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FOSTERING ORGANIZATIONAL COMMITMENT IN A FREE AGENT WORLD

Keynote by Jan Austin

The Association for International Management Search

Toronto, June 21, 2001

I’m fascinated by the complexity and magnitude of change in the global business environment. We are witnessing an era of unprecedented growth, against a backdrop of extreme volatility. There is good news and not so good news for the workplace. The good news is that productivity and employment can be expected to grow. The not so good news is that the fundamental agreements by which organizations conduct business, and workers participate in the enterprise, have been irrevocably altered. New road rules apply to those who seek success.

I’d like to share with you some of the trends I think are worth watching, their impact on organizations and people, as well as some strategies leaders can employ to gain the commitment to high impact performance by their workforces, in light of these trends.

I see four significant trends which will create turbulence and uncertainty in the global business environment for the foreseeable future.

High returns expectations: there will continue to be extreme pressure to elevate shareholder value, with a focus on short term performance. This will create considerable tension, because short term focus comes at the sacrifice of investment in the future of the organization. A long term focus will have to be balanced with short term strategies in order to achieve sustainable growth.

Lean and mean: The increasing costs of being “big and slow” have brought about a renewed focus on smaller, leaner, and more responsive organizations. Manufacturing and services will re-engineer themselves into “lean and mean,” focusing on streamlined processes, small scale production, small inventories, and reduced waste. While downsizing isn’t a primary goal of lean manufacturing, it is, nonetheless, often a consequence. Dell Computers is a case in point. Dell has been successful in reducing its personal computers inventory to just 24 hours, compared to rival Compaq Computer’s six days. Not coincidentally, Dell has reduced its Austin, Texas workforce by 6,000 within the last three months.

Extreme corrections for performance gaps: we’ll see continued downsizing, mergers, divestitures, terminated executives and stock market volatility as organizations make aggressive course corrections in order to meet goals. The speed of these corrections will exponentially increase the number of individuals personally affected by downsizing or termination. It’s becoming increasingly common for the same individuals to be affected by multiple downsizings within a short period of time. These corrections—and their impact on people—is creating a huge shift in how employment is being viewed.

Stiff competition to attract and retain top talent: one of the things that e-commerce has shown us is the power of knowledge capital in the free market. Talented people with great ideas will be able to generate high incomes and choose their work and lifestyles. Indeed, some companies are looking at locating their facilities in “lifestyle communities” where the talented people they seek like to live and play. But, of course, more than geographical considerations will need to be top of mind with recruitment and retention, as I’ll discuss momentarily.

There is little doubt that leaner organizations will perform better in the new economy. We must not mistake lean manufacturing, however, with real growth. Real growth comes from the germination of great ideas into innovative products and services.

There are also high hidden costs associated with strategies to create lean organizations. Employees of many organizations have been worn down by constant change, pressure to work harder with fewer resources, and repeated downsizing. As a result, organizational leaders are finding that their employees are reluctant to give their full commitment because employees don’t trust that it will be reciprocated.

One of the great ironies of our time is that leaders expect—and desperately need—the loyalty, commitment and trust of their workforces, but they are not able to make promises they can easily keep. Failure to re-examine these expectations in light of current organizational realities serves only to make leaders all the more suspect.

The notion of who is an employee and what is the nature of the employment contract must also be re-examined to make way for new workplace relationships. What is the new relationship?

Displaced, burned out, overworked, and under-challenged employees of the traditional workplace, as well as those who simply want more control over their work lives, have begun to re-define their relationship to work. They are re-engaging in the workforce as “free agents” in the form of independent contractors, licensees, or strategic partners. Organizations are getting right behind this, as their leaders recognize that contingent, project based employment can help them deploy the right talent for their current and emerging business needs as well as manage their bottom lines.

Free agents have discovered something very important—that if they can tolerate the risk of the marketplace, and if they are willing to continually develop themselves as brands, free agency may be their best hedge against downturns in the economy. Why? By diversifying and spreading their knowledge capital across a range of projects and clients, they are not as vulnerable if there is a downward trend in performance in one area. In fact, by assuming risk, free agents place themselves squarely in position to reap the full rewards of high impact performance.

The number of individuals who are claiming or defaulting to free agency is staggering. According to Fast Company Magazine, there are roughly 16 million soloists, 3 million temp workers, and 13 million micropreneurs in the United States. This is more than the total number of people employed in the entire public sector (comprised of federal, state, county and local governments, including police and teachers). According to the U.S. Census Bureau’s latest figures, 70% of the businesses in the United States have no paid employees. As a comparison, 66% of British businesses five years ago had no employees.

