Decoupling business, work and jobs: exactly where is value created in today's organisations?
The new concept of the corporation as a network of partners is here to stay. Smart businesses are not questioning this change; they are busy developing thoughtful transition strategies and focusing their people on value creation
A new narrative needs to be built, one that highlights the primary purpose of a business: To create value for an economy or a society as a whole
Understanding today’s concept of the corporation is important for CEOs and others in the c-suite, especially considering a political narrative around job protection and a media that wins readers with dramatic headlines.
In February 2017, a Wall Street Journal article titled ‘The End of Employees’ focused on the rise of global resources, contractors and other changes to work and noted that never before “have American companies tried so hard to employ so few people”.
It’s a long way from Peter Drucker’s The Concept of the Corporation, published in 1946, in which he defined the idea of management as it is known today.
However, aside from the response to politics or media, CEOs and other business leaders need to understand the impact of the accelerated decoupling of business, work and jobs across a range of issues including:
- How to design organisations around this new concept of the corporation
- A tighter focus on value creation and better communication about the value they create
- Transitioning plans for today’s ‘as is’ state to future business models
To understand where value is created today we need to re-examine three fundamental questions: What is a business? What is work What is a job?
What is a business?
At its core, business is an economic activity conducted through a legal entity to provide goods and services for money, at a profit.
What is work?
Work is what needs to get done for a business to provide goods and services. Work can be bought and is not a necessary function of a business. It is, in fact, a separate concept from what constitutes a business.
What is a job?
When a person is paid to perform work, a job is created. A business inherently is not a device to create jobs.
Jobs are an outcome of a business, not a goal. In order to provide goods or services, ‘work’ is needed. When ‘work’ can be only be done by a person, a job is created. In actuality, a business has little responsibility to create jobs. If the work required for an economic activity could be done by any means other than employing people, no jobs would be created.
The divergence of business, work and jobs
That a business, its work and jobs are all distinct, independent ideas might seem a new concept, but it has been an inherent truth since the inception of the free market. The trend is only more visible now due to the evolution of technology and the growth of the global economy.
A business is a provider of goods and services, but it need not be the producer of either. In fact, while the delivery of goods and services can be faster than ever before, production is becoming so complex, it is impossible for one entity to be able to produce them in their entirety.
A business has to buy work from other experts to produce a good or service. A business is a network of suppliers, partners and other connections — much more than a producer.
Value creation by the redefined corporation
Given the reality of how businesses are run today, the word ‘outsourcing’ is outdated. When there is no ‘in-’ to begin with, there is no ‘insourcing’ that can be ‘outsourced’. Most businesses are realising some portion of their business they used to do themselves is better done by others and are now buying that work from experts.
Businesses create much greater value if they can visualise and create a network of partners that help them get the ‘work’ done for their business in the smartest, most effective way. Smart businesses are now at the centre of an eco-system of expert organisations that they create. Smart businesses do not try to do all the work themselves and employ all the people that are needed to do this work.
A company’s organisation structure is a key element of maintaining or accelerating a company’s growth and profitability. The natural instinct of most senior leadership teams when they think of organisational design is to visualise the current and future corporate structure as it exists internally.
Because business, work and jobs are unrelated and independent, CEOs should think about the best way to deliver the work their business needs rather than the best way to redesign their traditional structure. This approach requires an ‘outside-in’ view.
A company’s future-state organisation design might require a larger network of partners, suppliers, joint ventures or other experts that collaborate to generate greater value than the company could achieve from a similar structure that exists internally across traditional silos.
Clarity on the fact that a business is there to provide services or goods will help CEOs design effective value creating plans that deliver returns to those who have invested capital, customers, partners or the public at large. This should be a CEO’s primary focus.
Building a narrative to communicate value
The notion of creating value instead of jobs needs to be communicated actively. A new narrative needs to be built, one that highlights the primary purpose of a business: To create value for an economy or a society as a whole. One example is the broader revolution of mobile devices. Although globalisation is commonly associated with providing less expensive technology to consumers, the impact is much more wide reaching.
Value creation vs job creation
CEOs and their colleagues have long been focused on value creation, but their communication tends to emphasise job creation within their own companies, especially when dealing with the media or when announcing new strategic initiatives.
Executive leadership teams in partnership with HR would have to build a relationship with employees so the internal workforce is constantly focused on value creation. This engenders a relationship where employees acknowledge that employment is a contract that delivers mutual value and not an obligation that either the employer or employee is morally bound to honour under all circumstances.
Transitioning from the old model of the concept of the corporation to a new one is challenging, as will be the continued evolution toward a global ecosystem of partners, suppliers and technology that further disentangles businesses, work and jobs.
Such a transition cannot be successfully enabled by sheer force. All parties, current and future employers, businesses and their partners will need to deploy well considered change management efforts that are built upon rational and empathic communication platforms. All parties would have to invest in building the narrative, obtaining buy-in and absorbing the cost of a sensitive transition.
The value creation potential of every business is significantly enhanced when the corporation business does not take upon itself to do all the work that the business requires. The new concept of the corporation as a network of partners is here to stay. Smart businesses are not questioning this change; smart businesses are busy developing thoughtful transition strategies.
A redefined concept of the corporation is necessary in today’s era of heightened customer expectations, digital disruption and increased competition. Companies in virtually every industry must transform.
For a more detailed argument please download my whitepaper here The new concept of the organisation
Executive leadership teams in partnership with HR have to build a relationship with employees so the internal workforce is constantly focused on value creation