A Generational Shift Is Revolutionizing the Workplace

Just before Labor Day 1993, I started conducting in-depth interviews with employees about work attitudes. Ten years later, I am still working on that research with my company, Rainmaker Thinking, Inc. Between 1993 and 2003, we have interviewed more than 10,000 individuals, studied the management practices of 700 different companies, held dozens of focus groups, polled thousands of respondents, reviewed internal survey data from 300 companies, and led more than 1,000 interactive seminars with hundreds of thousands of participants.

In September of this year, we released a report entitled, “Generational Shift: What We Saw at the Workplace Revolution,” focusing on the key workplace trends identified in our ten-year study. Between 1993 and 2003, a profound revolution has taken place in the values and norms of the American workplace. That impact has been felt throughout the world.

We call this revolution the “Generational Shift.” Why?

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In the early- and mid-1990s, we first observed these trends only among the youngest people in the workforce. Back then, these trends were decried as aberrations driven by the “free-agent” inclinations of Generation X (those born from 1965 to 1977). When Generation Xers first appeared in the workplace, they were viewed as disloyal employees unwilling to pay their dues and climb the ladder. Gen Xers demanded immediate gratification from employers, and this was seen as a youthful aberration.

It turns out that the Gen X employee attitude was a vanguard response to the transformation in the workplace. It was an accident of history. Largely unaware of the changes underway, Xers were responding naturally to a workplace without the myth of job security. The Gen-X workplace revolution was never about casual dress, desk massages, astronomical pay, foosball tables, and pizza. But the revolution was very real. In just ten years, workers of all ages have lost confidence in the old-fashioned career path and traditional norms of success.

Many analysts expected these free-agent trends to abate following the dot-com crash and the economic downturn that has persisted since early 2001. Instead, these trends have intensified. That’s because the changes in the employer-employee relationship derive from historic macroeconomic factors, not from short-term aberrations. Over the last ten years, globalization and technology have created a business environment of high risk, erratic markets, and unpredictable resource needs. To remain viable, employers have been forced to adopt extremely flexible and efficient staffing practices. This has meant constant downsizing, restructuring and reengineering, and, thus, an end to the myth of job security.

Average employees feel challenged to take care of themselves and their families. They struggle to balance desires for long-term security with short-term needs for opportunities, work conditions, recognition, and rewards. Employees work harder, experience less “down time,” more job-related stress, increased job requirements, and constant pressure to improve. People of all ages and at all levels realize that they are free agents because they have no other choice.  In the real new economy, it’s every person for him or herself.

Without credible long-term promises from employers, employees no longer labor quietly and obediently. Rather, most employees work anxiously to take care of themselves and their families and try to get what they can from their employers–one day at a time. As a result, the values and norms that first appeared among Generation X are steadily supplanting more traditional workplace values and norms.

Six Key Findings

Our ten-year study reveals that the real new economy is a far cry from dot-coms with magical business models, and rather has created a very challenging environment for most workers today. The report boils down to six key findings:

  • Work has become more demanding on employees.
  • Employer-employee relationships have become less hierarchical and more transactional.
  • Employers are moving away from long-term employment relationships.
  • Employees have less confidence in long-term rewards and greater expectations for short-term rewards.
  • Immediate supervisors are now the most important people in the workplace.
  • Supervising employees now requires more time and skill on the part of managers.

Each of these findings is supported by underlying trends that further explicate the workplace revolution of the last decade. Let’s take a closer look:

No. 1—Work has become more demanding on employees. 

Throughout the economic boom of the 1990s and into the downturn of the last several years, productivity numbers (output per labor hour) have increased consistently. But what does a productivity increase actually mean? It means getting more work and better work out of fewer people. These improvements are coming, not only from new technology, but also from increased human effort and effectiveness. Employees are working harder and facing increasing pressure to work longer and/or smarter and/or faster and/or better. Meanwhile, employers are reducing tolerance for employee error, waste, and inefficiency.

Nowadays, employees must routinely learn and use new technologies, processes, practices, skills, and knowledge, all the while adjusting to ongoing organizational changes that cause growing fear of imminent job loss.

At the same time, employees receive less management guidance and support, work in smaller teams with greater requirements, and have less time to rest, recuperate, and prepare. As a result, employees manifest increased workplace stress and related problems, including anger, interpersonal conflict, and “burnout,” as well as express greater need for work-life balance.

No. 2—Employer-employee relationships have become less hierarchical and more transactional. 

