The coronavirus has shaken the foundation of business to its core. While many business leaders are still reacting to the immediate impacts of the virus, others are looking into the future and asking themselves: What’s next? The answer, especially for those in the manufacturing industry, is transformation.
If you think it might be time to revolutionize your business by transforming your workforce, you’re in the right place. In this 10-part master class series, MAU president Randy Hatcher is sharing how to manage, analyze, and utilize your workforce in this new normal. In this post, we’ll explore the good and the bad of the Patriarchal Workforce Model.
If you missed them, be sure to check out part one (“Workforce Transformation is the Key to Future-Proofing Your Business”) and part two (“3 Signs It’s Time to Rethink Your Business Model”) of this series.
The Dangers of an Outdated Labor Blueprint
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 spin-offs. 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? In part four of this series, we’ll introduce you to two more workforce models and explore the pros and cons of each.
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Note: This blog post was inspired by and adapted from Randall Hatcher’s book, “The Birth of a New Workforce” and originally appeared here.