Enterprises must accept the new paradigm of work if they want to remain competitive…

From the desk of Miles Everson:

Hi!

Welcome to today’s edition of  “Return Driven Strategy (RDS).”  I’m excited to share another business insight in this article.

For those of you who are not yet familiar with this, RDS is a pyramid-shaped framework with 11 tenets and 3 foundations. When applied properly, these principles help businesses attain high financial returns and performance.

Let’s apply this framework in the context of today’s workforce trends.

Keep reading below to know about the new paradigm of work.

Enterprises must accept the new paradigm of work if they want to remain competitive…

Over the past decade, the pact that bound employers and workers together has undergone a dramatic shift.

This pact forged an implicit agreement between workers and companies: Employees gave their loyalty to employers in exchange of job security, career progression, health benefits, and a guaranteed pension.

Unfortunately, over the past several decades, this social pact has unraveled slowly but surely.

Now, benefits, particularly fixed benefit plans, have been cut back (if not totally eliminated) and mutual loyalty between organizations and workers has eroded to the point of nonexistence.

To fully understand why this pact eroded, we need to look into the reasons that led to it in the first place.

A Broken Promise

As the U.S. emerged from the ashes of World War II, a new American Dream emerged for middle class workers: In exchange for their loyalty and dedication, these workers would be taken care of by their companies in retirement.

In 1949, 78% of U.S. households were single income, and a great majority of the workers in these families had access to defined and employee-sponsored benefits plans.

However, over the course of the next several decades, the number of single-income households waned.

By 1965, single household families had shrunk to 38%, further nosediving to below 20% by the 90s.

During this period of protracted decline, defined contributions plans like the 401(k) had almost entirely supplanted defined benefit plans, essentially placing retirement in the hands of workers, not the businesses that hired them in the first place.

Fast forward to 2020, only 15% of U.S. workers had access to a defined benefit plan.

As a result of these trends, dual income households have become more prevalent in American society as the decades rolled around.

What’s more?

Along with defined benefits, employers enticed workers to stay for long periods of time through the promise of moving up internally.

It wasn’t unheard of for rank-and-file employees to move up to managerial roles or other positions of importance.

However, just like with defined benefits, promotions have become less common as years went by.

This not only led to less mobility but lesser pay, as some compensation systems tie pay to a worker’s job title.

Putting Food on the Table

Today, workers and their families are having a hard time making ends meet, despite belonging to dual income households.

Over the past several decades, household expenses and debt service have taken a considerable chunk of household income, leading to a decline in personal savings.

Since earnings aren’t enough to cover the costs of taking care of a family, many have turned to taking multiple jobs and personal loans such as credit cards and increasingly popular “buy now, pay later” schemes.

Additionally, a growing share of income in most U.S. counties has come from social safety net programs like SNAP, Social Security, and Medicaid.

In fact, money from programs like Social Security accounted for 18% of total personal income in 2022.

Put simply, holding a job is no longer a guarantor of a worker’s ability to make ends meet.

The Changing Paradigm of Work Through RDS’ Lens

Due to the factors mentioned above, it is clear that the pact between employers and employees has been broken.

Worker loyalty no longer exists and as a result, businesses now have to operate with a revolving door of workers while simultaneously coping with a talent crunch spurred by demographics such as declining birth rates and a wave of retirees exiting the workforce.

Unsurprisingly, workers no longer feel beholden to work for a single company for a long period of time.

Professor Joel Litman  and  Dr. Mark L. Frigo  in the book,  “Driven”  highlighted the importance of engaging employees as a crucial step in attaining high levels of performance.

According to them, high performance firms should treat their employees like customers and understand employee needs and create systems that fulfill those needs.

In the context of the changing paradigm of work, businesses need to understand that workers no longer feel obliged to work for just a single company.

As a result, these firms must understand how they can best engage with employees so that they can attract and retain talent effectively.

The talent crunch will worsen as the years go by, so it is crucial for companies that want to perform at high levels to know how to attract and retain top talent, especially if they don’t want to get left behind.

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If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out  “Driven”  by Professor Litman and Dr. Frigo.

Click  here  to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm.

Hope you’ve found this week’s insights interesting and helpful.

Stay tuned for next Tuesday’s Return Driven Strategy!

In the world of motorcycles, few names evoke as much passion and heritage as Harley-Davidson. More than just a brand, Harley-Davidson represents a lifestyle, a culture, and a community.

Learn more about  Harley-Davidson’s “HOG” as seen through the lens of RDS  in next week’s article!