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 time has come, we believe, for a new employer-employee compact. You can’t have an agile company if you give employees lifetime contracts—and the best people don’t want one employer for life anyway. But you can build a better compact than “every man for himself.” In fact, some companies are doing so.
We three come from an environment where the employer-employee relationship has already taken new forms—the high-tech start-up community of Silicon Valley. In this world, adaptability and risk taking are acknowledged as crucial to success, and individual entrepreneurs can have a big impact if the networks they’ve built are strong enough.
Two of us (Reid and Ben) recently wrote a book, The Start-up of You, that applied the habits of successful tech entrepreneurs to the work of building a fulfilling career in any field. Obviously, not every industry works like a start-up business. But most firms today operate in a similar environment of rapid change and disruptive innovation.
Tiny start-ups out-execute corporate giants all the time, despite seemingly huge disadvantages in resources and competitive position. Start-ups succeed in large part because their founders, executives, and early employees are highly adaptable, entrepreneurial types who are motivated to out-hustle, out-network, and out-risk their competitors—and who thus generate outsize rewards.