Invitation: HUMAN CAPITAL — THE NEW REALITY

The NetForum will meet again on September 26th at 830am to continue our peer-to-peer conversations about the most topical subjects for executives charged with scaling Digital Economy businesses, whether they are CEOs of Expansion Stage companies or corporate executives in charge of strategy, corporate development and revenue generation in large media, technology, and other Web-transformed businesses.  Our host will be General Assembly, and we will meet at their 902 Broadway location, on Level 4 (that’s in NYC for all my out of state readers!)

Our topic of discussion will be “Human Capital — the New Reality.  Have you felt it too?” Like an earthquake that is unexpected, the disruption in the world of Human Capital is everywhere.  At the NetForum, we will ask  “Did you feel it too, and HOW BIG IS IT?”

Some trends are continuing their slow march — the hold that large enterprises have on their employees is diminishing.  It’s not just that employee mobility (voluntary and involuntary) continues to rise.  I think that close observation would lead one to think that perhaps the social contract that is at the foundation of corporations is being rewritten.  The great economist Ronald Coase (who passed away this month at 102!) helped us understand how a “contract” between various resources (including labor) led to the emergence and stability of corporate organizations.  In my mind, the analysis is still very useful but the contract is being recut.  Initially, I think it was the corporations who rewrote the deal by beginning to reallocate their purchases of labor to multiple locations — essentially price shopping now that the cost of doing so became manageable.  But labor reacted to this with the advent of the Web by learning to sell its capabilities better.  The Web flattened the world, and networked it like never before, lowering the cost for labor to shop for work.  In Coasian terms, the transaction costs that formed the basis for corporate existence were lowered dramatically, forcing a rewriting of the corporate social contract, and corporations will never be the same.

The rules then are changing.  What employees expect from their employers is changing, and what employers are expecting is changing too.  Some things won’t change.  Most people do expect that getting a job is essentially an insurance policy, a respite from having to market oneself everyday to fund one’s life.  And employers do expect that people hired will be around at least to finish the tasks they were asked to perform when hired.  But how to get from these minimal expectations to creating a Good Job, where the employees come, stay and are fulfilled and thus motivated, and where the employers feel they would do everything they can to keep these employees as opposed to recycling them for cheaper labor, that’s the question!

And to do this when you are at the epicenter of the earthquake, in places like Silicon Valley or Sillicon Alley, where the ambitions and dreams of highly skilled employees, their access to superior information, and their demands for transparency collide with the reality of VC funding or public markets, customer demands, and hyper-competitive markets, is even harder.  But that is exactly what the members of the NetForum are doing day in, and day out.

So, let’s see how we do it.

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  1. Laurent Ohana says

    How are NYC’s fast growing digital companies finding, attracting, retaining and motivating People? I asked our breakfast attendees two specific questions: First, is there a skilled labor shortage in NYC and how is it being addressed? Second, are people entering the labor force today “different” and thus forcing a rethinking of organizational structure?

    The first question was easy to dispose of. Yes, there is a labor shortage in the tech industry in NYC. According to data shared by Eric Gertler, EVP of the NYC Economic Development Corporation, nearly 55% of NYC’s 593 internet companies have a “HIRING” sign up. NetForum members referred to the near impossibility of finding technical talent locally. The problem seems to be two-fold. There are not enough skilled people to fill the demand. Second, the skilled workers are either starting their own startups, or working for the big name companies that have invaded the city (like Google).

    The most common solution seems to be the geographically distributed team. Today people are building teams with the best people they can find anywhere and adjusting the operating mode of the company to make it work. The key to making this work? Good command of a common language (English), a good project manager and… Skype.

    The ability of Tech businesses to meet their staffing needs locally is important to the local economy. In a recent speech, Dennis Lockhart, President of the Federal Reserve Bank of Atlanta, said that labor market statistics (historically low productivity and labor reallocation rates among others) are casting doubts on the ability of the US economy to generate “transformative innovation.” As a point of light, Lockhart spoke about a nascent Entrepreneurship movement that the Fed is now studying as part of its “Gazelle project”. This is important to the NetForum members because we are the Gazelles! The tech industry has a high rate of net job creation (meaning that tech startups hire more than the average small business and despite the fact that they go out of business more often than the average small business, net net they produce a positive amount of new jobs).
    Turning to the second, harder question, about how to manage the new labor force, the NetForum members had a healthy debate about the Millenials. At a recent discussion panel, Pr. Thomas Malone of MIT’s Sloan Business School said that this generation of B-School students was different, that they “cared.” Carlos Dominguez, SVP at Cisco said that the best way to retain and motivate a strong labor force was to dedicate the company to a great mission. Hence Cisco’s motto: “Together we can change the world.”
    Some of our NetForum members did not buy it. Those “who care” are a minority, and caring may be an elite phenomenon. For the rest, issues of bread of butter predominate: money, raises and promotions are as important as ever.
    Yet, other members insisted that there was something different going on. The Millenials are “empowered.” (Which brought up the remark that “entitled” may be a more apt description…) A generation raised on the Web, with unlimited access to information and communication capabilities enabling it to question any action taken by anyone anywhere is bound to have its distinct views about corporations’ organizational structures. Jill Maguire-Ward made the very important observation that the Millenials need to be dealt with on their own terms. They demand more participation, more transparency, and will speak up. They have grown up in an environment where corporate loyalty has waned, free agency and job-hopping is the norm.
    Clearly, pyramid-like hierarchical structures may be ill-adapted to an empowered work force. New organizational structures are already evolving to encourage participation by all, resembling the structure of adaptive networks and crowd-sourcing marketplaces. Jeff Bezos encourages constant experimentation by employees by among other things reducing the cost and fear of failing. It seems to be working for Amazon!

    See you at the next NetForum breakfast!