Traditional sources of authority are being supplanted by new sources: Seniority, age, rank, and rules are diminishing. Indeed, employees are less likely to define “success” in relation to rank or seniority in an organization chart, and more likely to define success in highly personal terms. However, on the rise as sources of authority are more transactional forms such as control of resources, control of rewards, and control of work conditions. Organization charts are flatter; layers of management have been removed. Reporting relationships are more temporary; more employees are being managed by short-term project leaders, instead of “organization-chart” managers.

Among the consequences of these changes in organizations are that employees today are more likely to disagree with their employers’ stated missions, policies, and decisions. At the same time, employees are less obedient to employers’ rules and supervisors’ instructions, more likely to question or challenge employment conditions and established reward structures, and more likely to make individual requests regarding desired employment conditions and rewards. It must be noted, as well, that employees are more likely to agree, obey, cooperate, and perform at a higher level when their employers promise a specific quid pro quo.

No. 3—Employers are moving away from long-term employment relationships. 

Employers are more likely to undertake major business changes, such as mergers, acquisitions, spin-offs, restructuring, and liquidations, that eliminate jobs regardless of employees’ length of service. Employers are also more likely to implement new technologies that eliminate jobs due to reengineering. Meanwhile, there is a strong trend among employers of hiring fewer “employees” (full-time, exclusive workers), while hiring more contingent workers. Employers’ staffing strategies for the future reflect this change. As a result, traditional employees are diminishing as a percentage of the overall workforce, while the percentage of contingent workers is increasing.

Employers are more likely to award status, prestige, authority, flexibility, and rewards on short-term, measurable goals, rather than seniority. At the same time, employers are reducing long-term fixed pay as a percentage of overall employee compensation, while increasing the percentage of variable performance-based pay. Employers’ compensation strategies for the future also reflect this change.

Part of this new compensation strategy includes a reduction in the percentage of employee “benefits” (paid for by the company for full-time, exclusive workers) in relation to overall compensation. Further, employers are increasing the percentage of “employee services,” including health insurance and retirement savings, that are paid for by the worker on a pre-tax basis. Because of these new realities, employers are now less likely to make formal or informal guarantees about continued employment and job security.

No. 4—Employees have less confidence in long-term rewards and greater expectations for short-term rewards.

Employees are more likely to worry that their prospects for receiving long-term rewards are vulnerable to a whole range of external and internal forces that might shorten the natural life of the organization employing them. Workers worry openly about events or circumstances that have little or nothing to do with business, such as politics, diplomacy, war, terrorism, and natural disasters. They worry about broad business factors beyond the control of organization leaders, including monetary policy, global market shifts, changes in particular industries, and organizational changes. As well, they are acutely aware that the organization employing them might simply lose out in the fiercely competitive marketplace. Or short of their employer suffering in the marketplace, workers worry about the continued employment of their immediate supervisors and other leaders who know them best, or about their own continued employment.

There are numerous consequences of this diminished confidence among employees. First, employees are investing a lower percentage of savings in long-term vesting retirement plans and pensions, while investing a greater percentage in self-managed cash balance plans. Second, employees are less willing to make immediate sacrifices in return for long-term promises. Thus, given the choice, employees are more likely to prefer short-term over long-term incentives. Third, employees are more likely to make specific requests for immediate increases in pay, benefits, and work conditions, than long-term. Fourth, short-term incentives are more successful than long-term for maintaining high levels of employee productivity, quality, morale, and retention.

 

No. 5—Immediate supervisors are now the most important people in the workplace. 

Employees think of their immediate supervisors as the primary representatives of their employers’ missions, policies, systems, and practices. As well, employees rely on immediate supervisors more than any other individuals for meeting their basic needs and expectations and dealing with a whole range of day-to-day issues that arise at work. These include the assignment of tasks, resource planning, problem solving, training, scheduling, dispute resolution, guidance, coaching, recognition, promotions, and other rewards.

It is the immediate supervisor an employee turns to, whether he or she is seeking a special assignment, obtaining necessary resources, pursuing a special work location, avoiding a certain coworker, looking for a good performance evaluation, or hoping for a raise. Ultimately, the day-to-day communication between supervisory managers and direct reports has more impact than any other single factor on employee productivity, quality, morale, and retention.

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No. 6—Supervising employees now requires more time and skill on the part of managers. 

