When you speak with your friends and colleagues, are they excited to go to work? Does the thought of a Monday elevate their mood or depress it? If we look at the statistics, between 83% and 87% of employees are disengaged. That answers the question of how people feel about their work. Why, though, are so many employees disengaged?
We started to address this question earlier when we learned from Dr. Hartwig that work used to be inherently meaningful before the Industrial Revolution. However, at the start of the Industrial Revolution, the use of machines and the introduction of the Scientific Management movement changed the way work was perceived. The standardization of work turned meaningful work into meaningless labor.
While that helps to understand the current problem, it cannot be, nor is it, the full picture. Thomas Kochan, a professor of work and employment relations at MIT’s Sloan School of Management and co-director of the MIT Institute of work and employment research, fills in the missing pieces in his book Shaping the Future of Work: What Future Worker, Business, Government, and Education Leaders Need to Do for All to Prosper.
The thesis of Dr. Kochan’s book is that the current workplace challenges originate from a mismatch of the outdated employment policies and the fast-paced changes in technology, globalization, and demographics. The solution that he proposes is to update public policies, organizational practices, and business strategies to match the needs of the knowledge-based economy.
Let’s take a closer look at history to put these ideas into perspective. Most of the labor policies we have in place today date back to the New Deal legislation of the 1930s. The country was trying to recover from the Great Depression, but the labor laws at that time had not caught up and were not reflective of an industrial economy. Then, truly transformative legislation was passed by the Roosevelt administration. The four pillars of the New Deal Labor Policy were: unemployment insurance, social security and disability insurance, the National Labor Relations Act, and the Fair Labor Standards Act.
An unofficial social contract was created as a result of the New Deal labor legislation. Dr. Kochan defines a social contract as “the mutual expectations and obligations workers, employers, and their communities and societies have regarding work and employment relationships.” This social contract, or the ideal relationship between citizens and their government, lasted until the 1980s. During 40+ years, wages and productivity moved upward in tandem leading to an era of shared prosperity and an expansion of the American middle class.
In the 1980s, the postwar social contract broke down, and an era of “managerial militancy” emerged in labor relations. Dr. Kochan identified three events that triggered the end of the postwar social contract:
- Ronald Regan became president
- The deep economic recession of the early 1980s
- Increased international competition, especially from Japan, in the auto, steel, and manufacturing industries
The financialization of corporations or the unrelenting pursuit of profit maximization has always been the goal of the private sector. However, that relentless goal was tempered by the labor unions during the time of the postwar social contract when they demanded a share of corporate profits for the workers. Also, leaders of the postwar era had different beliefs about their responsibilities and the roles their organizations played in society. These leaders balanced the interests of investors, employees, and communities.
In the 1990s, that started to change. CEO compensation plans gave priority to stock options and aligning CEO incentives with shareholder interests. Employees’ wages flatlined. The lucrative stock options shifted executives’ interests from meeting all stakeholders’ needs and promoting stable and growing organizations to maximizing short-term earnings and boosting stock prices at any cost.
That brings us to today. Most CEOs still put the interests of the shareholders above all else, often ignoring other stakeholders. These CEOs might say that their people are their most important assets, but creating exciting careers for their employees is usually not a priority for many leaders.
Is there any hope that this will change? Definitely, and we have discussed several examples of companies that are able to combine generating strong profits and supporting employees and customers in a humanly responsible way. With some further progress, a new social contract should emerge where workers’ compensation, employment conditions, and living standards can advance in tandem with the profits they help to generate.