Fractionalized Employment Now!

By Restoring the Soul of Business Archives
Cover image for  article: Fractionalized Employment Now!

Most of us need to work and it is central to our identity.

Yet, even though work is important most of us do not define ourselves solely by work.

We have many other identities and responsibilities (parent, caregiver, sailor, artist…) that make us who we are or passions we wish to pursue.

To integrate and deal with the spectrum of what life brings we could work at a job with all its benefits but also constraints or be a free-lancer/independent worker with all its freedoms but uncertainties.

Today due to several forces there is the possibility of another way as we architect the future of work.

A way that benefits both the individual employee and the firm.

Four Forces.

Four con-current forces are re-sculpting the nature of work and what constitutes a company in the most dramatic ways in over a century.

1. AI: AI will significantly enhance productivity. Companies will be be able to do more with less. While new types of jobs will be created and enhanced productivity can allow companies to invest in new areas so employment will grow, it is very likely that the need for employees in any existing knowledge role will decline.

People will either do higher level tasks or be trained for new tasks or see a demand for their existing skills diminished.

2. Declining populations combined with an explosion of older people: Except for the continent of Africa most countries particularly Europe, the US, China, and Japan which account for most of the global GDP are seeing shrinking populations.

At the same time all these countries are seeing rapidly aging populations with 10,000 people turning 60 every day in the US. Many of these aging folks have skills and expertise that will remain critical in an AI age ( perspective, mentoring people, expertise in craft) and are likely to want to or need to work for financial or other reasons but may not want to or be in a position to work full-time.

3. Covid-19: Unbundled and distributed work has changed people’s mindsets. Our minds are like champagne corks that once opened swell and do not fit back in the bottle. Everything is being questioned from the nature of work to the role of management.

People want to and need to work but many now no longer ask how do I find time for my life in a world of work but rather how does work fit in my life?

4. Generational Mindsets and the Side-Gig: Today’s reality is that 66 percent of Gen-Z with a full-time job in the US have a side gig or side hustle and 76 percent want to work for themselves. A plethora of new marketplaces from UpWork to Etsy to Shopify are enabling the feeding of passion projects, enhancing optionality and increasing income.

The Fractionalized Employee.

Today most companies combine three types of work forces.

1) A full-time employee,

2) A full-time or part-time contracted employee from another firm (e.g., Wipro or Cap Gemini)

3) Free-lancers (directly or via an intermediate firm)

Full-time employees are usually the backbone of any company and its culture with contracted and free-lancers being mixed in to expand expertise and manage oscillating workloads in a cost-effective manner.

We may now want to think of a fourth type of worker to reflect the forces of technology, shifting demographics and new mindsets: The Fractionalized Employee.

Imagine if one could get both the continuity and loyalty of a long-term employee with the flexibility of cost management of a part time employee and the expertise of a free-lancer and do so in a way that both grows employees and retains them in the long run.

This is the Fractionalized Employee.

Every employee in the company is given a choice to work 100%, 75% or 50% of their time.

They get to select this at the beginning of every year or can adjust to a different level when a life event occurs (health, birth of a child, need to take care of a parent, a passion that needs to be attended to or other life issues).

No longer does an employee have to choose between staying or going or being torn trying to do two things at one time. If they wish to try out a different type of non-competitive job (starting a gaming company –assuming they are not working at a gaming company--or being an artist or writing a book) it behooves their employer from letting them do so because retaining half or three quarters of a talented person is better than zero. As importantly these external skills or vocations will make the employee better rounded and probably more productive. And there will be cost savings from both reduced compensation but also eliminating the friction and cost of severance, re-hiring, and training.

And as AI makes companies realize they need to change, adapt and manage new talent mixes, fractionalized employment allows for a smart way to manage costs by dialing down employee cost while ensuring the dignity of continued employment, the security of continued health care and the enablement of those employees using the non-employment time to earn revenue or build new skills for an AI age or take care of personal needs.

And it will probably attract a lot of talent who may want to work 50 to 75 percent of their time.

Including the more seasoned who might only want to work half time. As countries grapple with aging and declining populations this is one way to address this issue.

For the employee they do not have to give up an income stream, health benefits or a part of their identity to build new skills, pursue new horizons or take care of life’s events. Over the course of a career, they can dial up and down the percentage they work.

The Fractionalized Employee model will allow companies to retain talent, grow talent, mix, and match talent in ways that are truly win-win.

Employees gain greater flexibility, optionality, opportunity for growth, managing life stages, and time to build additional expertise.

Employers can attract new types of talent, retain stars, elongate the careers of seasoned experts and long time employees, calibrate costs in humane ways that do not negatively impact culture, and enhance adaptability to changing circumstances.

Overcoming the Hurdles to Fractionalized Employment.

The fact that outside Australia and some countries in Europe this is a very rare option is due to several concerns among employers which need to be addressed.

There are many concerns from it will be hard to implement to employees will use this to prepare for their next gig to customers and clients will find it un-acceptable.

We must lose these controlling mindsets, fear filled mindsets and lack of imagination mindsets.

Employee Flight: Talent is not owned by a company. They work for the company. Giving them more flexibility is likely to increase retention since talent can now do their side hustle or passion project openly and bring that expertise and credibility into the company. The time they have for themselves can help them look after their families or try new stuff without having to leave their company. They often can also discover that the the grass is greener on the other side because it is fertilized with bullshit. Trust talent and they will trust back.

Client/Customer Challenges: Clients and Customers are likely to embrace this for a variety of reasons. First they are likely in an AI age want to continue to access their key talent but given productivity increases not need as much. Second, if given a choice between not having access to the folks they want or less access they are likely to opt for limited access. Third coverage can be guaranteed because fractionalized employees can be 100 percent available during key periods and the savings from their compensation can be used to provide customers with a wider palette of talent or other coverage.

Most talent organizations are really good and can definitely incorporate this new type of worker by adopting the following process to make this manageable:

Limited Choices. Employees who wish to work less than full time but get full health benefits and pro-rated financial benefits such as bonuses or equity should be given only two alternative levels--50 percent of full time or 75 percent of full time. This limitation makes the program easier to administrate and manage. If people were allowed to select any percentage, it would be a nightmare for payroll and to arrange coverage when they were off work.

Limited Sign Up/Change Periods. An employee can only decide to change their percentage once a year during a particular two-week period—perhaps in September of the previous year for the following year. The only exception would be a major life or health event. This enables companies to forecast how many workers they will need and how work gets covered. It also enables far easier administration.

Limited Eligibility. Being selective helps funnel high performing candidates into the fractionalized program, a key measure since the program is designed for the company’s best talent and those who are well-versed in the company’s culture and processes. To limit eligibility, the following criteria are useful:

a)Having a minimum number of years of service. For example, one must have worked in the company for at least x years full time before being eligible.

b)Achieving a specific level of performance or a minimum rating level (only candidates with levels evaluation).

c)Restricting eligibility. Certain roles which require full-time presence such as overseeing a large team or providing continuous service to a highly demanding customer.

Companies that allow for Fractionalized Employment are going to have a significant advantage in a world of AI, changing demographics, new mindsets and emerging marketplaces.

Posted at MediaVillage through the Thought Leadership self-publishing platform.

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