Why Did Companies Make Permanent Hires?

 

Historically, companies wanted to hire permanent white collar employees for a number of reasons:

 

• Scarcity. It was hard to find good talent, so when you did find it, you wanted to lock it in.
• Training. Most companies operated in their own idiosyncratic way, so it took a long time to induct new employees to doing things their way.
• Trust. In a world in which monitoring quality was hard, you needed to trust your employees not to steal from you or neglect quality. 

 

Why Did Professionals Want Permanent Roles?

 

Likewise, professional workers also had their reasons for wanting permanent jobs:

​

• Career. Most big companies promoted from within, so if you wanted to get to the top, you needed to be prepared to stay around for many years.
• Pension. In the days of ‘defined benefit’ pensions, it made sense to stay in one organisation for a long time, to get the best possible pension.
• Healthcare. In the US, healthcare was (and still is) generally paid by the employer for their full time employees. 
• Social Pressure. Changing employers too often was considered unethical, and could make you less employable elsewhere.
• Lack of Transferable Skills. In the pre-internet world, an enormous amount of company knowledge wasn’t codified - it was learnt on the job and was considered company- or industry-specific. Therefore, it was hard to learn transferable skills that could help you move between companies, industries or functions. 

​

​

​

​

​

​

 

​

​

From Jobs For Life, To Jobs for A Few Years, To Jobs For A Few Weeks

 

For decades, ‘jobs for life’ were evolving into careers working for multiple employers. The average age of companies in the S&P 500 has changed from 30 years old in 1980 to just 10 years old now. Old companies were declining and the new companies were hiring, leading to more job switching. Mid-career changes of employer, stimulated by studying for an MBA, or being poached by a headhunter, was also becoming more common.

 

The internet has accelerated this trend further. We have LinkedIn and other job sites, online training, video conferencing, dashboards to track almost anything. Working in a startup is considered cooler and a faster way to both learn and get rich than going to a big, established company. It also leads to more churn, as startups pivot often. Given all this, the average time that professionals stay at each employer has been drifting down, and is now below three years per employer. 

 

The coronavirus lockdown has just accelerated this evolution that was already happening. Now that all white collar professionals are working from home, companies can hire talent from anywhere in the world. For example, my small consulting business has a virtual team of 10 people. All of them are paid per project/ deliverable, we don't have an office and none of them live in London (near me). 

 

So what does the future look like?

 

Employers Want Far Fewer Permanent Employees

 

Employers don't need, or want, as many permanent employees as they had before:

​

• Talent Mobility. It is now much easier to find ‘good’ talent, on LinkedIn and other job sites, or by using headhunters - so organisations don’t need to lock in their talent so tightly. Also, talent needs vary over time, and new blood is seen as a good thing.

• Need For Flexibility. Companies now need to be much more nimble, spinning up new teams and closing down others at a much faster rate. That is better done with temporary manpower. And it is now easy to find consultants or outsource specific projects, such as a discrete piece of analysis, getting an expert opinion or building an app. 

• Hyper Competition. In the global economy, most organisations need to become the best in the world at something, or risk death. To be the best in the world means tapping into world class talent and global expertise. Such people are often only available as a consultant rather than a permanent hire. 

• Training. All companies now do a much better job of being able to explain how they operate to newcomers, so it is now much easier for outsiders to turn up, understand how a company works, conduct a project successfully, then walk away.

• Trust. It is much easier to trust outsiders now. There is no cash, most ‘deliverables’ are digital and trackable, and people who do let you down would ruin their reputation through bad ratings/ reviews, or having bad references.  This would hurt their future earnings.

 

Given all of these changes, the only professional roles that are likely to remain permanent are those that require long term continuity and/ or at least 40 hours per week for the foreseeable future. These would include things like CFO, brand manager, product lead etc. According to the OECD forecast, this would mean that less than half of the workforce will have permanent positions by 2030.