Everything from new technology to social and demographic change is shaping how, where and when we work. But what will the workplace of the future look like?
The days of people spending their career at the same company before retiring with a golden handshake and pension are long gone. Technology, the rise of Generation Y (millennials), social and demographic changes and congestion in major cities around the world are the four drivers that have led to a significant shift since the 1950s in how, when and where people work.
Julian Birkinshaw, Professor of Strategy and Entrepreneurship at London Business School, believes these four drivers have had a huge impact on the nature of work in developed countries – and he expects them to shape the workplace of the future.
Smartphones, tablets and video conferencing facilities have given people the ability to communicate with their colleagues wherever and whenever they want. Such technology has also provided managers and their staff a way to share information freely and easily.
“The transparency of information in the workplace means we can get work done more efficiently than before, because we don’t need a hierarchy, Professor Birkinshaw says. “In the old days, the manager was the conduit for all information, but that role is much smaller now due to the rise of technology that allows us to share that information data quickly.”
Another major change linked to the rise of technology is how and where people work. Employees with a desktop computer or laptop, broadband and phone do not have to head to the office five days a week to do their job; they can work from home or visit their local Starbucks for a change of scenery. “More people are using their local Starbucks or Costa coffee as an office,” Professor Birkinshaw says.
With new technology comes greater flexibility. The on-demand economy, where customers using their laptops, smartphones or tablets can order round-the-clock services such as mechanics, cleaners or deliveries, has given people the freedom to choose their hours and work around family commitments.
Take Uber, the global transportation network that uses freelance drivers in cities around the world to pick up people within minutes of booking a taxi through their phone app. The company allows its staff to set their own schedule, so they choose the hours they work. The on-demand economy has given rise to other businesses like Uber that offer flexible hours to their independent contractors.
Working at the same company for several years was normal in the 1950s and 1960s. However, today’s workers tend to move jobs more frequently than their parents and grandparents to challenge themselves and develop professionally. They also have different attributes, weaknesses, demands and expectations when it comes to work.
Research carried out by professional services firm EY in 2013 found that the baby-boomer generation (people born just after World War II) are team players and loyal but struggle with change. The tech-savvy members of Gen Y do not work so well with others, while Gen X – those born between the 1960s and early 1980s – are entrepreneurial, but rank low in terms of executive presence.
Professor Birkinshaw says age has a major impact on how someone feels about their career. “You get this sense that Gen Y doesn’t believe in jobs for life the way that baby-boomers did, because of the security and comfort in which younger people live today compared with older generations.
“As a result, Gen Y appears less patient about spending time at a corporation and looking for the right opportunities to progress their career, and they aren’t bowled over by big brands. Society is becoming more accepting of the variety of opportunities out there and the big traditional brands – whether it’s the civil service, oil companies or investment banks – are less important to millennials.”
Understanding what motivates millennials in the workplace is a big challenge for today’s organisations, according to Professor Birkinshaw. “Money matters, but it’s never enough,” he says. “It gets employers in the game but they have to be mindful of the more intrinsic drivers that motivate employees, such as whether they feel they’re on a good team and getting the chance to develop the skills they need. These are the real motivational drivers for establishing high-performance organisations.”
The global population is expected to rise from 7.3 billion today to 9.7 billion by 2050, according to the United Nations. The UN also predicts a jump to 11.2 billion people by 2100 in its report ‘World Population Prospects: The 2015 Revision’, which was released in July 2015.
Countries with high-fertility rates, mostly in Africa or regions with already large populations, will drive the population growth. That growth will mostly come from nine nations: India, Nigeria, Pakistan, Democratic Republic of the Congo, Ethiopia, Tanzania, the US, Indonesia and Uganda.
Increased life expectancy arising from improved healthcare in developed and emerging countries is also likely to have a big impact. The UN report shows that the number of people aged 60 or above is expected to double in the next 35 years and triple by 2100.
Meanwhile, people in the world’s poorest countries are, on average, living six years longer than they were at the turn of the century. The average age that people lived to between 2000 and 2005 was 56, rising to 62 from 2010 to 2015.
