Is It Time To Stop Paying People For Time?

Paying people for their impact instead of time

By the year 2020, 43 percent of the US workforce is expected to be made up of “freelancers” in some capacity (there are already 53 million today, or over a third of the workforce). More and more Americans are eschewing traditional employment in favor of temporary, part-time gigs -- hence the name “the gig economy”. So, what is causing this significant change in the way people make a living? In a word: control. People want control over what they do for a living, when they do it, where it is accomplished and how much they get paid for it.

 

My stepfather recently retired from the US Postal Service where he served as a mail carrier for 39 years. The Post Office is a great example of the old, conventional form of employment that people would gravitate to for security (i.e. pension) and stability -- although it remains to be seen how much longer it is considered stable as they have reported 11 straight years of financial losses.  How many members of Generation Z do you think will work for the same company for 39 straight years? In fact, a recent study by Deloitte found that 43 percent of Millennials surveyed plan to leave their jobs within two years.

Part of this shift is due to economic realities that have slowly eroded the trust that previously existed between employer and employee. In the past, people would willingly trade loyalty to their employer in return for a decent salary, the perceived certainty of employment, and help funding their retirement.

Another contributor to the demise of this relationship is the pace and magnitude of change in virtually every industry. The disruption that accompanies these changes can completely upend business models (see the current retail environment) resulting in the impossibility of any type of guaranteed stability of employment. This is illustrated by the average life expectancy of a business in the US falling from 50 years back in the 1950s to 20 years today (and it is likely to keep falling).

As a result, individuals have come to realize that adaptability and agility are absolutely critical to survival. They therefore want to exert more control over how they make a living. At the same time, technology has enabled greater freedom in the way that work is accomplished and measured. No longer are we tethered to cubicles and landlines to accomplish tasks or interact with customers. Gallup data shows 43 percent of Americans work remotely at least part of the time, and Millennials are increasingly demanding flexible work arrangements.

With all this change and transformation, perhaps it is time to completely rethink the way we pay people for their work. We have been trading our days for dollars for decades, but this antiquated paradigm arguably includes perverse incentives. Are we motivated to work faster and more efficiently if we get paid by the hour? Despite the proliferation of new technological tools, productivity remains anemic. U.S. worker productivity grew below its long-run average for the seventh straight year in 2017 at only 1.2 percent.

What if we started paying people for their impact instead of their time?

Certain industries and positions lend themselves to this type of format easier than others. Technology allows us to track virtually any aspect of work itself as well as the impact we have at work. Manufacturing environments frequently quantify performance based on the number of “widgets” produced; in a call center it is fairly easy to track and report on the number of calls/issues resolved and in sales -- arguably the simplest of all professions to pay for performance -- we evaluate representatives on revenue generated. But in fields like healthcare, where care is delivered by large teams of individuals, it becomes more challenging to assess. However, that does not mean we cannot observe and track it.

While nursing may seem destined to remain an hourly position requiring defined schedules and physically showing up to work at the hospital, the evolution of healthcare policy (from treating illness to preventing it) may create new opportunities to structure nursing roles. Most Millennials prefer a telemedicine appointment versus seeing a clinician in person. This provides more opportunities for nurses to contract with a healthcare system to see patients virtually and get paid per patient instead of an hourly rate.

As more and more care is delivered outside of acute care settings, the healthcare workforce will experience the need for more flexible work arrangements -- think of the explosion of home care agencies and the challenges of that delivery model. 

Most of us recognize that time is the most valuable commodity on the planet. But few of us consider the manner in which we trade it in order to make a living. One of the biggest complaints for many hourly workers is control over their schedule. Missed birthdays, holidays and recitals all for a $15/hour job? Independent freelancers’ ability to choose when and for how long they work is arguably the main draw of this lifestyle.

As future generations eventually take over the workforce, we are likely to see the definition of work and retirement evolve as well (consider Vicki Robin’s FIRE movement, which stands for Financial Independence Retire Early). Retirement may eventually come to mean something more akin to freelancing as people scale back the amount of time they spend working and gain more freedom and flexibility in doing so. These new mindsets, along with the ability to make money off existing assets, such as renting out a spare room on Airbnb, may change our view of work entirely.

Future generations may be mortified to learn that many of us in the early 21^st century only had one job at a time (as the new normal may become working 3-4 part-time gigs at once – a completely new definition of financial security).

In reality, this concept of pay for performance has been tried before. Best Buy infamously attempted a ROWE (results only work environment) back in the early 2000s, only to revert back to a typical hourly wage after mixed results. Why? Because quantifying the impact someone has at work is extremely challenging, even with advancements in technology. In addition, existing labor laws and the fact that most Americans get their health insurance from employers make this movement away from full-time employment more than a little challenging.

It is true that many of us are already considered “exempt”, meaning we get a salary regardless of how many actual hours we work. But even this model stands to be disrupted, as more salaried employees are negotiating work arrangements that include greater flexibility, i.e. 4-day work weeks or substantial time off over holidays and summer. Who knows -- maybe instead of getting paid in dollars for hours worked, we will eventually be paid for agreed-upon results in bitcoins. That may have seemed extremely far-fetched even a few years ago, but not so much anymore.

Author Bio

Marcus Mossberger is Senior Director, Healthcare HCM Strategy at Infor. Visit www.infor.com Connect Marcus Mossberger