Inversion of the mix

Steve Pruneau

You may not know it, but we are at the threshold of a new era of employment.  We can all feel it.  Something feels unsettling about our employment relationship.  Some of us are anxious about the future.  “Will I be able to continue finding jobs?  How can I remain employed long enough to reach retirement?  Will I be able to save enough for retirement?”

These are all artifacts, left-overs from the era of corporate paternalism, lifetime employment.  They are valid concerns for sure.  But the solution does not lie in the past.

We all know that lifetime employment is gone.  We are in an era when even the US Postal Service is forced to reduce the number of employees and change services.

For most, this may seem frighteningly uncertain.  So let me help calm nerves by showing you where it has played out before: manufacturing and logistics.  Do we expect Ford or Toyota to make 100% of their components AND assemble them, all as a single company?  No.  It is understood that almost no manufacturer makes all components used in the end product.  It is understood that there are parts makers, original equipment manufacturers and then there are assemblers.  While Boeing makes many of its own components, it also purchases many of it’s components from external suppliers and then brings all the parts together, inputs from hundreds of suppliers into sub-assembly lines and then the final assembly line.  And so it is with nearly every manufacturer in the world economy today.

Vertically integrated manufacturing has been converted into a supply chain, mainly due to 2 very powerful economic forces:

  1. The need to convert fixed costs into variable costs, which we can do by shifting production to a supplier.  This helps companies respond quickly to changes in customer demand.
  2. Efficiency gained through specialization.  Human nature dictates that you cannot do everything well.  Having multiple suppliers focus on a few components each allows everyone to specialize.

And yet, with employment, company executives usually assume all our talent, every skill requirement, needs to be on the in-house company roster.  “Everyone who works here, needs to be an employee of the company.”  For most companies, the employee roster still has very high percentage of permanent full-time employees.  Yes, there are part-time employees, temporary employees, contractors, consultants and the number of those is growing.  But we haven’t yet reached the tipping point, the inversion when the mix of permanent full-time employees represents only a small percentage of the total number of people providing inputs to the company value chain.

After we pass through this inversion, there will be many more part-time employees, temporary employees, contractors, consultants, than permanent full-time employees.  Call them on-demand talent or just-in-time talent.

Steve Pruneau leads executives and business owners to solve the gap between variable revenue and a fixed workforce. He is the first consultant at Free Agent Source. As a founder, Steve engages the broader community of corporate clients, entrepreneurs, startups and consultants. He manages company operations and lives in Los Angeles, CA.

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