Better health and ever-improving healthcare will lead to more people reaching triple figures, according to London Business School professors Lynda Gratton and Andrew Scott. Their study ‘The 100 Year Life: Navigating Our Future Work Life’ shows that a third of today’s children will become centenarians. It also reveals that people who reach triple figures will likely have to work into their 80s to avoid poverty when retired.
So how will living longer affect where and how people work? Professor Birkinshaw believes the rising global population – spurred by medical advances, the emergence of middle classes in developing countries such as China and Brazil and birth rates exceeding the number of deaths – will create more congestion in the world’s most developed cities.
This, in turn, will force people to relocate to areas within commuting distance, where property prices are more affordable due to relatively lower demand. Professor Birkinshaw adds that soaring rents and overheads in major cities will force companies to relocate either domestically or abroad.
“We have to take seriously this question about physical space and the relative cost of doing business in different places,” he says. “We are seeing businesses outsource many low value-added activities to cheaper nations or more affordable regions in their own countries.”
Many nations are still feeling the effects of a global economic downturn that started in late 2008. At the time, some economists predicted a rapid recovery within two years of the recession. Their optimism has since proved to be misguided. While some developed nations are on the road to recovery, their journey has been longer and more arduous than many anticipated.
Global growth for 2015 is predicted to hit 3.1 per cent, according to the International Monetary Fund (IMF). The recovery in advanced countries is expected to pick up slightly compared with 2014, while activity in emerging and developing markets will likely slow for the fifth year in a row. The IMF attributes this slowdown to weaker prospects for some large emerging economies and oil-exporting countries.
Professor Birkinshaw believes economic uncertainty will have a big impact on how people work. “Without competitive threat, you can keep on doing what you’re doing, but the more we face volatile environments and new competitors coming in, the more we have to think carefully about how we best use technology, win the war for talent and put activities in low-cost locations.”
The four drivers are changing the nature of work, particularly in developed nations. Professor Birkinshaw says that while limited liability companies around the world have declined, from 58,000 to 46,000 since 2000, the volume of people working freelance or as contractors continues to rise. In the UK alone, there are 4.6 million self-employed people.
“The relationship between the individual and the company is changing,” he says. “An increasing number of people working as professionals or part-time employees are contracting themselves to different companies. This is leading to the rise of hybrid or virtual organisations, where the traditional boundaries between salaried employees and contractors are blurring.”
Eden McCallum, a London-based strategy consultancy, is one such hybrid organisation. The firm has a pool of nearly 1,000 consultants on a freelance basis; some work predominantly for Eden McCallum while others do occasional projects. All are paid on a project-by-project basis. At the centre of the firm a management team that chooses the right consultants for particular projects.
Boston-based IT company TopCoder operates a similar model. The business, which develops software for its clients, breaks projects down into stages and chooses independent coders from around the world for each one. Coders are then pitted against each other, with the winners of each phase receiving a cash prize rather than a fixed fee.
“In both cases, the people doing the work can make a lot of money, but the incentive structure is completely different compared with the traditional models you find in companies,” Professor Birkinshaw says. “The workers are responsible for choosing what they do and when they do it, while the company has to structure the work in a way that makes it attractive. If a project isn’t framed in an interesting or lucrative way, the work doesn’t get done.”
While the world of work is evolving, many of the processes that companies employ remain the same, according to Professor Birkinshaw. He attributes this to people being uncomfortable with change in the workplace. “The only thing that’s changed dramatically in the working world over the last 30 years is IT and communications. We still manage budgets, do performance reviews and conduct meetings in remarkably similar ways to back then.
“This is partly because of the inertia in the system – even when we can see new and better ways of working, there is always a quiet majority who are comfortable with the status quo and put a damper on the changes that are taking place.”
Companies with this in-built conservatism will, nonetheless, change – but at a steadier pace than people may expect. “We need more companies like Eden McCallum and TopCoder that are prepared to shake things up,” Professor Birkinshaw says. “These entrepreneurial companies are the agents of change that will create the workplace of the future.”