Performance Management Solutions

Politicians, especially those in the USA and the UK, talk boldly about the creation of new jobs, growth and the increase of wealth as a result of their policies, and something similar is being heard right across the EU from Commissioners and MEPs through to national politicians. Their self-belief is ‘wonderful to behold’ but is it built on any firm foundation? There is a growing body of evidence to suggest that they have, essentially and dangerously, assumed that the future can be built using the out-dated policies and ideas of the past. Behavioural economist and business school professor, Alasdair White, argues that the future is based on the current trends and rather than simply assuming that current policies and theories will deliver the hoped for future, it is time for a serious re-think, it is time to look at the reality of the trends, and to conduct a thorough going review of policy. It is time for some serious soul-searching. 

A brief history of work

Back in the 1980s, Peter Drucker, the management theorist, suggested that most work could be characterised as being one (or a mixture) of four types: labouring (making or moving things), craftwork (using special tools to make or move things), technical (using technology such as machines to achieve an orders-of-magnitude advance in the efficiency of making or moving things), and knowledge work (the creation of knowledge or the pure application of knowledge). Such a linear analysis may be too simplistic but it hints at what may now have become a significant issue: that the nature of the work being done, and thus the skills and knowledge to do it, may have changed in such a way that has not been fully recognised.

If we go back just over 300 years to the late 1600s, the majority of the workforce was engaged in agriculture, the work of which ranged from simple labouring to craftwork. The knowledge and skill sets required for the agricultural labourer were minimal, generally not requiring any formal education, with experience of the repetitious nature of the work filling any knowledge deficiency. For the craftwork of the period, such as blacksmithing, an apprenticeship to an existing craftsman served to provide the worker with the requisite practical knowledge and skills, but usually not the theoretical knowledge. This situation did not change much for the next 100 years, even though there were technical advances in the form of seed drills and other machinery that delivered orders-of-magnitude improvements in efficiency thus increasing agricultural revenue, both as a result of increasing yields and of reducing the number of labourers required to work the land as many were heading to the growing cities and the industrialised workforce.

In the early 1800s, Europe was subjected to continent-wide war that then spread to all parts of the globe as France with a varying collection of allies competed with Great Britain and its allies to control world trade. The outcome was the growth in demand for war materials such as weapons, ammunition and ships, with an accelerating shift in the labour force from agriculture to early-industrialised production of non-agricultural materials. Although this created the foundation of the industrial revolution and the urbanisation of the population, it didn’t change the nature of the work: it was still labouring, utilising a minimal knowledge and skill set.

This trend continued right the way through to 1940 when World War II massively increased the demand for production of war materials, to an extent that created an imbalance between supply and demand of labour and production capacity. The problem was resolved by the development of production techniques through the introduction of mechanisation but there was still little need for a more skilled or a more knowledgeable workforce. Even the shift in the 1950s to a consumerist economic model and the diversification away from large-scale goods towards small consumer goods did little to change the nature of the work being done: the majority was still labouring and doing craftwork, although increasing mechanisation was moving some sectors into a technical work categorisation.

Fitting the workforce for the work

Throughout all this, the education systems were meeting the demand for minimal knowledge and skills. The gentle upward trend for increased knowledge had seen the establishment in 1870 of compulsory education in the UK up to the age of 10; this increased to 11 in 1893 and to 13 in 1899. In 1914 the school leaving age in the UK rose to 14 and then in 1944 it was set at 15. It stayed at 15 for the next 28 years before rising to 16 in 1972 and has stayed there until today, although now a child in the UK has to either stay in full-time education until they are 18 or to take part in an apprenticeship or other authorised training that must last until they are at least 18 years old.  Whichever way this is examined, it is clear that, at least in terms of public policy, a child is considered to have obtained all the knowledge it needs to be a useful member of the workforce and of society by the time it is 16 (or possibly 18).

