Prophet sharing

Is the workplace revolution over? Are the biggest changes – the shift from manufacturing to services, more women in work and more part-timers – behind us?

As part of its rolling inquiry into the future of people’s working lives in the next 20 years, the Tomorrow Project has just completed a programme of study and consultation involving more than 100 researchers, policy-makers, futurologists and CIPD members. Its conclusion: there are even bigger changes ahead that will raise major strategic issues for employers.

The experts predict that one major factor behind these changes will be a phase of radical outsourcing. The consultations, which led us to write our book, Tomorrow’s Workplace, have confirmed our view that outsourcing will be taken further.

There is certainly a lively debate about the limitations of outsourcing, particularly on whether it means a loss of control, quality and culture. Organisations will remain under intense pressure to increase efficiency, but “slash and burn” will not be enough, because they can’t go on cutting jobs indefinitely. They will find instead that their survival hinges on reinventing products and processes – doing new things better – which will require them to become more focused.

For instance, car manufacturers may find that the next logical step will be to outsource their factories, as well as their accounting and other functions. This will allow them to concentrate on brand management: design, distribution and understanding their customers’ needs.

Firms that focus on manufacturing or specialist services, where margins are narrower, will consolidate to gain economies of scale and find purchasing efficiencies to cut costs. They will outsource so they can put more into their core activities. Nearly two-thirds of UK organisations in the PricewaterhouseCoopers HR 2000 European Benchmarking Survey said they were outsourcing some elements of their HR functions.

Many of our respondents thought that, despite trade union opposition, the public sector would follow suit. Already the NHS is seeking to give hospitals greater independence, increase private-sector provision and let some surgeons own and run specialist surgeries. Perhaps the health service will in time become a “brand management body”, commissioning services, rating them and managing the NHS brand.

New technology will make this possible by enabling outsourced networks to be managed through high-speed digital links. If you thought the earth moved with the arrival of the World Wide Web, you ain’t seen nothing yet. Driven by the same people who developed the web, “the grid” – the next generation of the internet – is destined to make the web a dinosaur over the next decade.

With broadband technology and improved mobile telephony, e-communications will be piped through the equivalent of the Channel Tunnel rather than today’s drinking straw. It will be more user-friendly and much faster. Announcing in April that the government would spend £118 million on developing the grid, Lord Sainsbury boldly declared: “Imagine the business opportunities… of real-time linkage to the supply chain. Now is the time for the revolution.”

A firm in the US is already providing a taste of things to come. Made 2 Measure Systems can run a small manufacturing company’s entire day-to-day operations completely online, with huge efficiency gains. There is great potential for the same provision to be extended to the service sector.

Alongside the “build the core, outsource the chores” trend will be the continued drive towards self-managed work. Our experts predict that this important trend will be propelled further by four developments.

First, outsourcing will create new opportunities for individuals and small firms to provide specialist services. The local management of schools, for example, has led to an increase in the number of specialists offering services to schools in competition with local authorities. Many of them are either self-employed or working for tiny organisations in which they have lots of responsibility.

Second, as technology and other developments continue to make most jobs more skilled, the close supervision of workers will become impractical. Individuals will know far more about their jobs than their managers and will have more responsibility and discretion as a result. At Toyota’s celebrated Takaoka assembly plant, individuals can stop the whole line simply by pulling a cord if they see a problem in the production process.

Third, new methods of management control will allow rules and observation to be replaced by targets, performance measurements and financial incentives. Control will be indirect rather than direct, based on incentives rather than commands and designed to improve individuals’ judgment instead of telling them what to do.

Fourth, a growing number of people will both want and expect to manage their own work. In the 1980s and 1990s a new generation of workers took in the “no jobs for life” message and many responded: “Great. That’s what I want. I’d prefer to reinvent myself by moving from job to job. Let me develop my skills and networks with you for a couple of years and then move on.”

Self-management will transform many workplaces. For instance, staff in call centres have traditionally been closely monitored as they follow a routine set of tasks, perhaps even reading from a standard script. The best practice now is to increase personal responsibility. Rather than taking an inquiry and passing it to someone else who knows the answer, workers are encouraged to find the answer themselves and call the customer back.

