The vast majority of us work for somebody else. We rely on our employers to provide a paycheck in exchange for our services. To us, our employers are assets, providing the single largest source of income most of us will ever have.
To our employers, we are a liability. The costs associated with employees are by far the largest expense for most publically-traded corporations. In addition to salaries, there are taxs, healthcare benefits, liability insurance, real estate costs, furniture, supplies, 401(k) matches and pension costs.
To complicate matters, a significant number of employees are also shareholders. They either hold stock in their employers, have an equity mutual fund in their 401(k) plan (making them shareholders in other companies) or both.
From an employee's perspective, there are two primary goals. The first is to remain employed so that you can maintain your current income stream. The second is to get promoted in order to earn more money.
From an employer's perspective, there are also two. The first is to generate as much revenue as possible. The second is to reduce expenses to the lowest possible amount. Taken together, these two steps are designed to maximize profits for shareholders.
There is an inherent conflict between an employee's goal of earning more money and an employer's goal of reducing expenses. How this conflict plays out in the workplace will have a significant impact on your life.
An Obligation to Shareholders
Your employer has an obligation to investors: help them make money. The strategies for meeting this objective are quite logical. They include growing the business and minimizing expenses.
Expense minimization includes an intentional effort to hire the best possible talent at the lowest possible price. For many companies, it also includes hiring as few people as possible, giving them as few benefits as possible and replacing them with less expensive employees whenever possible.
The results of this strategy have manifested themselves in ways that have transformed the American workplace. Outsourcing to low-wage countries such as China and India is commonplace, as accounting tasks and medical scan interpretation have joined manufacturing and manual labor in the offshore world. Salaries for Chief Executives have become disproportionally high when compared to the average worker, as the most senior executives are paid for highly-valued strategic thinking while labor has become a commodity to be purchased at the lowest possible price. The end result is that a small number of people are paid large salaries while a large number of people are paid small salaries.
What it Means to You
The relentless effort to increase shareholder value means that the average worker is going to change careers frequently, with a significant number of those changes occurring on an involuntary basis. According to the Bureau of Labor Statistics, among "a nationally representative sample of people born in the years 1957 to 1964 who were living in the United States when the survey began in 1979 … younger baby boomers held an average of 11 jobs from ages 18-44. Twenty-five percent held 15 jobs or more, while 12% held zero to four jobs."
While those job change numbers did not differentiate between voluntary and involuntary changes, additional data on unemployment provides some insight. According to the survey, "High-school dropouts experienced an average of 7.7 spells of unemployment from age 18-44, while high-school graduates experienced 5.4 spells and college graduates experienced 3.9 spells. In addition, nearly one-third of high-school dropouts experienced 10 or more spells of unemployment, compared with 17% of high-school graduates and 5% of college graduates." Clearly, all of the job changes were not of the voluntary variety.
To survive and thrive in the modern workplace, it helps to have a strategy. The first thing an aspiring worker can do is get an education. The statistics demonstrate an inverse correlation between education and unemployment. Less educated workers experience more instances of involuntary career changes than their more educated counterparts. Acquiring a higher level of education is the first step you can take in an effort to ensure longevity in the workplace. After that, you have an opportunity to determine the mindset with which you will approach your career.
If you have a laid back personality and aren't particularly concerned about periods of unemployment, you can simply take a wait-and-see approach. After taking a job with an employer, you can show up everyday, do your job and wait to see how it all plays out. If it works out well, you will keep getting a paycheck. You might even advance. If the ax falls, you can change jobs and repeat the process. This is a common strategy. Many people are content to take things one day at a time and hope for the best.
A number of companies have adopted the Carvath System, known in the U.S. military as "up or out." Under this system, invented by Paul Drennan Cravath, workers are hired and trained for specific period of time. If, after a certain number of years, the workers have not received a promotion, they are dismissed.
While this process is most commonly associated with employers, employees have the ability to practice it. If your career and/or your compensation are not advancing at a satisfactory pace, you have the ability to seek other opportunities. By making career changes on a schedule of your choosing, you increase your ability to control your own fate.
Taking this approach to the next level, you can intentionally seek out companies that invest in their people. There are firms out there that offer attractive benefit packages, above average wages and better job security. If those are traits that you value, there is nothing stopping you from intentionally seeking employment with these companies.
If you are not the type to wait for the ax to fall and don't find the idea of job hopping very appealing, you do have another choice. Work for yourself. Self-employment gives you a greater degree of control over your fate and your income. Your status and income are, in large parts, directly related to your efforts and business acumen. At one end of the spectrum, you may be content to run a sole proprietorship, where you don't have to worry about managing employees. At the other, you can seek to build the next Microsoft or Apple. The choice is yours.
The Bottom Line
Regardless of where you choose to work, you can also choose to take an active role in shaping your future. Rather than do the minimum, follow orders and work from nine to five. You can make continuous learning a standard part of how you operate. By taking training classes at work, adding a credential to your resume or pursing an advance degree, you can better prepare yourself for unforeseen developments and unexpected job changes.
ProfessionalsThese group calls offer investors a chance to hear management respond to analysts' hard-hitting questions.
Active Trading FundamentalsFinancial statements don't tell you everything about a company's health. Investigate the management behind the numbers!
Options & FuturesCompanies balance the interests of owners, customers and employees. Find out who comes out on top.
EntrepreneurshipWhether or not you are a fan of human resources, every employer needs to know the answers to these questions.
SavingsThe ABCs of FSAs: What you can and can't use your Flexible Spending Account funds for.
Investing BasicsFind out what fiduciary duties a board of directors owes to the company and its shareholders, including the duties of care, good faith and loyalty.
EntrepreneurshipDo you have an idea for a business, but are struggling to find the time to launch it? Here's how you can start a business when working a full-time job.
EconomicsHiring a new employee costs a lot more than that person’s salary. Just finding the right person can be pricey.
EconomicsA horizontal merger occurs when companies within the same industry merge.
EconomicsBusinesses use quality control to ensure their products and services meet a certain standard, as well as any industry regulations.
A limited liability corporation (LLC) can have an unlimited number of employees. An employee is defined as any individual ... Read Full Answer >>
An individual can utilize an employer’s cafeteria plan of employee benefits to establish a flexible spending account (FSA). ... Read Full Answer >>
Unclaimed property refers to personal accounts in financial institutions or companies that have had no activity and whose ... Read Full Answer >>
Today, almost every investor invests through online brokerage accounts. Investors often believe that their trades are directly ... Read Full Answer >>
Escheatment is the process by which ownership of abandoned property is transferred to the state. Escheated property can include ... Read Full Answer >>
Escheated property in the United States is a designation for personal property such as bank accounts, shares, insurance proceeds, ... Read Full Answer >>