In June, Reid Hoffman (the co-founder and now chair of Linkedin), Ben Casnocha, and Chris Yeh published an article in Harvard Business Review that presents some new thinking around business operations, specifically with regard to establishing a new compact, as they put it, between employers and employees.
Reid Hoffman, Ben Casnocha, and Chris Yeh, Tours of Duty: The New Employer-Employee Compact
For most of the 20th century, the compact between employers and employees in the developed world was all about stability. Jobs at big corporations were secure: As long as the company did OK financially and the employee did his or her job, that job wouldn’t go away. And in the white-collar world, careers progressed along an escalator of sorts, offering predictable advancement to employees who followed the rules. Corporations, for their part, enjoyed employee loyalty and low turnover.
Then came globalization and the Information Age. Stability gave way to rapid, unpredictable change. Adaptability and entrepreneurship became key to achieving and sustaining success. These changes demolished the traditional employer-employee compact and its accompanying career escalator in the U.S. private sector; they are in varying degrees of disarray elsewhere.
We are not the first to point this out or to propose solutions. But none of the new approaches offered so far have really taken hold. Instead of developing a better compact, many—probably most—companies have tried to become more adaptable by minimizing the existing one. Need to cut costs? Lay off employees. Need new skills? Hire different employees. Under this laissez-faire arrangement, employees are encouraged to think of themselves as “free agents,” looking to other companies for opportunities for growth and changing jobs whenever better ones beckon. The result is a winner-take-all economy that may strike top management as fair but generates widespread disillusionment among the rest of the workforce.
Even companies that have succeeded using minimalist compacts experience negative fallout, because the compacts encourage turnover and hamper employee productivity. More important, although the lack of job security indirectly creates incentives for employees to become more adaptable and entrepreneurial, the lack of mutual benefit encourages the most adaptable and entrepreneurial to take their talents elsewhere. The company reaps some cost savings but gains little in the way of innovation and adaptability.
The authors do a great job of diagnosing the downside inherent in companies seeking greater flexibility by stretching the old compact to its limits, where most the the stretching is done by the employees, since they are the weaker in an unequal power relationship with the organization.
But the authors offer an alternative. And like most optimizations it requires more effort at the start so that less cost (and pain) is borne at the end. In a nutshell, they propose that instead of perpetuating the old, late industrial conceptual model of employment — nominally employment forever, but in fact, a highly precarious unstable deal — a new compact should be put into place that takes as its starting point the new form factor of work.
First, they propose that jobs should be thought of as gigs (although they don’t use the term), as “tours of duty” with a proscribed duration, and with a clearly defined start-or-go trajectory. This is, they say, the shift from assumed — and seldom realized — mutual loyalty, and instead structured as an alliance. This is similar to the consulting company pattern of “up or out”. Again, from the article:
If you think all your people will give you lifetime loyalty, think again: Sooner or later, most employees will pivot into a new opportunity. Recognizing this fact, companies can strike incremental alliances. When Reid founded LinkedIn, he set the initial employee compact as a four-year tour of duty, with a discussion at two years. If an employee moved the needle on the business during the four years, the company would help advance his career. Ideally this would entail another tour of duty at the company, but it could also mean a position elsewhere.
And the company’s responsibility is to groom the worker for lifetime employability in lieu of lifetime employment. The tour of duty sets a time period of mutually agreed trust, with two agreed upon possible outcomes. Either the company will set up a second (or third, etc.) tour of duty at an appropriate time in the tour, or either party can indicate that this tour will be the last, and that case, the company will work to help the soon-to-be-departing worker a new gig.
It’s imperative to clearly define ‘moving the needle’, so that both can agree if and when it is accomplished. Here’s is where the work of optimizing takes place. The organization has decided that Bette is a great candidate to join a new product team, but instead of some generalized notion of quarterly and annual reviews, the goals can be much more entrepreneurial in spirit.
The authors state that this is an end run around centralized HR:
This approach can’t be executed by a central HR function; you’re making a compact, not drawing up a contract. We’re not suggesting that you negotiate a guaranteed arrangement that spells out all the specifics—a rigid approach is the opposite of an entrepreneurial mind-set. You’re building a trust relationship that’s based on the employee’s actual job, so the conversations must be handled by direct managers.
This bears on the second element of the author’s approach: the company is obliged to maintain an active network with other companies, alumni, and organizations so that departing alumni can take on new work elsewhere. And to accomplish that, the company must create and maintain an active alumni network, at whatever expense, so that career-long relationships between alumni and employers.
I believe that the new form factor for work is fast-and-loose, where companies strive for high flexibility and agility. The downside of that can be the direct impact on people who can’t flex as fast or as far as large, amorphous organizations can. So setting a hard date for making the determination about stay-or-go allows the parties to operate in a trust relationship, but also for each to retain their flexibility. This reminds me of the arguments for term marriage, for obvious reasons.
My sense is that Hoffman and his co-authors have codified one aspect of the new business ethos of work for the postnormal economy, replacing the illusion of open-ended employment with the certainties of a closed-ended tour of duty.