Book Resume - The Quitting Economy
Your salary used to reflect the value you generated or your years of experience. Today, it is more tied to the number of times you switch companies.. In the new knowledge economy, current employers provide salary raises that go hand in hand with inflation, while hiring companies provide a 10-20% salary increase when you switch. The increased salary offsets the risk you take by switching companies. One strategy to increase your salary 1.5X or even 2X across the next few years is to switch companies every two years. This strategy mostly applies to job functions in the knowledge economy.
The CEO of Me: The evolution of human capital
Worker roles in the knowledge economy require the adoption of The CEO of Me, Inc. mentality, where workers see themselves as a business instead of just an employee. The results of this shift in how people see their role in the workplace has created a labor force of quitters instead of career seekers. Gary Becker, an American economist and Nobel Prize winner, understands this new shift in the work environment. He coined the phrase “human capital” to describe this new type of employee and how they should view themselves in this new workplace economy.
Gary’s concept of human capital means that employees must realize that their value is determined by the market, just like the businesses that hire them. Workers must see themselves as a “company” that continues to evolve, increase its value, and is always prepared to move on to better salaries and better opportunities to add knowledge and skills. This new era of how people work could lead to a more even playing field between companies and workers, but there's still a lot to learn from the fallout.
No more gold watches
The trend of employees viewing themselves as a business has coincided with a steady decline in the traditional security and benefits of long-term work. Companies have long been thought to offer long-term value for employees, shareholders, and communities. But all that has changed as the overall value of a company has become synonymous with that company's market value. The staples of what used to make a company valuable, such as career opportunities, community outreach, and other elements of a “good” company culture are being discarded. The days of retirement parties and gold watches are long gone.
Now the value of a company is largely determined by short-term results, specifically profits and stock prices. Quarterly reports and stock values have become the primary definition of success, changing how companies value employees and vice-versa. The result is a sort of “every man for himself” mentality, a climate where employees and employers consider their own best interests above all else. There is no loyalty to either party, only an endless jockeying for position to get “theirs.”
This culture, focused on profit above all else, has created a sort of “catch 22.” If companies give employees more money, that means shareholders get less. If they give employees less money, shareholders will get more, but employees will either decrease production or just quit. This cycle of short-term thinking is bad news for traditional employees. Unless workers adopt the CEO of Me mindset, in a short-term culture driven by immediate profits, the shareholders will always win, at least for now.
American Airlines learned this lesson recently when they decided to make compensation levels more competitive. They announced the increases to staff salaries and began allocating funds that would have previously gone to shareholders. The reaction on Wall Street was quick and sent a clear message as American Airline's stock value dropped. How American Airlinessolves this dilemma will depend on how effective they are at creating incentives that directly relate to the new workforce of the quitting economy.
Creating a workforce of quitters
Labor continues to be one of greatest expenses in business and can impact profits, and stock values, more than any other factor. To keep these high labor costs in check, companies pay their employees as little as they can. The cost effective trend of using temporary workforces has grown because it allows companies to increase or decrease this disposable workforce as short-term demands change. This "shareholders first" approach has created an atmosphere of expendable labor where employees are simply another expense instead of a long-term asset.
As long as inexpensive and temporary labor continues to be available, and production results in profit, this trend will continue. While this method will continue to pacify shareholders, the disregard for employees is creating a workforce that has no loyalty. When employees have no sense of loyalty, they will contribute just enough to keep their job until they can find something better and quit.
To further decrease labor costs, companies have also begun to dismantle those long-term benefits such as retirement and other tenure-based incentives. Companies may not admit it openly, but the loyal, long-term employee is no longer the preferred hire. The most valuable employee has become the one who will work long and hard on short-term work and will be easy to let go when they are no longer needed. This lack of commitment to one another between employers and employees has created a workforce of quitters and a revolving door of new hires.
If everyone quits, who wins?
The climate of market driven value, for companies and workers, has created an entirely different career path. Workers now have to think of their career path as more of a hit-and-miss trial than the traditional method of linear progress. Careers now have to be shaped to reflect the decreasing security and fewer benefits. A worker's route to increased earning power is now determined by their ability to effectively jump from one job to the next, the ability to pick up new skills, and being prepared for their next move.
The CEO of Me mentality means that workers must view themselves as job-quitters and shape their approach to every job with the intention of eventually moving on. This intentional focus on work being a temporary endeavor means the best result will be quitting for a better job and the worst will be getting laid off. In the past, a good job was the one that had perks and an opportunity for steady advancement. Today, a good job is the one that prepares workers for finding another job that pays a little more or offers a chance to learn new skills to continue the cycle.
Workers must now redefine what a “good” job looks like. A good job offers a chance to learn skills that are transferable to the next job. A good job will be one with a reputable company in the hopes that by association, a worker will be able to land a better job down the road. Understanding the new trends in the workplace means workers will search out jobs that will benefit them the most when they quit. The quitting economy means companies want temporary employees and employees must be willing to fill those roles while preparing for the next.
If the quitting economy continues to become the norm, shareholders should be clear winners as long as this new way of working produces results. If workers can learn to adapt to new ways of looking at career paths and understand where their value lies, it may be a win for them too. Companies may end up being winners here as well, or at least not losers. But they must be able to embrace this new culture of temporary workers and learn how to get the most with the least while still turning a profit.
Co-workers as recruiters
The new rules of employment change the dynamics of just about every aspect of work, including the relationships of co-workers. It's always been sound advice to get along with co-workers for obvious reasons such as teamwork, advancement opportunities, and other collaborative reasons. But in the quitting economy, co-workers can be instrumental in helping one another continue their progress as they move from one job to the next.
The temporary nature of the quitting economy means greater turnover, which in turn leads to more contacts with other companies as co-workers move on. Since companies are bypassing traditional criteria when hiring, they may begin placing more and more emphasis on referrals. The worker that companies hire is temporary after all, so any recommendation from someone already working for them will carry more weight than it used to. At the very least, knowing someone on the inside can open the door enough to get an interview.
The way people work will continue to evolve in response to not only greater shareholder expectations, but also technology and consumer behaviors. Winning by quitting will most likely be one of many new approaches to work that workers must learn to keep those paychecks coming. Workers who accept the rise of the quitting economy will be able to survive. Workers who understand the quitting economy and shape their approach to work by expanding their skills, networking, and always being prepared to move on could thrive.