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Companies Do Not Care About Staff Loyalty (Anymore) - How Money Works - YouTube
Channel: How Money Works
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Do any of you know what a gold watch is?
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A blingy way to tell the time⊠sureâŠ
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But it used to mean so much moreâŠ
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A gold watch was traditionally given to a
worker by their employer when they retired
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with more than 25 years of service to that
company.
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This little tradition has almost entirely
been forgotten however⊠why?
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Well maybe itâs the rising price of gold
or the adoption of alternative timekeeping
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methods, but most probably itâs simply because
company loyalty is a thing of the past.
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How many people do you know that have been
with their current employer for more than
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10 years?
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Well according to the US Bureau of labour
statistics itâs actually 29% of people,
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which sounds suspiciously high until you consider
that a vast majority of this group are made
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up of workers on the verge of retirement,
which is important to remember for later.
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Amongst all workers in the US the median was
just over 4 years.
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In fact multiple studies have suggested that
full time workers that stick with their employers
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for more than two years on average get paid
FIFTY PERCENT LESS.
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This is an unbelievably large gap, ESPECIALLY
when you consider that the average of the
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loyal working group will be drastically inflated
by senior executives and the c suite who tend
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to have more tenure.
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In plain English, for regular joes like you
or me, this 50% figure is likely understated.
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So why arenât companies stopping this?
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Surely having to pay tens of thousands of
dollars to advertise a position, interview
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candidates, onboard new staff, train them
and wait for them to get up to speed with
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their new role is not sustainable if it has
to be done over and over again every 2 yearsâŠ
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right?...
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Well you would think so, but there are a few
reasons why companies donât care about employee
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loyalty⊠anymoreâŠ
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An abundance of skills
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Standardisation of tasks
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Globalisation
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Broken corporate ladders
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And of course an ever changing demand for
different roles.
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So itâs time to learn how money works and
go into the terrifying mind of someone that
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works in âhuman resources: to find out what
employers DO actually value, so that you can
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get the most out of the career that you will
probably be working until you are a hundred
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years old.
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The first factor that is ruining the appeal
of company loyalty is the easiest to see,
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and that is the changing demand for different
roles.
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If you look at your local classifieds these
day you are likely to find a lot more companies
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looking for a dev ops engineers and far fewer
companies looking for switchboard operators.
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As technology develops it is creating new
jobs, while simultaneously making other jobs
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totally redundant.
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The rapid place of this change in the modern
world means that a lot of people are going
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to end their careers working jobs that didnât
EXIST when they first started working.
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Naturally if you are in a role that can easily
be replaced by a machine, or even just a piece
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of software, you are going to be shown the
door pretty quickly reducing the average tenure
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of the workforce.
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This goes both ways as wellâŠ
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An bookkeeper that realises they could earn
twice as much as a social media manager is
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also likely to jump ship as well.
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THE most sought after job amongst children
these days is âYouTuberâ go back just
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20 years and people would think that is some
kind of very specific plumber.
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I know this is not news to any of you, so
I donât want to spend too much more time
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on this factor, but do try to keep this in
mind as we look at the other forces pushing
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companies away from valuing staff loyaltyâŠ
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âŠ
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Next up is the abundance of skills available
to employers.
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Educational attainment is at all time highs.
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A college graduate is (for better or worse)
no longer a rarity.
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Companies do well for themselves by being
open to these new hires for a few reasons,
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for starters they are cheaper than their more
tenured peers, but they naturally tend to
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be younger and more willing to put in overtime
to make sure certain projects are delivered.
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An extreme example would be companies like
the big four accounting firms.
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They offer very widely recognised graduate
programs that pay terribly and expect massive
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sacrifice.
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They offer these with the mutual understanding
that almost none of these graduates will stay
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on with the company and instead seek out higher
paying positions with a better work life balance
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once they have committed their two years for
that resume boost.
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A recent internal report found that Deliotte
had a staff turnover rate of around 13% annually,
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potentially costing the business 427 million
dollars a year in hiring and training expenses
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as well as intangibles like project delays
due to staff members leaving.
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This sounds bad, but both partiesâ kind
of know what they are getting into here.
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Deloitte gets a cheap pool of labour to bill
out for a few years and those overworked juniors
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get to put the graduate program on their resume
so they can get a better job with a regular
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company.
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The regular companies that hire these ex-graduate
program staff also love this system for three
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reasons.
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For starters, surviving two years at a big
four accounting firm is a good indication
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they can handle a pretty big workload.
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They also come equipped with some genuinely
useful insight.
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If a KPMG grad was doing consulting work in
the pharmaceutical space and then latter went
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on to work at Johnson and Johnson, they are
going to be equipped from day one with the
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basics of how the business functions because
they were directly involved with their projects
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in the past.
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Perhaps even more importantly they will have
knowledge of how their competitors are operating.
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Now I am not talking about high stakes corporate
espionage or anything here, more just things
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like âoh GSK streamlined their expense approval
process by using this softwareââŠ
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Simple little insights like that can save
multinational corporations millions.
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Now this is not specific to just accounting
firms, I only use them as one particularly
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egregious example, the truth is businesses
know that the best way to stay at the top
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of their industry is to make sure they have
a healthy supply of talent coming in from
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their competitors.