Other routine jobs will “grow” in similar ways, flattening hierarchies and strengthening horizontal ties. Instead of going up the chain of command to seek permission, they will be expected to negotiate arrangements with their peers.

Outsourcing and self-managed work will reinforce each other. Together they will hasten the trend away from fixed organisations and to fluid networks. Tomorrow will be radically different from today, not because there has been a change of direction, but because the shift towards networks will have been driven to its logical conclusion. The revolution in the workplace has only just begun, but we can see where it’s going.

What shape will these emerging networks take? Much will depend on two variables.

Imagine a chart where the horizontal axis represents the degree to which organisations must adapt to their workers, and how far workers must adapt to their organisations. Tight labour markets, for example, will shift power in the direction of the workers. Intense competition in the product market, on the other hand, may force workers to accommodate the needs of the organisation.

The vertical axis represents the varying stability of networks. Will employers favour stable networks that allow them to retain tacit knowledge, or will they let them be more transient because they have found better ways of storing that data electronically? Will they prefer stable networks as a way of maintaining the trust that is vital if these structures are to function properly? Or will rapid change require teams to assemble, dissolve and reform so quickly that long-term relationships between their members become almost impossible? We suggest three scenarios for the year 2020.

Fragile communities

Competitive and financial pressures force workers to adapt to organisations. Individualised contracts are widespread, and workers are contracted to perform specific tasks and are paid by results. Nurses’ pay is linked to patients’ recovery times! But networks are fairly stable. Skills shortages encourage organisations to retain their knowledge workers, while the importance of trust encourages the attitude of “hanging on to the people we know”. Best practice seeks to maintain existing supply chains.

Organisations transfer as many risks as they can to the individual, but individuals still have the benefit of working within fairly stable networks. The anxiety that arises from taking more responsibility is cushioned by the continuity of personal relationships.

But this is not a stable situation. Competitive product markets compel workers to adapt to the organisation, but they also stimulate innovation, which may call for new expertise that disrupts an existing network. The very factor that forces workers to fit into organisations makes it harder to preserve networks. There is tension at the heart of this model.

Stable communities

This scenario is driven by skills shortages, the need to build trust and the easing of competitive pressures as rivals merge or collaborate. Organisations must adapt to the needs of their workers – for example, by investing in measures to improve work-life balance. At the same time they seek to maintain stable networks. The easing of competition reduces the pace of change, so that networks are disrupted less often.

This is ideal for many people. Individuals carry fewer risks, organisations are more responsive to their needs and workers have more of a chance to establish long-term relationships. But is it viable? How far can competitive pressures be tamed in the global economy? Will the public sector face tighter financial constraints?

Disposable communities

This is almost the exact opposite of the previous scenario. As in the first model, intense market competition requires workers to adapt to organisations by shouldering a heavier burden of risk. They are paid by results, even though these are not entirely under the individual’s control.

But this time there is no cushion in the form of stable networks. Labour is seen as a commodity. The presence of better-educated workers in the UK, together with access to a global pool of skilled labour, allow firms to tap into the supply of talent as and when required. Knowledge is stored electronically. It’s a world of “come-and-go networks” – a nightmare for most people. Power lies with the employer and the workplace feels insecure. But can it last? Pushed too far, this scenario could face strong resistance. Workers would downshift, take early retirement or spend longer on parental leave. Skills shortages would emerge, forcing employers to adopt more worker-friendly practices. The scenario would become self-defeating.

Elements of all these scenarios exist today, but which will be most common in future? In a world of work that is changing as fast as the society that surrounds it, each organisation has to decide its own stance and its own view of how it wants to treat the people who work for it.

The answers will vary in lots of ways – between and within organisations, from sector to sector, from one part of the country to another and according to the state of the labour market. But the questions are the same for all of us. How do we get the best out of people in a world where employers will be more concerned about skills shortages than unemployment and where people will increasingly expect to be treated as individuals? People will be more and more able to choose when, where and how they work, and their values will be strongly conditioned by their lives as consumers.

These are challenging and important issues. They will be near the top of the HR agenda before 2020.

