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PARADIGM SHIFT (Part 1)Several years ago, I heard the word "paradigm" for the first time. It is a fancy word, used to refer to a fundamental way of looking at things. Often used in the phrase, "a paradigm shift," it then means a change in the fundamental way of looking at things. The "fundamental" part is central. Simply looking at things from somebody else's point of view, is not what this is about. This is more than the technical process of turning the coin over and looking at the other side. This is Fundamental. A Paradigm is a way of looking at things upon which your whole life, or at least a substantial part of it, is based. It is the root of your beliefsystem. We might go through half a dozen minor paradigm shifts but rarely more than one major paradigm shift in a lifetime. One who has a profound religious experience that changes his way of thinking would go through a paradigm shift. Paradigm shifts occur suddenly. The circumstances can build up slowly,but even then the realisation usually comes with a jolt. After months oflooking for that next job, you look in the mirror one morning and suddenlyfind you have aged. When that happens, your way of thinking changes; your fundamental approach to life is different; you're not quite so cavalier in your attitude. And you can feel that the very foundation of your life has changed. James Watt is often credited with inventing the steam engine which started the Industrial Revolution. Actually steam engines had been used to pump out mines for at least thirty years before Watt came into the picture. All Watt did was to turn the up-and-down pumping motion into a rotary motion, and so enable locomotion to occur. It seems pretty rudimentary to us now, because we are accustomed to the concept. For James Watt and his contemporaries, it needed a paradigm shift, and it took thirty years to produce one. Well, there are changes going on around us in the very fabric that makes up the business world - a fundamental shift in the way society operates. These changes will have profound consequences on the job scene as we know it. We have been living an illusion over jobs for so long, it seems that it could never end. Several generations have been born and raised in this illusion, so that it is now fundamental to our way of thinking. A paradigm shift is coming. Are you ready? Having a job brings a measure of security to our lives. We have grown accustomed to thinking of having a job as something secure: as abirthright, even. When we lose our job, we become insecure. For the vast majority, the idea of financial security is based on having a job. Yet this is a poor understanding of financial security. The only way you can be "secure" is to have enough money that you can totally dismiss anyone who bothers you. "Security" in a job is the next best thing, perhaps, but it is not security - never has been. We have deluded ourselves all this while! Before the factory worker came into his own, a job wasn't something you had, it was something you did. It isn't a quirk in the English language that gave rise to the term "journeyman" and "journeyman craftsman". It wasonly with the rise of the modern corporation that the job as a permanentposition arose. Henry Ford sanctified the situation when he parcelled production into standardised routine activities, which were then made the responsibility of long-term employees. Prior to that a job was always something to be done, and when it was done and paid for, the worker went on his way. It will help us to appreciate the coming situation if we understand why and how a job became a position rather than a task. The cost of information and transaction expenses to a large extent determine whether firms bring activities in-house or contract them out.Your company may need the services of an accountant, let's say - they could employ one to work within the company, or call an accountancy firm and hire their services on a fee basis. What makes your company decide one way or the other? Usually, it would be the amount of accounting work anticipated - ie. the cost of the work. Economy of scale would dictate that it would becheaper to employ an in-house accountant if you have a lot of accounting work, and cheaper to hire one on a fee basis if you needed them only occasionally. The cost breakpoint would force the decision. But information and transaction costs are coming down at a tremendous rate as information technology improves. Take that accountant situation -Outside firms find they can do their work cheaper because of technologicalimprovements. Laid off accountants set up their own private firms or work as independent contractors. They can compete with the larger accounting firms because of the same advances in technology that got them laid off in the first place. Competition causes everyone to charge less. As they charge less they are forced to be more efficient. The breakpoint for the hiring company rises, meaning that only those companies with a very large amount of accounting work find it economical to do the work in-house. As the cost of processing, computing and analysing information comes down, the cost per transaction comes down; now it is cheaper for a corporation to contract work out. The same could be said of many other services needed to operate asuccessful business. As long as the cost of doing business was high, large corporations developed. As the cost of doing business comes down, small companies and independent contractors can function better. And as the cost of doing business comes down and small businesses can function well, large businesses will save money by employing them and eliminating 'permanent' positions. So people get laid off because the large company can do without them.These people now start looking for their next 'permanent' position. But unemployment does not rise because some, at least, are taking matters into their own hands and setting up their own small businesses. And these small businesses hire workers on a more temporary basis. In the business expansion from the lows of the 1930s that is still going on today, it wasrelatively easy (fluctuations acknowledged) to find another job. That is changing. Secure jobs seem few and far between today. Ask any worker today and they will likely blame corporate greed for thepresent situation. Top people lay off thousands of workers, then get a big bonus based on the increased profit created by reduced expenditure. Yet, on the other hand, our deeply seated values of individualism and personal gratification lead us as consumers to search for the best product at the lowest prices. This is also a good description of greed, is it not? Corporate greed vs. consumer greed. Employees are caught in the middle. But employees are the consumers! "Good jobs" will soon be a thing of the past. In the recent past, 'good jobs' existed mainly because of high information and transaction costs.Firms grew bigger and brought a wider range of functions into their structure because doing so allowed them to capture economies of scale.Inevitably, the character of business organisation guaranteed that the most highly skilled and talented people, who created most of the value-added in an organisation, were paid proportionally less than their contribution was worth; because so much of what they earned was used to pay the transaction costs - the multitude of paper-pushers that permeate any large organisation. This is changing rapidly. In the future, individuals who create significant economic value for their firms will be able to retain most of the value they create for themselves. If they cannot do it within the organisation, they will leave and do it outside. This has always been a possibility, of course, but now it is becoming easier. Support staff who previously absorbed a large partof the revenue generated by the principal income creators in an enterprise, will be replaced by low-cost information systems. It will become incumbent upon those support people to form their own low-cost support systems and secure contracts with the innovators for that work. There is another major reason why information technology makes it moreattractive for companies to contract out functions previously done by permanent employees. Microprocessing tends to make product cycles shorter - new models can be introduced quicker. This would favour virtual corporations or temporary firms as a style of organisation. Independent contractors, even if they are one-person firms, have vastly more sophisticated information networks at their disposal, today. Electronic aids perform a wide variety of office functions from answering the telephone to secretarial duties. In the future, digital servants, or automated information systems, will replace secretaries, advertising agents, travel agents, accountants and others. Throughout most of history, there were no jobs in the modern sense, only temporary tasks. The phrase "a job well done" was a compliment for aspecific task done well, not a statement made about an employee retiring with a gold watch after 40 years. As we approach the twenty-first century, jobs will become more and more like the temporary tasks of former times, and employees more like the journeymen of old. *** Part 2 of this article can be found at: Paradigm Shift 2 ***
Contributed by Frederick Pearce, head of the Pearman Cooperation Alliance
and webmaster of THE BUSINESS START PAGE at: | ||||||||
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