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The End of Employees (Wall Street Journal)

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vinylawesome

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"
Never before have big employers tried so hard to hand over chunks of their business to contractors. From Google to Wal-Mart, the strategy prunes costs for firms and job security for millions of workers

“We will outsource every job that we can that is not customer-facing,” David Cush, Virgin America's chief executive, told investors last March.

"Freelance is the Future: Within 10 years, we will see a new Global 2000 company with no full-time employees outside of the C-suite." - Accenture

Key Ideas:

A.
Never before have American companies tried so hard to employ so few people. The outsourcing wave that moved apparel-making jobs to China and call-center operations to India is now just as likely to happen inside companies across the U.S. and in almost every industry.

B.
The men and women who unload shipping containers at Wal-Mart Stores Inc. warehouses are provided by trucking company Schneider National Inc.’s logistics operation, which in turn subcontracts with temporary-staffing agencies. Pfizer Inc. used contractors to perform the majority of its clinical drug trials last year.

C.
The shift is radically altering what it means to be a company and a worker. More flexibility for companies to shrink the size of their employee base, pay and benefits means less job security for workers. Rising from the mailroom to a corner office is harder now that outsourced jobs are no longer part of the workforce from which star performers are promoted.

For companies, the biggest allure of replacing employees with contract workers is more control over costs. Contractors help businesses keep their full-time, in-house staffing lean and flexible enough to adapt to new ideas or changes in demand.

For workers, the changes often lead to lower pay and make it surprisingly hard to answer the simple question “Where do you work?” Some economists say the parallel workforce created by the rise of contracting is helping to fuel income inequality between people who do the same jobs.

D.
At large firms, 20% to 50% of the total workforce often is outsourced, according to staffing executives. Bank of America Corp. ,Verizon Communications Inc., Procter & Gamble Co. and FedEx Corp. have thousands of contractors each.

E.
Janitorial work and cafeteria services disappeared from most company payrolls long ago. A similar shift is under way for higher-paying, white-collar jobs such as research scientist, recruiter, operations manager and loan underwriter.

F.
“I haven’t yet met a CEO who’s not surprised by how many people who touch their products aren’t their own employees,” says Carl Camden, president and CEO of staffing agency Kelly Services Inc.

G.
Steven Barker, 36 years old, says companies often dangle the possibility of full-time employment but seldom follow through. He has worked contract assignments at Amazon.com Inc., where it was common during orientation sessions for someone to ask if the job could become permanent.


He says the answer usually was: “We’ll see. Anything’s possible!”

H.
Few companies, workplace consultants or economists expect the outsourcing trend to reverse. Moving noncore jobs out of a company allows it to devote more time and energy to the things it does best. When an outside firm is in charge of labor, it assumes the day-to-day grind of scheduling, hiring and firing. Workers are quickly replaced if needed, and the company worries only about the final product.

I.
Steven Berkenfeld, an investment banker who has spent his career evaluating corporate strategies, says companies of all shapes and sizes are increasingly thinking like this: “Can I automate it? If not, can I outsource it? If not, can I give it to an independent contractor or freelancer?”

Hiring an employee is a last resort, Mr. Berkenfeld adds, and “very few jobs make it through that obstacle course.”



"

Source: The End of Employees

Source: https://www.accenture.com/fr-fr/_ac...d-Workforce-Technology-Vision-2016-france.pdf
 

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lifeNchoices

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This is pretty much how I work now. All of of the work I get comes from companies who want to outsource. I've setup my own LLC to take on the work, and I've found a few ways to to make this profitable for me. Its still in the slowlane, but it allows me to leverage my skills with companies in need.
 

G-Man

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Does is not mention that hiring an employee means inviting the government even more into your life than it already is?

It's a bit like dating a girl with a criminally insane ex that could show up at the front door at any time.
 

ZF Lee

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Oho, outsourcing's the new fad?
Not very new though. Outsourcing is pretty old.
The colonial British outsourced labour to work on their mines all the way from faraway countries. The foreign labours were not even on official paperwork in those historical times. They just did work and got paid. Happened in my country as it used to be a British colony.

