Until Peter Drucker’s seminal 1946 study of General Motors, organizations were seen as functionally organized, centralized structures based on the principles of a military hierarchy. In the 1960s, GM’s divisional model took hold. In the 1970s, large companies tried to address the challenges of the increasing business complexities by introducing a matrix structure. Yet today we know that power in organizations is less and less defined by their structure, but by the social networks inside a company. More than ever before, the relationships between companies, managers, and employees are undergoing fundamental changes. In addition, the boundaries between work and private life continue to be blurred. And last but not least, organizations are far more tightly integrated with their customers, suppliers and partners than ever before.
How companies contract with employees. In times of globalization and the information age, the traditional lifetime employment compact is giving way to a free agent model where employers are increasingly planning to use 3rd party employees. Salary, bonus, equity participation, employee recognition, health care, insurance, retirement plans, social security, perks, and sustainability are becoming ever more unbundled. Just to mention one example, the Affordable Healthcare Act is fundamentally disrupting how healthcare is provided.
What employees expect from employers. Employees are increasingly behaving like freelancers. To increase their own status and attractiveness to other employers, posting accomplishments on LinkedIn has become de rigueur. Employees are also expecting a ‘fair’ treatment, and by posting anonymized salary and compensation levels on Glassdoor they make it easier to assess their value in the market place. Social networks such as Facebook and Twitter are communication channels to the outside world to demonstrate that value. As Napoleon Bonaparte said “Vanity made the revolution; liberty was only a pretext.” Employers need to embrace this trend and enabled their employees to create, curate and share content for their company. Everyone is a marketer now.
How employees engage with each other. The rapidly changing nature of work makes lifelong learning and growth key elements for skill development; and knowledge based industries with flat hierarchies are leading the way. Functional silos are increasingly being replaced with project based collaboration. Internal networks of brokers and connectors are becoming more powerful than the line hierarchies. To wit, social networking software companies like Jive and Yammer have reached early adoption by directly engaging with employees without senior level awareness or approval.
We live in an era of unprecedented access to information, and companies are only beginning to grasp the magnitude of these revolutionary changes. For software companies and for startup investors, these these changing relationships provide massive opportunities. As Robespierre observed in the French Revolution: “The secret of freedom lies in educating people, whereas the secret of tyranny is in keeping them ignorant.”