But the correlation between the knowledge and skill sets required in the world of work and that provided by the education system has now been broken – and has been out of step for the last 30 years or more. However governments have yet to address this. Let me explain.

In the late 1970s and into the 1980s, as companies driven by the demands of shareholder value and shareholder ROI sought greater efficiency in their production systems, automation of routine and rule-driven, repetitious work activities started to play a major role. Whilst helping companies make greater profits, it also reduced the number of jobs as the demand for labour decreased and the demand for higher-level knowledge and skill sets increased. The workforce, entrenched in their low-level knowledge and skills sets, and lacking the more advanced level of knowledge and skills that arose out of automation, took industrial action as they fought to save their jobs and a period of disruption occurred: a period that saw the mass destruction of whole sectors of industry and the biggest change in the knowledge and skill requirements for productive work in 200 years.

The paradox of the Internet

But an even greater change was about to occur, one that few policymakers even remotely understood and so were fundamentally ill-equipped to deal with: the arrival of that most disruptive of technologies, the personal computer and all its derivatives such as the smart phone. Computerisation takes automation (and the associated field of robotics) to a whole new level of disruption. As any job that is rule-based, routine and repetitious can be done more efficiently and effectively by a computer – and most jobs are still rule-based, routine and repetitious – it is inevitable that computers will displace workers in a major way, something that started to happen in the 1990s as the ultimate disruptive technology, the Internet, became publicly and widely available.

The pursuit of the advantages and benefits of the Internet and the hypertext protocols have led many organisations to create systems that are entirely driven by technology and operated by the end-users. Egov. is now the flavour of the times in most advanced economies and with its increasing sophistication, it is delivering huge parts of the governments’ operations in a highly efficient manner. This is just the most recent example of ‘consumerisation’ about which I have written three blog essays and although customerisation, once the customer has adapted their processes and procedures to its use, generally delivers major benefits to the customer and significant financial ROI and cost savings to the organisation, it has a massive ‘cost’ to society as is illustrated in this chart from Bridgewater Associates, quoted in the UK Business Insider.

According to the UK Business Insider, the chart is based on data from MIT economist David Author and shows that while the number of low-skilled jobs (labouring and craftwork) has grown and the number of high-skilled jobs (knowledge work) has grown significantly, the number of middle-skill jobs (generally those that require a full secondary education but little else) has fallen dramatically over the last 27 years.

In other words, the advent and adoption of Internet technologies and the development of heavily customerised user/supplier interfaces has resulted in a hollowing out of the types of jobs that are available in the advanced economies: low-skilled work is available, knowledge work is growing but the number of middle-range jobs is declining dramatically, which is going to put a lot of people out of work. The section of the workforce, those with no more than secondary education and possible years of experience, are suddenly going to find themselves part of the long-term, structurally unemployed. To get back into work, they will either have to downgrade to low-skilled jobs with the associated loss of status and reduced income, or else they will have to return to full-time education to up-skill themselves and obtain advanced knowledge and thus seek employment in the still small but growing knowledge work sector.

I recently came across an example of a governmental department that, at the beginning of the technology change, had 600 employees and now, a few years later, was a highly efficient organisation delivering an increased level of service with a reduced workforce of around 100 – and none of the 500 redundant workers had been able to find a job at a similar level and salary scale as before. Those 500 were now long-term and structurally unemployed, and costing the government in terms of social security.

Essentially, the chart above shows that all the developed economies of Europe, with the addition of the USA, face a long-term trend towards rising structural unemployment, rising demands on the social security/unemployment benefits system, decreased levels of disposable income, decreasing growth, possibly decreasing GDP, increasing levels of poverty and a widening poverty gap. To address this sort of issue will require changes in political policy, but there appears little recognition of the issue at the national political level and certainly no policies are being put forward. Instead, political leaders from the US President, Donald Trump, and the UK’s Brexit-preoccupied PM, Theresa May, to the Commissioners of the European Commission, are all blandly talking about job creation and economic growth. Somebody needs to take action soon!