Now it's just weaponised via the Internet. I smell a Fastlane GOLDMINE.
 

lifeNchoices

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Since this thread got some rep, I'll explain my process. I'm very good at a few aspects of IT. So what I do is I use my current skillset to get into a company. Once I"m in there I let them know I have backup and can call on a wide range of talents to solve problems. Usually some of the recruiters don't like this, but I try to work that out with them in the beginning. Then I call on my network(some upwork or local) and use there skills for projects. I was able to do about 300K in business last year, this year I'm on track to do about 400K + with the same amount of effort by me.

Still slowlane cause

1. I still use a lot of my time with the clients.
2. I depend on recruiters to find business where as I need to free up time to do this myself.
3. Recruiters can some times control the rates.


To turn this into a fastlane I need to.

1. Remove the recruiters from the equation or change the business relationship with them.
2. I don't need to be the primary guy with the clients, I need to takes some steps back and be used for Customers service/Escalations with the client.
 

ZF Lee

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Since this thread got some rep, I'll explain my process. I'm very good at a few aspects of IT. So what I do is I use my current skillset to get into a company. Once I"m in there I let them know I have backup and can call on a wide range of talents to solve problems. Usually some of the recruiters don't like this, but I try to work that out with them in the beginning. Then I call on my network(some upwork or local) and use there skills for projects. I was able to do about 300K in business last year, this year I'm on track to do about 400K + with the same amount of effort by me.

Still slowlane cause

1. I still use a lot of my time with the clients.
2. I depend on recruiters to find business where as I need to free up time to do this myself.
3. Recruiters can some times control the rates.


To turn this into a fastlane I need to.

1. Remove the recruiters from the equation or change the business relationship with them.
2. I don't need to be the primary guy with the clients, I need to takes some steps back and be used for Customers service/Escalations with the client.
Or you could get affliate marketers to work in your Fastlane! MJ did something like that! In fact, I will be looking into establishing such a program for my own Fastlane when the scaling gets big and tough.

Lots of people will be looking to just work for some bucks, staying simple to 'work for a living' and not making Fastlane businesses. It would be fine to let such folks have a go at it, provided you still captain the Fastlane ship.

But yeah, I understand the problem with hiring recruiters. Human resources can be a pickle unless you have a system or program for them!
 

lifeNchoices

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I've thought about using affliate marking for some of the "cloud" based services. I would need to build clear and defined portals so they would have easy access to them and make sure my hands are out the pot as much as possible.
 

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Long gone are the days when a big company meant having 500 employees or more. Long gone are the days when making millions required an office building and dozens of staff. Today, all it takes is an internet connection, a PC, and an extremely determined person.
 

458

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Does is not mention that hiring an employee means inviting the government even more into your life than it already is?

It's a bit like dating a girl with a criminally insane ex that could show up at the front door at any time.

Lol, a bit dramatic.. I hire and fire constantly. Where some see decline, others see opportunity.
 

G-Man

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Lol, a bit dramatic.. I hire and fire constantly. Where some see decline, others see opportunity.

Ever been big enough that you had a state workforce commission in your office for a week?
 

vinylawesome

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Does is not mention that hiring an employee means inviting the government even more into your life than it already is?

It's a bit like dating a girl with a criminally insane ex that could show up at the front door at any time.

The WSJ article and Accenture Whitepaper do not mention the government directly but, Virgin America's CEO David Cush saying, "We will outsource every job that we can that is not customer-facing," can't be due to a government that is pro business.
______________________________________________________________________________________________________________
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

I Googled the article to see if there were any well formed opinion pieces that analysed the article.

The first result and first comment received are as follows:

The End of Employees | Hacker News

"Another sign the world is moving towards a cyberpunk future, with extremely unevenly distributed outcomes.

Work in tech as a full time employee at a megacorp or well funded start up and in many ways your value has never been higher. On the other hand some companies are outsourcing entire IT departments."

_______________________________________________________________________________________________

If Accenture is correct, What are the Fastlane opportunities for this long term trend?

A Few Ideas:

  • HR Department Consulting Firms (Outsourcing Firm for HR Departments).
  • Outsourcing firm that focuses on a Niche. (Outsourcing of non customer facing labor and processes).
  1. Solar Technician Operations and Outsourcing Services.
  2. Operations and Outsourcing Services that focuses on the LED lighting industry.
  3. Operations and Outsourcing Services that focuses on the Energy Retrofit Industry.
  4. Operations and Outsourcing Services that focuses on the Solar Power Industry.
Any other ideas?



