This is part three of a 10-part series designed to help you transform your company, gain a competitive advantage, and sustain long-term business success. In part one, we helped you explore whether or not you’re ready for the future of business. In part two, we introduced you to one executive whose business model eroded thanks to an outdated labor blueprint. Today, we’ll dive deeper into the many pitfalls of the old labor blueprint and explore how it’s still impacting businesses today.
Patriarchal Workforce Model: a big family of full-time, regular employees working for one company their entire lives.
What a great country the United States is. Early business pioneers perhaps understood this best—the Rockefellers, Carnegies, and Fords. They participated in the U.S. manufacturing transformation that would ultimately produce more than one-third of all global industrial output.
Between the late-eighteenth and early-twentieth centuries, America gave birth to many of the world’s most successful companies. From these came second-, third-, and fourth-generation international entities and spinoffs. In most of these organizations, everyone worked for the “Company”: one big, happy “Family” of full-time regular employees—the janitors, cafeteria workers, security guards, groundskeepers, drivers, managers, and CEO. They all belonged to the Family and they all received a paycheck from the Company. According to this Patriarchal Workforce Model, people expected to stay with one organization until they retired—or died.
According to the first labor blueprint,
the Patriarchal Workforce Model, people assumed that they would be working for one company their entire lives.
Over time, many of the Family members grew dissatisfied, maybe because of too much perceived or actual corporate greed, too much concentration of power and money, or too much employee abuse. Eager to improve their situation, some of these disenfranchised workers sought the help of an outside partner: the union.
Unionized companies provided higher pay scales and rich benefits, including health care and generous retirement programs (which eventually became too generous). Whether or not you support unions, you can’t question their significant influence on wages and benefits throughout the marketplace, since even the nonunion companies copied from union playbooks. In many cases, they did so just to make sure they kept the unions out. Although businesses didn’t particularly like the situation, corporate profits were soaring, and there seemed to be enough money to go around for everyone.
Huge corporate profits masked the escalating compensation and benefit costs that were generating a long-term employee legacy debt.
The Dark Side of the Patriarchal Model
With its static full-time workforce, the Patriarchal Model offered no buffer against changing business conditions, seasonality, or market fluctuations. Companies found themselves overstaffed when their production levels dropped and understaffed when they rose, but never perfectly balanced with the right number of employees. Employers had no effective staffing solutions for marketplace expansions and contractions.
When production decreased, management had to decide whether to let go of employees or carry the fixed cost. A few industries could afford to keep workers when business conditions did not justify doing so, but most companies had to let them go, a step they were very reluctant to take. Not only did layoffs increase their unemployment insurance taxes, but they also tarnished their reputation as an employer, consequently affecting their ability to recruit the best talent in the future. Furthermore, layoffs opened an employee wound for which unions provided emotional salve.
Having only a static labor force at their disposal, employers had no effective staffing solutions for marketplace expansions and contractions.
On the other hand, when production ramped up faster than expected, organizations had to hire new personnel or work overtime. But hiring put pressure on the company to recruit, interview, select, and train totally new people—a long, expensive process to undertake to meet an immediate, unpredictable need. And working overtime not only increased the cost of the product but also led to decreased efficiency as employees put in longer hours.
The Patriarchal Workforce Model saddled employers with having to make ongoing difficult decisions on over- and understaffing. In hindsight, we can see that this premium-priced family workforce offered very limited business flexibility and led to an ever-growing debt that was too far off to see but was real nonetheless.
Curious to learn more? Check back in next month for part four of this 10-part series. We’ll introduce you to two more workforce models and explore the pros and cons of each.