The demise of defined benefit pension schemes is a key driver behind the evolution of the workforce and the relationship held between employers and their employees.
Long gone are the days when employees remain with their employers for life, safe in the knowledge they will be able to live comfortably in retirement on the income they have accumulated in their final-salary pension schemes during their careers.
Instead, employees are now more likely to work for a number of employers to whom they commit their time and passion in exchange for an employee value proposition (EVP) that extends far beyond remuneration, assuming, of course, the right level of remuneration is in place.
Employees, particularly millennials, are increasingly in search of an EVP that offers sound corporate values and missions to which they can relate and connect, access to career development opportunities, relevant training and development programmes, the opportunity to engage in corporate social responsibility activities and, importantly, enjoyable, challenging and varied work.
This means that employers have had to rethink the way in which they attract and retain staff, although not with a view to retain staff for life. In fact, the notion of a job for life is little more than a myth in many areas of the labour market.
As Peter Reilly, principal associate at the Institute for Employment Studies, explains: “I remember writing about the end of the job for life at the beginning of the 1990s. After each recesssion and after each crisis we say jobs for life are over, but jobs for life never existed for some parts of the population and still exist for others.
“I think employers’ reasons for holding on to people are much the same as they always were. They’ll keep people if they feel they need to and dispense with them if they feel they don’t, or if economic circumstances change.”
Changing economic circumstances have been a recurring theme of recent years in the wake of the global financial crisis of 2008. Business leaders have since found themselves under increasing pressure from shareholders to produce short-term results at the expense of long-term investment.
As Reid Hoffman and co-authors Ben Casnocha and Chris Yeh observe in their best-selling book, The Alliance: “The rise of shareholder capitalism led companies and managers to focus on hitting short-term financial targets to boost stock prices. Long-term investment took a backseat to short-term cost-cutting measures like ‘rightsizing’ – or as we used to call it, firing people.”
In the UK, the decision to leave the European Union has exacerbated this pressure and the breakdown in trust between employers and employees generated by the financial crisis. This has resulted in large numbers of employees feeling disposable and undervalued in their job and the part they play in driving the growth of their business.
Mr Hoffman believes it is employers’ lack of loyalty that is destroying trust. “The company is asking employees to commit to itself without committing to them in return,” he explains.
The solution, he suggests, is a new “alliance” between employers and employees in the form of “an employment framework that facilitates mutual trust, mutual investment and mutual benefit”.
This framework should be structured to enable each party to make one another more valuable. This means that employers should be willing to work more collaboratively with employees as they help develop employees’ personal brands and make them more marketable. In return, employees should be willing to commit to the business by way of performing and innovating to the best of their ability.
“In an alliance, the manager can speak openly and honestly about the investment the company is willing to make in the employee, and what it expects in return. The employee can speak opening and honestly about the type of growth they seek – skills, experiences and the like – and what they will invest in the company in return by way of effort and commitment. Both sides set clear expectations,” says Mr Hoffman.
Allowing employees to perform multiple job roles or projects, which Mr Hoffman terms “tours of duty”, can help employers and employees to build the trust their businesses need to grow. “In the context of the alliance, the tour of duty represents an ethical commitment by employer and employee to a specific mission,” he says.
This then helps employers to retain staff for longer and, consequently, grow their business while enabling employees to grow their personal brands through a variety of interesting and engaging job roles.
This framework should be structured to enable each party to make one another more valuable
A new survey from Deloitte supports Mr Hoffman’s theory. The Global Human Capital Trends 2016 survey, entitled The new organisation: Different by design, suggests a desire by employees to become “volunteers” to be re-engaged and re-recruited each day, with employee engagement and retention being about empowering a workforce’s desire for flexibility, creativity and purpose.
As Anne-Marie Malley, UK human capital leader for Deloitte, says: “The key theme of the report this year reflects our strong conviction that in 2016 business leaders must radically evolve their organisation to cope with a series of new disruptors. These include a raft of demographic changes that have made the workforce both younger and older, and are driving the need for talent solutions that meet the needs of multiple generations; the rise of digital technology; the increased pace of change in business models; and a shift in the way the psychological contract between employer and employee works, with employees looking to move employer more frequently in the course of their careers.”
In fact, the concept of job hopping is shaking off its negative connotations of old and being seen by some industry commentators as an economic necessity. Laura Gardiner, senior labour market expert at think-tank Resolution Foundation is a case in point.
She says: “There’s a big debate going on, and has been for a while, about security in the labour market, particularly with zero-hours contracts where security is a real challenge.
“But one of the best ways to achieve pay progression in your career is to move from one job to another, and that’s important to the individual and it’s also really important on a macro level because it’s the best way of firms reallocating productive capacity. Firms become more productive through the staff they take on who are a better fit for the organisation.”
Consequently, job mobility helps to drive profitability, keeping shareholders happy in the process.
But business leaders need to accept that job mobility is the worst nightmare of employees for whom work is just a job and progression is of no interest, meaning that a more transactional relationship may be more appropriate than some version of Mr Hoffman’s alliance.
There are also many process-driven roles for which a transactional relationship between employer and employee is more appropriate.
As Claire Kelliher, professor of work and organisation strategy, people and leadership, at Cranfield School of Management, says: “In some cases, we might see what we’d term healthy employment relationships for some organisations, particularly with employees they may place greater value on.
“But I guess that in other areas of the labour market, with increasing developments of things like zero-hours contracts, contractors and practices that we’ve seen with the gig economy, what we would have called the traditional employment relationship is a different type of relationship now, [but] I’d hesitate to use the word broken.”
Seasoned business leaders know only too well the importance of creating alliances that engage, motivate and inspire employees, whatever their role and level of commitment to the business. This is because the negative impact of presenteeism and sickness absence resulting from employees not feeling recognised or appreciated can far outweigh the input of high-performing talent and cost the business dearly.