 

G-Man

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  • HR Department Consulting Firms (Outsourcing Firm for HR Departments).
  • Outsourcing firm that focuses on a Niche. (Outsourcing of non customer facing labor and processes).

Both of these things already exist in big ways. I never considered it because it would basically make the thing I hate most about business into my entire business :clench:
 

vinylawesome

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Both of these things already exist in big ways. I never considered it because it would basically make the thing I hate most about business into my entire business


I’ll approach this from another way with a practical example of businesses who have succeeded with a small staff and mostly outsourced labor.

*******************************************************************

This WSJ article reminded me of another article that @MJ DeMarco posted some time ago;


How Bold Entrepreneurs Are Breaking $1 Million In One-Person Businesses



Fastlane - Solopreneurs Doing $1M or More...

______________________________________________________________________________




1. Preference of Hiring Contractors Over Employees


"Rather than adopt Henry Ford-era business models, where scaling up depends on hiring legions of employees, these entrepreneurs travel light. When they need to expand their individual capabilities, they generally rely on contractors such as web designers or firms that handle outsourced functions, like billing. As their businesses grow, so do those of the contractors they hire. Some find that creates a more positive, egalitarian relationship than many managers have with employees."


2. Outsourcing Labor Saved His Business


"Mezheritsky got so frustrated that he almost bailed. “After six years in business I was ready to throw the business away,” he says. Then he asked himself a question: Why was he sticking to a business model built on hiring employees? The real estate industry, he noticed, was operating successfully with a different model, where a parent company would license brokerages to independent owners."


3. Operates a “Labor intensive” Multi Million Dollar Business with Zero Employees


So far, his model has been working. The business has grown to the point that it has 126 personal trainers in Canada and is on track to break $4 million in system-wide revenues this year. At his corporate headquarters, where he is still the only worker, he projects $1.2 million, with about a quarter of that in profit. His secret to growing the business without formal employees is a customized software to automate many functions, in which he has invested more than $250,000 over time. For instance, the software enables clients to log into the company’s computer system and see the homework their trainers have assigned."


4. Outsourcing Labor Creates a Win Win Scenario for Labor and Employer


"In retrospect, Mezheritsky realizes that under the traditional model of hiring employees, turning a profit meant creating a “negative lifestyle” for employees. He couldn’t pay them a salary that would really motivate them or get them invested in the company’s success. “Maybe the top trainer was making $35,000 a year,” he says. As a result, employees were driven to show up mainly to collect a paycheck." In his new model, his interests and those of his trainers are aligned. Because he makes money from the recurring fees the trainers pay him, he’s highly incentivized to help them succeed and keep them part of his brand. And they are extremely motivated to grow their businesses, because they are the ones who make more money when they do.


“Not only are we attracting people I could never have attracted as an employee, but they’re paying us $400 a month to provide those services for them,” he says. “They are making about $60,000—a very good living.” And the overall vibe of the business is better. “Everyone is here because they want to be,” he says.

__________________________________________________________________________________________________________


The Outsourcing / Reorganization of labor is a smart way to scale a business quickly. Less burden on the company owner and a system that creates a win win for the labor provider and business owner.


I've seen similar types of labor models in utilizing franchisees as labor providers in:


  • The cleaning industry: CleanNet, Jani-King, Coverall, etc.

  • Promotional products: Proforma.

  • Office Supply: OffizeZilla

  • Health Care: Right at Home, BrightStar

It's doubtful the above mentioned companies would have scaled as quickly or have the profit margins that they do by utilizing a "traditional employee / employer" model.


______________________________________________________________________

The Cleaning Industry


Jan-pro, Jani-king, Bonus Building Systems, Coverall, and the like will beat you on price 9 times out of 10.


The above mentioned have a different business model than the traditional Janitorial company who bid jobs and hire employees to fulfill them.


Their business model is essentially:


1. Bid low and secure contract


2. Sell service contract rights to Franchisee for 4 x monthly contract's gross value.

-Usually extend financing to franchisee.

-Collect royalty based on gross revenues.

-Sell cleaning equipment to franchisee.



3. Continue to be the face of the contract to client as well as maintain ownership over contract


4. Continue to collect revenue from client and maintain all accounting records.


5. Pay franchisee; subtracting for royalties, finance fees, and cleaning supplies / equipment.


6. Franchisee is responsible for:

+ Insurance: Liability and Workmans Comp.