The trend toward free agency has resulted in what some business leaders are calling “brain drains” and “capital flight”—no doubt pointing to their concerns about a serious loss of knowledge capital from their organizations. What used to be considered private property or proprietary technology is now offered freely in the open market.

It’s little wonder that organizational leaders are worrying more these days about recruiting and retaining top talent in their organizations. They understand that high levels of employee commitment represent a business necessity, and that talent shortages will be an obstacle to sustained high performance. They also know that their earnings projections are vulnerable. According to Fast Company, 85% of companies are still projecting earnings at levels which historically only 10% of companies have actually delivered. This is a huge gap, and I can’t help but wonder what is causing so many companies to miss their targets. My strong hunch is that what is missing can be found in the human side of the enterprise.

There is more than ample evidence that there is a crisis of commitment in today’s workplace, the solution to which requires a paradigm shift in everyone’s thinking—

starting with leaders. Every leader must make it a top priority to earn the full commitment of every member of the workforce. Yes, I said “earn”, because just as employees can no longer feel entitled to their jobs, leaders cannot feel entitled to employees’ loyalty. And, every individual must make it a top priority to become career resilient—to become change agile and self-managing of one’s skill portfolio—to assume the mindset of free agency

So, what does it take to have the full discretionary effort of every individual available to make the business a success?

First, let’s consider what attracts people to organizations, and what gets them to stay. Let’s be clear that it isn’t money, and it never was. A study by Towers Perrin revealed that the top three reasons people choose to stay in their jobs are:

challenging work
work climate
stock options

While compensation was on the list, it was ranked much lower as a factor which attracts and retains people in the organization.

Let’s now consider what causes people to leave:

A study by Christian and Timbers showed that the top three reasons people leave their jobs are:

lack of challenge
limited opportunity for growth and advancement
lack of appreciation

We intuitively know that these findings are true; yet, organizational leaders don’t pay nearly enough attention to the things that are clearly within their sphere of influence.

So, I have some bold suggestions, based on my coaching of hundreds of organizational leaders and individual contributors. This is a short list of the things that an organizational leader can do to earn the commitment of members of the workforce to achieve the organization’s goals:

Hire people for their strengths and then ensure they can play to them. People are more likely to give their full commitment under conditions which allow them to exercise—and grow—their natural strengths. Challenging job assignments, tied to strengths, are the basis for exceptional performance which can be sustained over time. Several studies, including two by Dalton and Thompson, suggest that the best predictor of long term career success is varied job assignments; i.e., job role development—the process of changing and expanding one’s job over time.

Engage in adult relationships. Traditional employment relationships based on paternalism, lifetime employment, and command and control decision making will not support the world class innovation and efficiency needed for success in the new economy. New relationships based on the alignment of individual and organizational goals, and skill sets which fit current and emerging business needs, must be established. Individuals must be willing to continually upgrade their skills, and organizational leaders must be willing to share the investment in this process.

Create and widely communicate a credible business vision. People commit when they see the promise of a credible future which excites them and allows them to align their personal aspirations with those of the organization. It’s what ignites their fire and connects them to the challenge in the work. Leaders must be relentless in telling the truth—in good times and bad. People can deal with setbacks, even increase their commitment in the face of them, if they feel they are being dealt with truthfully by their leadership. From what I’ve seen, there’s a lot of room for growth in the truth telling department by organizational leaders. Leaders must get past the need to protect their employees—or perhaps themselves—from the truth about the enterprise and its performance. The communication of a credible business vision also requires that leaders be champions of great ideas and of people. People have to be able to see themselves as fitting into the credible business vision in order to give their full commitment.

Foster a work climate which energizes and rewards success. The number one enemy of commitment is indifference. Commitment exists in the context of relationship, based on shared purpose and reciprocal actions. Leaders cannot allow business to get in the way of relationships! Commitment thrives in a non-cynical work environment. Leaders who foster it are optimistic about the future, responsible for their own commitments, and recognize and reward value added contributions.

The retention studies I talked about indicated that stock options are the third highest reason people stay in their organizations, and lack of appreciation is the third highest reason they leave. This suggests another strategy for increasing commitment, and that is recognition in some form which gives people a stake in the enterprise and which is tied to the achievement of high impact results.

The world of business is changing at a rapid pace, but there is plenty to be optimistic about. There has never been as much opportunity to create value in the marketplace as there is in this time in our history. There is no absence of talent, no absence of great ideas, and no absence of a market which is hungry for the products of great talent and ideas.