‘designed in California, manufactured in China.’” Since we can outsource almost anything, we will see companies starting to retreat to the most profitable activities.
The confluence of these trends is thrusting us into a very different work environment in which work is done by freelancers, leaders are chosen by the people, hierarchy falls, and competitive advantages are ephemeral. Employment as we know it is shifting in several ways:
According to Jonathan Becher, CMO of computer software company SAP, already up to half of all U.S. workers are freelancers. But they aren’t on the books, HR leaders don’t count them as employees, and they aren’t part of training and culture initiatives. That will need to change.
We have grown up assuming that title and position make someone a leader. But freelancers have a choice. If you don’t inspire them, they will find a leader who does. Even full-time employees, particularly millennials, expect greater choice. In a Facebook/Twitter world, in which leadership is measured by followership, the idea that a company can dictate who you should follow is foreign.
SAP, in partnership with Hamel, recently hosted the “M-Prize Unlimited Human Potential Challenge,” an open innovation project aimed at reinventing management for the 21st century. The contest received 109 entries and revealed a key trend: forward-thinking leaders are looking for a new organizational model, one based not on the centuries-old command-and-control hierarchy, but rather a form in which people choose where and how to contribute on their own.
For example, software company Red Hat is now crowdsourcing its strategy, allowing thousands of employees to define the company’s goals, direction, and commitments. Harvard Business School professor John Kotter suggests companies should adopt a “dual operating system,” in which the traditional hierarchical structure lives alongside a new networked one.
In a fast-paced world, the “sustainable competitive advantage” Harvard Business School professor Michael Porter taught us to seek out becomes nearly impossible to find. Instead, Hamel says, “the fundamental challenge [today] is not building a competitive advantage but building the ability to reinvent yourself.”
So how can you adapt ahead of your competition? There are four interconnected keys to this:
The traditional top-down hierarchical structure is the product of a paper-based information paradigm in which you needed to push information up to a manager who would synthesize it and push it up further.
In a digital, big-data world, we don’t need this anymore. We will start moving away from tightly defined job descriptions toward a world in which employees get to pick which efforts they want to contribute to. VAGAS, a Brazilian software company and one of the M-Prize winners, has structured itself as a “radically” horizontal organization, with no hierarchy and no command structure. Self-managing teams have a high degree of freedom and autonomy. Leaders aren’t officially designated, but emerge organically.
We have been speaking for years about companies like Google that allow engineers to invest 20% of their time on ad-hoc projects. This practice will grow. SAP is exploring a model that measures the performance of employees with a formula of, say, 80% on your core role, 10% on your ability to help the sales team cross-sell, and 10% on the success of a special strategic project.
Non-financial motivations, like shared value and drawing a sense of purpose from your work, are becoming more important. The “career ladder” will stop being the carrot every manager clamors for and your promotion will no longer rest in the hands of one boss. As Hamel said, “When one individual is largely responsible for my career, how can that person be free?” Your boss will start being measured on things like the number of ideas their organization generates and number of ideas that make it through the pipeline.
Companies must start training all types of employees to be innovators, not just those in the Chief Innovation Officers’ camp. Companies may say they take innovation seriously, but when Hamel’s team asks shop floor workers “Do they pay you to be a business innovator? Have they taught you to recognize trends or recognize opportunities?” the answer is no.
We will start seeing distributed marketplaces in which ideas can compete for funding. Pearson has been admiring several companies that are doing this well and believes this is critical for any large organization that wants to be nimble. GE, for example, solicits thousands of growth ideas then partners with VC firms to fund them. AT&T has succeeded with a similar effort.