+ Both Personal and employers share of FICA:

-Social Security, Medicare, and unemployment taxes.

+Complying with all employment laws for themselves and employees.


-------------------------------------------------------------------------------------------------------


The above model can and has been replicated in other service related industries. This is all done without traditional employees and is in line with Accenture’s predictions.
 

LifeTransformer

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I was going to post this article in the other thread similar to this one. But it fits well here and I'm feeling lazy. ;-)

Subscribe to read

EDIT: The article might be behind a pay wall. It's basically about AI taking over jobs in the banking sector.

Anyone work in banking?
 

vinylawesome

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Thanks for sharing that article @LifeTransformer .

This quote about sums up the trend from the FT article; “Companies have really thrown bodies at this to deal with the demands of the regulators. They have had no option,” he said. “But now we are shifting from a revolution of labour arbitrage and offshore to a revolution of automation around this.”

The short term business play is to squeeze out any efficiency with a labor arbitrage, (1099 Contractor Model), "ala Uber" and longer term to squeeze out even more efficiencies through automation, "ala Self Driving Cars".

I was going to post this article in the other thread similar to this one. But it fits well here and I'm feeling lazy. ;-)

Subscribe to read

EDIT: The article might be behind a pay wall. It's basically about AI taking over jobs in the banking sector.

Anyone work in banking?

Banks’ AI plans threaten thousands of jobs
Automated compliance systems set to wipe out post-crisis regulatory roles


Banks have boosted staff working on compliance and regulation, an area that is set to see more automation © Dreamstime


Thousands of jobs will be put at risk as the world’s biggest banks harness artificial intelligence systems to the wave of roles created in recent years to meet ever-growing regulatory demands, industry experts have warned.

New technologies mean that banks could make vast savings in compliance, according to Richard Lumb, head of financial services at Accenture, who estimated that “thousands of roles” in the banks’ internal policing could be replaced by automated systems.

“We are seeing work with clients today which is very much around big data and robotic process automation, where in compliance — take anti-money laundering — you can take out thousands of roles,” Mr Lumb told the Financial Times at last week’s World Economic Forum in Davos. “That is coming quite quickly now and that will sweep across the industry.”

He said many of the jobs created by banks in recent years for compiling and checking data on customers and transactions had already been moved offshore to lower-cost countries. In the next wave of automation they will simply disappear.

“Companies have really thrown bodies at this to deal with the demands of the regulators. They have had no option,” he said. “But now we are shifting from a revolution of labour arbitrage and offshore to a revolution of automation around this.”


Citigroup estimates that the biggest banks, including JPMorgan and HSBC, have doubled the number of people they employ to handle compliance and regulation. This now costs the banking industry $270bn a year and accounts for 10 per cent of operating costs.


In a report called “digital disruption” sent to clients this week, Citi said there was a “huge cost take-out opportunity for financial institutions” from the fast-growing area of regulatory technology, or regtech.

Ronit Ghose, banks analyst at Citi and co-author of the report, said: “So much stuff in banks is still paper-based. We are forever being asked to sign things. That is just archaic and with the advent of artificial intelligence and biometric identification it has to change.”

Spanish bank BBVA recently estimated that, on average, financial institutions have 10 to 15 per cent of their staff dedicated to this area. This heavy investment has been necessary in response to the crackdown by regulators that followed the financial crisis. European and US banks have paid more than $150bn in litigation and conduct charges since 2011, Citi estimated.

The US bank said that, ultimately, banks would benefit from pooling their resources in compliance. “Over the longer term, a nationwide [know your customer] utility could be beneficial to the whole of society, and many regulators and governments are working towards this ideal,” it said.

However, progress has been slow on persuading big US and European banks to sign up to the private sector projects offering to provide a customer identity-checking utility service to the sector.

Lance Uggla, president of IHS Markit, a financial data provider that is offering a KYC utility service, said he was “disappointed” at the lack of progress but the concept remained “very strong” and the expectation of success was “intact”.

“The concept of a utility for KYC is very well embraced by financial market participants today as well as many other shared services they would like to create to reduce their cost structures,” he told the FT.

Source: Banks’ AI plans threaten thousands of jobs
 

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