Why Our Work Incentive Structure Needs Change

“That is the beliefs that individuals, groups, and societies hold which determine choices are a consequence of learning through time - not just the span of an individual’s life or of a generation of a society but the learning embodied in individuals, groups and societies that is cumulative through time and passed on inter-generationally by the culture of a society.” – Douglass North

Determining Economic Priorities

Most Americans would probably say that going to work and earning an income takes priority over spending time with their friends, family or children. The argument usually is that without a paycheck I cannot afford a living worth enjoying. That leaves Americans working in order to afford healthcare, pay the bills or provide a certain standard of living for themselves or family. My question to you all is why hasn’t the reason we worked changed? Since the Great Depression, the United States has developed laws and regulations to govern the workplace and devised certain social safety nets e.g. unemployment benefits that were suppose to make working a more enjoyable experience. Unemployment currently stands at over10% nationally, are we any better off?

When 7 Hours Became 8 and 8 Hours Became 9

Americans work considerably longer hours than most industrialized nations yet we’ve developed powerful tools that help us get our jobs done faster. This disconnect (longer hours vs. tools to help us work) is due to not capitalizing on the productivity gains we’ve realized.

The main reason for this is that we’re still measuring output as if we were a manufacturing-based society. Our economy is predominately supported by the production of services that are elastic, meaning they are sensitive to changes in demand. There are no inventories for services; you cannot produce a lot now and save it for later. The need for services depends solely on there being a demand.

This means that there will be some days, weeks or months when we may work well over 10 hours a day. Other time periods we may need only 2-4 hours to complete our work due to changes in demand. Why are we then still using the 40 hour work-week as a standard work-week?

We've been increasing the numbers of hours we dedicate to work but haven’t gained much in return. Why? Because the way we work has remained stagnant. Currently there is no flexibility built into our operating environment that allows us to capture these differences in demand. If you only need 4 hours to complete your work for one employer then why not have the ability to spend time with you family, take training, get an education or volunteer?

It is these additional “outside” activities that are going to positively impact our future generations. As Douglas North mentioned in his Nobel Prize lecture, it is the cumulative knowledge of a society that is passed on through generations. In order to increase this knowledge we need to work smarter and use our time more wisely. This includes changing how we reward staff – it shouldn’t be about how many hours you worked but rather the quality of the service you provided. We are no longer dependent on making widgets in our society – we sell our knowledge. The only way we’ll be able to actually grow our cumulative knowledge is if we’re given time expand our experiences.

Growing Our Economy

The first step toward growing as a society is the advent of social-networking tools. These tools have helped us collaborate more, share more information, and build relationships in ways previously deemed as unimaginable. This has yet to fully cross over into our culture but it has the potential to change the way we work and the way we interact with our customers and clients.

The Great Recession has caused many workers to question their role in the economy and the priorities they’ve set. We must now consider new ways to move forward, to grow and remain competitive – providing more flexible workplaces that incentivize quality of service versus quantity of hours should be the starting-point.

Being Laid-Off Might Not Be So Bad

So this post follows-up to my previous post & comment - why I feel like being unemployed might be a good thing. I know that people may read this and think that I'm ungrateful for the job I have (I might be) and that I'm nuts for thinking being unemployed could be good. Hear me out.

Fire in the Belly

As I've stated in the previous post, I've watched my friends and family members lose their jobs. It hasn't been a pretty sight and unfortunately most of them still do not have jobs. Some of them of become depressed and thrown themselves month long pity-parties. Others have thrown themselves hook-line-and-sinker into finding out what they want out of a job and developing a plan to find it. They've followed Oprah's advice, and begun to do some serious soul-searching to find answers to questions such as: What aspects of my previous job did I love or hate? What will make me happy? What am I good at? What are my needs and wants from a job? What kind of career or job is for me?

Those who took a week or two to sit under a tree and contemplate their navel now have found satisfying jobs that pay well and most are in a different industry from where they were before. I understand this might not be for everyone; most of us need one or two incomes and have major financial responsibilities that, after a layoff, can be difficult to keep up with. I hear ya. I am suggesting though that if you have been laid off, take advantage of the time you have to contemplate your navel. Doing this will help you hone your job search, you'll know what you want and when you know what you want you can sell yourself better to future employers.

This gets to my final point: Get that fire in your belly - develop your idea of your perfect job and go after it. Unlike us employed folk, you have nothing to lose.

Global Competition & A Lesson Learned

While I might be ungrateful for my job, those of you who don't have one might no longer be. This is something I cannot stress enough - most of us Americans have been blessed with the ability to work. We've experienced low-levels of unemployment in comparison to many emerging markets and I feel that this has caused us to take our jobs for granted.

Global competition is increasing, just take a look at what's happening to GM and Chrysler. Asian countries have been able to build better quality cars for a cheaper price. I, like many of you, feel upset and sorry for those who work in the GM and Chrysler factories & dealerships. They specialized in an industry where union contracts and a poor growth strategy caused them to lose their jobs. What's worse is that because they got promised more in salaries than the going rate overseas it's unlikely they'll find manufacturing jobs here in the US.

They took their jobs for granted - they thought they were safe and they're about to lose them.

Let this be a lesson to all of us; unless you're in a job that requires a clearance or is extremely specialized, consider yourself vulnerable to global competition. We're no long competing with just Americans, we're competing with the world. That means keep your eyes open, get a variety of different experiences and network. If you find yourself in a situation where your work is about to become outsourced or competition is eroding your company's profit margin, you'll be in a much better position if you've caught it early, have cross-trained yourself and built a network that can help you find your next position.

So why is being laid-off a good thing? It gives you a chance to dig deep, figure out what you want, get some fire in your belly and no longer take your job for granted. All of these things could pay huge dividends later, especially when competing with those of us who have weathered the storm with jobs and don't have nearly the drive that you all do.

Employed now? Read Alexandra Levitt's commentary on how to bring your passion to work: http://online.wsj.com/article/SB124374051483469533.html

So Why Write?

I never thought I would ever participate in the blogosphere until this current financial crisis has caused several of my friends and family to lose their jobs. I guess you could say I'm lucky enough to still have mine, though I honestly feel it might be better to be unemployed (explanation will follow on a separate post). Our country has gone through a lot over the past 2 years; our financial climate and institutions look very different, we've racked up an enormous amount of debt and emerging markets like China, India and Brazil are finding themselves invited to tables previously reserved for the G-8.

So that answers the economic part, but how does this affect me at work? That's the question I'm hoping to help answer throughout this blog. Americans need to better understand how each hour they slave away in an office, construction site, school or church ends up affecting the US and global economies. It's not just the hours though that we need to better understand, it’s how the income we end up using to buy and sell goods & services from this work affects the economy.

Without employment, people do not have money to spend. When people do not have money to spend, businesses do not sell their goods. When businesses do not sell their goods, suppliers do not make a profit. When businesses and suppliers can't earn a profit they stop producing finished goods, stop harvesting food, stop trading raw materials and the whole economy as we know it collapses. This is the point where the government then has a decision to make - bailout businesses or let them fail.

What many of us didn't realize is how critical of a role we all individually play in this vicious economic cycle. If it hadn't been for us (consumers) pulling out of the economy (along with a variety of other reasons), this deep recession could have been less painful than it will be. Let's get educated, let's understand what role we have in the global economy. Once we have a better understanding of our role and the different players, it's my belief that we can help mitigate future crises by being responsible and holding not only our leaders accountable but also ourselves.