Do any of you know what a gold watch is?
A blingy way to tell the time… sure…
But it used to mean so much more…
A gold watch was traditionally given to a worker by their employer when they retired
with more than 25 years of service to that company.
This little tradition has almost entirely been forgotten however… why?
Well maybe it’s the rising price of gold or the adoption of alternative timekeeping
methods, but most probably it’s simply because company loyalty is a thing of the past.
How many people do you know that have been with their current employer for more than
10 years?
Well according to the US Bureau of labour statistics it’s actually 29% of people,
which sounds suspiciously high until you consider that a vast majority of this group are made
up of workers on the verge of retirement, which is important to remember for later.
Amongst all workers in the US the median was just over 4 years.
In fact multiple studies have suggested that full time workers that stick with their employers
for more than two years on average get paid FIFTY PERCENT LESS.
This is an unbelievably large gap, ESPECIALLY when you consider that the average of the
loyal working group will be drastically inflated by senior executives and the c suite who tend
to have more tenure.
In plain English, for regular joes like you or me, this 50% figure is likely understated.
So why aren’t companies stopping this?
Surely having to pay tens of thousands of dollars to advertise a position, interview
candidates, onboard new staff, train them and wait for them to get up to speed with
their new role is not sustainable if it has to be done over and over again every 2 years…
right?...
Well you would think so, but there are a few reasons why companies don’t care about employee
loyalty… anymore…
An abundance of skills
Standardisation of tasks
Globalisation
Broken corporate ladders
And of course an ever changing demand for different roles.
So it’s time to learn how money works and go into the terrifying mind of someone that
works in “human resources: to find out what employers DO actually value, so that you can
get the most out of the career that you will probably be working until you are a hundred
years old.
The first factor that is ruining the appeal of company loyalty is the easiest to see,
and that is the changing demand for different roles.
If you look at your local classifieds these day you are likely to find a lot more companies
looking for a dev ops engineers and far fewer companies looking for switchboard operators.
As technology develops it is creating new jobs, while simultaneously making other jobs
totally redundant.
The rapid place of this change in the modern world means that a lot of people are going
to end their careers working jobs that didn’t EXIST when they first started working.
Naturally if you are in a role that can easily be replaced by a machine, or even just a piece
of software, you are going to be shown the door pretty quickly reducing the average tenure
of the workforce.
This goes both ways as well…
An bookkeeper that realises they could earn twice as much as a social media manager is
also likely to jump ship as well.
THE most sought after job amongst children these days is “YouTuber” go back just
20 years and people would think that is some kind of very specific plumber.
I know this is not news to any of you, so I don’t want to spend too much more time
on this factor, but do try to keep this in mind as we look at the other forces pushing
companies away from valuing staff loyalty…
…
Next up is the abundance of skills available to employers.
Educational attainment is at all time highs.
A college graduate is (for better or worse) no longer a rarity.
Companies do well for themselves by being open to these new hires for a few reasons,
for starters they are cheaper than their more tenured peers, but they naturally tend to
be younger and more willing to put in overtime to make sure certain projects are delivered.
An extreme example would be companies like the big four accounting firms.
They offer very widely recognised graduate programs that pay terribly and expect massive
sacrifice.
They offer these with the mutual understanding that almost none of these graduates will stay
on with the company and instead seek out higher paying positions with a better work life balance
once they have committed their two years for that resume boost.
A recent internal report found that Deliotte had a staff turnover rate of around 13% annually,
potentially costing the business 427 million dollars a year in hiring and training expenses
as well as intangibles like project delays due to staff members leaving.
This sounds bad, but both parties’ kind of know what they are getting into here.
Deloitte gets a cheap pool of labour to bill out for a few years and those overworked juniors
get to put the graduate program on their resume so they can get a better job with a regular
company.
The regular companies that hire these ex-graduate program staff also love this system for three
reasons.
For starters, surviving two years at a big four accounting firm is a good indication
they can handle a pretty big workload.
They also come equipped with some genuinely useful insight.
If a KPMG grad was doing consulting work in the pharmaceutical space and then latter went
on to work at Johnson and Johnson, they are going to be equipped from day one with the
basics of how the business functions because they were directly involved with their projects
in the past.
Perhaps even more importantly they will have knowledge of how their competitors are operating.
Now I am not talking about high stakes corporate espionage or anything here, more just things
like “oh GSK streamlined their expense approval process by using this software”…
Simple little insights like that can save multinational corporations millions.
Now this is not specific to just accounting firms, I only use them as one particularly
egregious example, the truth is businesses know that the best way to stay at the top
of their industry is to make sure they have a healthy supply of talent coming in from
their competitors.
This becomes even more important when you consider the role of globalisation.