How abbey are they?

The future is already here as far as Abbey National is concerned. Outsourcing has become almost passé as the company gets to grips with new forms of partnership.

Last month it turned four of its branches into pilot franchises, selling local managers a 49 per cent stake. It has also been experimenting with “café banks” run jointly with Costa Coffee.

Back-office operations are not immune either. MBNA now manages both the credit card operation (employing Abbey’s former staff in that function) and customer relations – but not in a traditional outsourced capacity. The bank is also engaging in joint ventures.

Colin Brown, HR development manager at Abbey National, sees all this as the start of an entirely new type of organisation, held together by its brand, with far-reaching implications for the employment relationship.

“Employees could become the key parts of a networked organisation, with the company dependent on these individuals,” he says. “So you can imagine lots of little bubbles with people in them. The company has a brand for customers, but actually they are separate little businesses.”

Abbey National joined the discussions on Richard Worsley’s and Michael Moynagh’s book in August as a sponsoring organisation. Its value, he believes, is in sketching out different scenarios for the future without doom-mongering.

Brown believes the emphasis at present is on the employer adapting to the employee, partly because of the relatively stable economy. “I think that will continue and we will have a situation where organisations cease to exist and it’s the connections between people that will matter.”

He predicts two different types of job function: knowledge workers and service workers who provide hairdressing, healthcare and so on for the former.

In this environment, Brown says, HR becomes more about culture. “You can no longer manage employees through a contract. Instead you have more of a psychological contract. But how do you imbue your contractors, or other people not working directly for you, with enough of your values to get them to behave the way you want them to?

“You may want to find the right mix of culture between trust and training and, for instance, strong ideas and innovation. You need to give enough space for the company to grow while also retaining what the customer values,” Brown says. “One of the errors in outsourcing used to be finding the cheapest supplier, which often meant that the service would deteriorate. So maybe it’s a matter of paying for the culture of an organisation.”

Key lessons from Abbey National’s experience include picking the right partners, having a very open style of communication, ensuring proper training and resources for managers, recruiting managers who can establish and maintain relationships with new groups of people and learning how to get the right balance between close working relationships and looser ties.

“We are learning that this varies – and that we haven’t quite sussed this out,” Brown admits. “Sometimes you want a close relationship and sometimes a more distant one. It’s hard to know up front how to get that balance right.

There are two kinds of franchised branches. In the first model – known as internal franchising – launched last year in one-third of the bank’s local markets, managers remain in post but risk a percentage of their salary on the business. In the latest pilots, in Belfast, Cardiff, London and Newcastle, managers have resigned and set up their own company, employing the rest of the staff but holding only 49 per cent of the business. They are risking a larger part of their salary, but come away with the national minimum wage if they fail to hit targets. 

Jane Pickard

Boots the alchemist

The networked organisation is taking shape at Boots as it moves to transform itself from a UK retailer into a global “well-being” company.

It has established a string of new centres to offer customers private health and fitness services alongside its traditional pharmaceutical offerings. These new services will come from outsourced and freelance providers, putting extra demands on store managers.

This means a different approach to management development. So Carole Kirk, Boots’ internal management development consultant, is drawing up plans based on a vision of the “perfect manager” for the year 2006. “We expect the job to be more about managing a more emotional relationship with the customer,” she says.

Store managers will also have to be better at working collaboratively and across businesses. “Boots recognises that you can’t force-fit the types of employees who are great at building relationships with customers; you have to work with what will motivate them,” Kirk says. “But it’s also about the future of work more generally, the kind of workforce we will be managing and what people will want from work. We are expecting them to have different views on work-life balance and perhaps to be motivated less by career development and money.”

The company’s desire to predict the future is reflected in its appointment of Sam Porter as “corporate radar manager”. Porter, an economist who believes that “the important developments tend to be surprises”, helps the company to work out how best to manage uncertainty.

Further information

The CIPD believes that these scenarios will be central to the work of HR managers. Over the coming year the institute will be encouraging members to debate these scenarios. 

Further reading

This article is based on a section of the authors’ CIPD- sponsored book Tomorrow’s Workplace: Fulfilment or Stress?