Supervisors are under increasing pressure from senior executives to increase productivity and quality. That means getting more work and better work out of fewer employees, while utilizing fewer resources. Average spans of control (the number of employees officially reporting to each supervisor) are increasing. In addition, supervisors are given more responsibility for staffing, recruiting, selection, orientation, training, performance management, and retention. Supervisors are also required to deal with more bureaucratic red tape.

Meanwhile, supervisors must learn to deal with and accommodate the needs and expectations of an increasingly diverse workforce. Employees are more likely to make special requests (or demands) of supervisors regarding assignments, work conditions, benefits, rewards, or other special needs. Employees need, expect, and request more coaching and guidance than they currently receive from supervisors.

Across the board, in every industry and at almost every level, supervisors report increasing frustration and difficulty in their efforts. In the best situations, supervisors struggle to obtain and deliver special rewards for high performers. But mostly, supervisors are struggling to hold employees accountable for overall performance standards, as well as meeting daily goals and deadlines. On the low end of the performance spectrum, supervisors have trouble implementing effective performance improvement plans with low performers and terminating recalcitrant low performers.

The bad news is that supervisors who spend less time engaged in managing employees spend more time rectifying employee errors, salvaging lost resources, mediating conflicts among coworkers, resolving complaints from vendors and customers, and solving other problems. These supervisors also spend more time on lower level tasks. The good news is that supervisors who learn, practice, and implement proven management techniques generate higher productivity, quality, morale, and retention. These supervisors also spend more time on high-level tasks. But either way, managing people has become a very high-maintenance endeavor.

The Generational Shift Will Continue

The workplace revolution of the last decade has been profound, but now there are powerful demographic forces underway that will cement the generational shift. First, those of the Silent Generation (born before 1946) are gradually exiting the workforce. By 2006, two experienced workers will leave the workforce for every one who enters the workforce. Second, the Baby Boomers (born 1946 to 1964) are becoming the aging workforce. Every day 10,000 Baby Boomers turn 55 years of age. Third, the prime-age workforce will be made up increasingly of Generation X (born 1965 to 1977) and Generation Y (born 1978 to 1987).

No matter how effective organizations may become at retaining older workers in flexible roles, soon Generation X and Generation Y will become the dominant players in the prime-age workforce. As they do, they will usher out the last vestiges of the old-fashioned workplace values and norms and finish the workplace revolution. Meanwhile, huge cadres of aging workers (often with significant power in organizations) will reach advanced life stages, at which they will need and demand more flexible work conditions, ironically, pushing the free-agent agenda in their own ways for their own reasons. On top of all that, a new generation of younger workers with no attachment to the old-fashioned career path and work patterns will emerge.

What Will this Mean?

The revolution in workplace values and norms will continue. The traditional career path and old-fashioned management tactics will finally fade away. The one-size-fits-all approach to employer-employee relations will be dead. In good times and bad alike, the idea of a long-term career in one company will be rare. Employees will come to accept that they must take responsibility for their own success and fend for themselves as best they can. The most successful people will be focused on learning marketable skills, building relationships with decision makers who can help them, and selling their way into career opportunities.

Business leaders and managers are going to be scrambling for the foreseeable future to get more work and better work out of fewer people, consistently. Having hired like crazy in the frenzied seller’s market of the late 1990s, they found themselves downsizing even faster throughout 2001and 2002. They are not going to make the same mistake again of hiring every warm body in sight. Rather, the pressure will be on to hire the best person for every role at every level and then manage every person aggressively to reach higher levels of productivity.

Yes, there will be a growing tension between the goals of employers and the needs of employees. Most individuals will feel an increasing amount of pressure to work longer, harder, smarter, faster, and better. In response, workers of all ages are likely to become much more assertive about getting their workplace needs met…primarily flexibility…one day at a time. That will be just fine because the best way for business leaders to increase productivity, quality, and cost-effectiveness will be to customize work conditions, requirements, and rewards for employees, one person at a time. And leaders and managers will come to accept this new environment.

As most workplaces become less hierarchical and less formal, relationships between employers and employees will become increasingly short-term and transactional. Individual careers will be much more fluid and self-directed. Most communication will be just-in-time oriented, tied to the growing availability of information through easy-to-use technology. The pace of everything will continue to accelerate, while long-term thinking and planning will be much less relevant. Managers will have to discard traditional authority, rules, and red tape, and become highly engaged in one-on-one negotiation and coaching with employees to drive productivity, quality, and innovation.

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