What the Gig Economy means for CEOs

The changing structure of the working community is a significant challenge for CEOs. The increasing globalisation of worker availability has changed the dynamics of workforce structure. There has always been a place for a temporary workforce to manage workflow peaks, such as in the agricultural sector where fruit pickers are employed only during the season when fruit is ripe, but now the trend is to casualise the employment of high skilled workers too, almost as a matter of course.

The arguments to support this strategy seem sound: The economy is fast paced, technology changes are replacing skills, trend forecasting is fraught with error, and future skills needs are unknown. It feels safer to casualize the workforce than take the risk of incurring overheads that will be hard to later reduce. Casualizing the workforce transfers risk to the worker, a seemingly better idea than keeping the cost inhouse. The trouble is, like with any strategy there will be some fallout, and the fallout here is much bigger than many are wont to see.

The gig economy removes income certainty for the casual earner, which may sound like freedom at first as it can be argued this gives the gig worker control: Control over the work they do, the hours they work, who they wish to serve and what skills they wish to learn. In time however, it becomes a noose that inhibits development and functioning. In time, the impact is negative on each of the firm, the individual, the community and the economy.

Let’s look at each of these in turn:

The firm:

Each one of us constantly attunes to the behaviours of others. We feel pleasure when we know that someone is fully engaged in our conversation, as subconsciously our self worth is validated by the attention. The validation supports our confidence, and with it our ability to weather our own personal storms, translating into an ability to be more forgiving of errors, more open to new ideas, more able to enjoy the company of others, and be happier to take more risk.

However, for the gig worker it is highly likely that their worry will divert their attention away from the speaker, at least for some part of the conversation. A hit is thus taken on the speaker’s self worth. The speaker’s expansiveness will contract.

If the speaker is a fellow team member a little distrust has now arisen, impacting the results of future work together. If the speaker is a customer a little angst has crept in to eat up the flower of loyalty. The bottom line cost can be large.

The individual:

Income certainty has a stabilising impact on the emotions. When emotions are dysregulated attention shifts towards that which is distressful. If income is a concern then this will get attention. Only when that distress is solved will attention be placed on other matters.

The very nature of the gig economy ensures that income distress will be a continuous feature, so at any point in time the individual’s attention will be split between the current moment, (be that an intimate dinner with a loved one, play time with the kids, studying new concepts, completing the responsibilities of the role viz., life in general), and the nagging concern about meeting future financial obligations. The impact is vast. No part of the individual’s life will be untouched.

In time the individual’s desire to learn new skills will be lessened, as will be their income earning potential. The desire to learn will drop in response to the realities of employment. Why bother to invest in new skills if one is employed only for proven activities?

The community:

Every day we are told that we must buy more. The paper AFR Weekend of 9-10 September 2017, gave a third of its front page to the question “Will the wage squeeze ease?” This question suggests that no growth in wage rates is worrying. That somehow our success is measured not by whether we have enough to live on, in this low inflation environment, but whether our income is increasing. If stable income is ‘worrying’ what then should we call income insecurity? Alarming maybe?

Fear of financial insecurity shows up in growing intolerance, increasing anxiety, decreased personal care, family dysfunctioning, reduced sexual urges, reduced intimacy, protectionism, increased sexualisation and objectification, reduced desire to tackle hard issues and more.

No person is immune to the stress inherent in this problem, though some handle it better than others.

The economy:

In the AFR article I quoted earlier, the writer makes the case that spending is being restrained as a result of the lack of certainty (in this case the certainty of wage rises). There is no question that the comment is sound. Whenever buyers change their buying patterns the money flow changes. With wages uncertainty, buyers become more selective in their cash placement. In itself this is nothing novel, buyers have always changed their behaviour and firms have had to adapt, but for those in the gig economy (yes, I include gig workers in this category as firms) the impact is greater as all marketing and operational effort is conducted by a single person.

The constant hunt for new work, which is biased towards existing skills, means that investment in new skills is lessened. Yes, there will be the benefits coming from skill portability as the revolving door of employment transfers new skills between firms, but the ported skills will be less complex.

The lower complexity of skills building comes from a myriad of reasons including:

  • reticence to question why things are done as they are (biting the hand that feeds you is always a risky idea)
  • lack of free energy to solve complex problems because worry is draining
  • new ideas tend to need a trusted voice to be heard (and trust takes a long time to develop)
  • really good solutions require a full understanding of all the nuances of the situation, something a gig worker may not have access to

Extrapolate this for a few years and skills will stagnate with associated impacts on income earning and the economy overall.

It’s not new but the effect is changing

Granted this casualization of skilled workforce has been around a long time – Thirty years ago I held skilled casual roles when I was a young Chartered Accountant enjoying the fruits of my recent qualifications. My skills recency meant I jagged some very interesting roles, but I always knew that these casual roles would not advance my career, only permanent roles would allow me do so and I returned to permanent work quite quickly. This year I could be considered part of the gig economy but I am not. I have the financial resources to allow me real control over my life. I am able to invest in my education, and am relaxed about my efforts. I have elected to have the role that I have and it suits my life. But there are many solopreneurs who are not as fortunate as me and do not see an end to their situation. Their families and futures are being compromised by the ongoing distress of an endless round of contracts.

Permanent employees in firms which casualize staff positions are also effected. These permanent staff will wonder at least a little about the safety of their own employment. This is distracting with obvious impacts on productivity and morale.

So what now?

Great firms are created from employees who challenge ideas, explore nuances and options at length and develop solutions which solve the customers’ problems well into the future. Such passion requires longevity of employment, not only so attention can be undistracted but also to build the knowledge, both deep and broad, that enables elegant solutions for complex problems. Customers stay with people who serve them with full attention and adapt to their needs – undivided attention wins the contract time and time again.

So CEO when you are next evaluating your staffing strategy I recommend you be intentional in your efforts. Consider not only the impact on your current needs, but also the impact on the future needs of the firm and the persons from whom it will choose. Casualization may be an appropriate strategy for your firm. If so, choose it. Then update your Culture strategy to ensure interpersonal controls exist which sufficiently mitigate any problems that may arise.

Jennifer is a strategy implementation coach who helps leaders turn their strategies into remarkable results.

She assists executives and business owners to achieve goals such as improved profit, productivity, leadership skills, business value. Her services are Business and Executive Coaching, Group Facilitation, Strategic Planning, and advising on Board Governance.

 To find out how she can help you, call +61 439 520 182 or email.