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This becomes even more important when you
consider the role of globalisation.
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The rise in offshore service centres and a
massive increase in skilled migration means
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that the pool of talent that companies have
to choose from in almost every industry is
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wide and deep.
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Itâs not uncommon for companies to advertise
even entry level positions GLOBALLY, especially
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since everybody is working from home anyway.
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Now the third reason businesses love these
outside hires, especially when it comes to
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more senior positions is because it prevents
catastrophic chain reactions in staffingâŠ
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âŠ
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Imagine a company that made every effort to
promote internally and only ever filled senior
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positions by promoting people from within
the business.
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This actually sounds pretty great, but it
can cause some problems.
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Lets say one day a senior manager in the business
retires, good for themâŠ
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Anyway a floor manager from one of the 4 departments
the senior manager oversaw is chosen to replace
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them, and then a project team manager is chosen
to replace that floor manager, and a senior
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associate is chosen to replace the team manager.
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A lot of people in the business would be feeling
pretty good about themselves, and in theory
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this is the fairy tale example of climbing
the corporate ladder.
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But you might already be starting to see the
problems.
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Not only has this business lost a senior manager
but it now has 4 people in key roles that
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are totally new to their job all at the same
time.
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No matter how much experience they have had
there is going to some kind of learning curve
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involved in a new senior role so the business
may be in a position where projects get delayed
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months because an entire corporate vertical
is completely out of action.
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Compare this with an alternative where the
senior manager just gets replaced by an outside
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hire and not only does the business not have
to worry about all of this nonsense, it might
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be pulling away a talented individual from
a competitor.
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Itâs a win win, although this just means
the business is winning twice, the employeeâs
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can get funded.
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Now you might argue that this is nothing new,
but ironically as businesses have been pushing
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for flatter organisational structures with
less defined roles it has become even harder
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because it getâs harder to map out exactly
who does what.
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The classic line of âyouâre irreplaceableâ
has two meanings.
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Fortunately for companies this external hire
process has become a lot easier anyway thanks
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to the standardisation of tasks in the workplace.
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Let me ask a question to any office employees
watching, what program do you use the most
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in your role?
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Probably email right?
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If not it will probably be some Microsoft
suite product and whoever doesnât fit into
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this category is probably a programmer of
sorts.
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The adoption of computers in the work place
has massively improved how productive we as
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individuals can be.
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A spreadsheet that might have taken a team
of bookkeepers weeks to produce just two decades
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ago can now be created in one afternoon by
in intern with excel.
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Beyond maximising man hours, it has also made
most roles far more uniform.
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Whether you are in sales, customer service,
administration, accounting or whatever else
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involves using a computer chances are there
is an industry standard software suite that
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gets used by most companies.
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So an onboarding process that could have taken
weeks to get someone up to speed with how
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a company system works can now be as easy
as, âok so you have used salesforce before?
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Here is your client list, pick up the phone
and start diallingâ.
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The most extreme example of this is the role
of the bank manager.
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A few decades ago being a bank manager was
a BIG deal, almost on par with being a doctor
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or a lawyer.
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This was because bank managers had to decide
who to give loans to and who not to give loans
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to.
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This might sound easy in the age of credit
scores but back then it took a very detailed
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understanding of business functions, the local
economy, the national economy, regulations,
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and the banks own financial position.
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Beyond this bank managers were encouraged
to develop strong relationships with local
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business people and the community in general
in order to gain their business.
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Fast forward to today and a bank manager is
a glorified customer service role.
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They donât make the decisions about who
gets a loan and who doesnât.
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that gets handled by an offshore credit department
that in turn just plugs numbers into a computer
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program to get an approval or a decline.
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Replacing a bank manager 40 years ago was
a massive deal and because their role relied
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so heavily on day to day experience and relationships
they almost needed to be replaced with someone
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else from the branch.
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Replacing a bank manager today is as simple
as putting up a job posting and waiting for
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a line of hopeful new candidates to come knocking.
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Now if this all sounds depressing, just know
that it doesnât have to be.
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Sure the dream of having a nice stable job
for a 40 year career is probably dead, but
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if anything the current reality is⊠refreshinglyâŠ
honest.
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Companies are there to get the most out of
you until a better alternative comes along,
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and you are there to get the most out of a
company until a better alternative comes along.
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Switch jobs!
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The stats donât lie, you will be better
off for it.
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As we saw the only way up the corporate ladder
is by jumping between them.
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Yes employers are going to try to screw you,
they are a business not a charity, so screw
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them back, keep that swanky linkedin profile
looking sharp, accept any certifications or
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trainings that your business will pay for
and donât fool yourself into thinking that
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you will be rewarded for loyalty, because
you simply wonât beâŠ
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Alright there are of course two other big
factors at play here, all of the statistics
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and trends that this video explored have been
for full time employees.
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This whole situation would be a whole lot
worse if it was to include the rapidly growing
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army of casual workers and gig economy contractors.
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I am going to make a video about that soon
so stay tuned.
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The other factor that we didnât explore
was the increasingly service oriented bull
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jobs that are being created every day which
inherently have less staying power than more
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traditional operational roles.
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Fortunately I have already made and entire
video on this point so go and check that one
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out to keep on learning how money works.
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