The rise in offshore service centres and a massive increase in skilled migration means
that the pool of talent that companies have to choose from in almost every industry is
wide and deep.
It’s not uncommon for companies to advertise even entry level positions GLOBALLY, especially
since everybody is working from home anyway.
Now the third reason businesses love these outside hires, especially when it comes to
more senior positions is because it prevents catastrophic chain reactions in staffing…
…
Imagine a company that made every effort to promote internally and only ever filled senior
positions by promoting people from within the business.
This actually sounds pretty great, but it can cause some problems.
Lets say one day a senior manager in the business retires, good for them…
Anyway a floor manager from one of the 4 departments the senior manager oversaw is chosen to replace
them, and then a project team manager is chosen to replace that floor manager, and a senior
associate is chosen to replace the team manager.
A lot of people in the business would be feeling pretty good about themselves, and in theory
this is the fairy tale example of climbing the corporate ladder.
But you might already be starting to see the problems.
Not only has this business lost a senior manager but it now has 4 people in key roles that
are totally new to their job all at the same time.
No matter how much experience they have had there is going to some kind of learning curve
involved in a new senior role so the business may be in a position where projects get delayed
months because an entire corporate vertical is completely out of action.
Compare this with an alternative where the senior manager just gets replaced by an outside
hire and not only does the business not have to worry about all of this nonsense, it might
be pulling away a talented individual from a competitor.
It’s a win win, although this just means the business is winning twice, the employee’s
can get funded.
Now you might argue that this is nothing new, but ironically as businesses have been pushing
for flatter organisational structures with less defined roles it has become even harder
because it get’s harder to map out exactly who does what.
The classic line of “you’re irreplaceable” has two meanings.
Fortunately for companies this external hire process has become a lot easier anyway thanks
to the standardisation of tasks in the workplace.
Let me ask a question to any office employees watching, what program do you use the most
in your role?
Probably email right?
If not it will probably be some Microsoft suite product and whoever doesn’t fit into
this category is probably a programmer of sorts.
The adoption of computers in the work place has massively improved how productive we as
individuals can be.
A spreadsheet that might have taken a team of bookkeepers weeks to produce just two decades
ago can now be created in one afternoon by in intern with excel.
Beyond maximising man hours, it has also made most roles far more uniform.
Whether you are in sales, customer service, administration, accounting or whatever else
involves using a computer chances are there is an industry standard software suite that
gets used by most companies.
So an onboarding process that could have taken weeks to get someone up to speed with how
a company system works can now be as easy as, “ok so you have used salesforce before?
Here is your client list, pick up the phone and start dialling”.
The most extreme example of this is the role of the bank manager.
A few decades ago being a bank manager was a BIG deal, almost on par with being a doctor
or a lawyer.
This was because bank managers had to decide who to give loans to and who not to give loans
to.
This might sound easy in the age of credit scores but back then it took a very detailed
understanding of business functions, the local economy, the national economy, regulations,
and the banks own financial position.
Beyond this bank managers were encouraged to develop strong relationships with local
business people and the community in general in order to gain their business.
Fast forward to today and a bank manager is a glorified customer service role.
They don’t make the decisions about who gets a loan and who doesn’t.
that gets handled by an offshore credit department that in turn just plugs numbers into a computer
program to get an approval or a decline.
Replacing a bank manager 40 years ago was a massive deal and because their role relied
so heavily on day to day experience and relationships they almost needed to be replaced with someone
else from the branch.
Replacing a bank manager today is as simple as putting up a job posting and waiting for
a line of hopeful new candidates to come knocking.
Now if this all sounds depressing, just know that it doesn’t have to be.
Sure the dream of having a nice stable job for a 40 year career is probably dead, but
if anything the current reality is… refreshingly… honest.
Companies are there to get the most out of you until a better alternative comes along,
and you are there to get the most out of a company until a better alternative comes along.
Switch jobs!
The stats don’t lie, you will be better off for it.
As we saw the only way up the corporate ladder is by jumping between them.
Yes employers are going to try to screw you, they are a business not a charity, so screw
them back, keep that swanky linkedin profile looking sharp, accept any certifications or
trainings that your business will pay for and don’t fool yourself into thinking that
you will be rewarded for loyalty, because you simply won’t be…
Alright there are of course two other big factors at play here, all of the statistics
and trends that this video explored have been for full time employees.
This whole situation would be a whole lot worse if it was to include the rapidly growing
army of casual workers and gig economy contractors.
I am going to make a video about that soon so stay tuned.
The other factor that we didn’t explore was the increasingly service oriented bull
jobs that are being created every day which inherently have less staying power than more
traditional operational roles.
Fortunately I have already made and entire video on this point so go and check that one
out to keep on learning how money works.