The last two years has forced me to consider one big question: Is our conventional understanding of the "theory of the firm" dead? If it is, let's honor its long life—almost a century. Built largely around Ronald Coase's transaction cost theory in the 1930s, the idea was that people organize into firms because the transaction cost of production through the market is greater than within the firm.
Almost a century on, the digital revolution had rattled those foundations—access to information and collaborative technologies have made a pure transaction view of the world an inadequate reason to stay within a firm, especially for knowledge workers, but also for front-line workers.
In addition, the emergence of whole new technical capabilities—whether virtual spaces, block-chains and NFTs, crypto-currencies, artificial intelligence, big data and analytics, sensor-tech, and autonomy—have accelerated shifts within industries. In most cases, new companies and new kinds of organizations have cut at the foundations of hardware-oriented and centralized organizations.
Then the COVID-19 virus came along and the rattling turned into a virtual earthquake. Forces by the virus to isolate, quarantine, go online or bravely go forth masked into the frontlines, individuals go the chance to reflect deeply on their motivations and drivers. The meaning they had found in work was put to the test. The connective tissue of water-cooler interactions, team scrums and offsites gave way to zoom calls and online shared document reviews. More and more, individuals have looked deeply at their day-to-day and questioned their careers. And many have walked away. Their discontentment and disquiet manifested in a greater set of social transformations as well, as evidenced by the Black Lives Matter movement. The "normal" was past. Work was no longer the glue that held groups together.
What, then, is the raison d'etre of firms?
It would seem, that it is in providing a strong purpose and culture that affirms and grows the employees within their virtual and hybrid walls. Among the myriad conversations I've had these past few months are three notable voices that capture the voice of the manager and leader in companies. As they see it, the theory of the firm is not one of limited or reduced transaction friction. It's about greater engagement and culture. It's about leadership and purpose. Here are a few of those voices.
Chief Innovation Officer
The last two years have been unprecedented for a lot of reasons, not the least of which is our ability to see the pandemic unfold in real time, through media and through government information channels. Yet while the public eye has focused mostly on the COVID-19 virus and the consequences of disease, privately the pandemic crisis has led many to question their career choices. We call what is happening now the Great Resignation. But is it about resigning from where you are, or is it more about going towards something else, re-evaluating your career choices in the light of what is important to you and to the people close to you?
We spend much of our lives at work, creating bonds at a team level and thereby establishing strong bonds to our work family. Does it feel the same when all of a sudden those bonds have to be created virtually? A sociological question which will likely requires years of research to answer with any certainty—what we do know is that many of us had to learn new ways of working, and a new way of balancing family life and work life. All of which is occurring at a time when companies need their employees to be hyper-focused on how to embrace and manage the business and societal changes that the pandemic accelerated. Therein lies the great leadership challenge created by this moment in time: How to give our employees space at a personal level while at the same time accelerating change at the enterprise level.
A strong culture and a strong team often begins with simply being human. Replacing the water cooler moment with sharing vacation photos on a video call. Remembering to ask about family and friends. Not only accepting, but embracing that the first couple of minutes in a meeting are not supposed to be "let's get to the agenda," but rather should be the moment in time when people get settled in the room and catch up with colleagues. Many people will never go back to five days a week in the office, they will have hybrid or even fully remote work arrangements. Which in turn means that we need to learn new habits, as employees and as leaders. This change in leadership culture and permanent, not temporary. It requires us to re-evaluate exactly what our role is in creating a better team, a better organization and (if we are lucky) a better world.
As business pressures and opportunities shift around us, we must in turn change how we look at things like staff attrition. If the Great Resignation is not about leaving something, but about embracing something else, then the very first question we must ask is this: What is the most important thing that makes you feel good when at work? When was the time we asked that question first, in the context of talent management? Think about it.
Vice President of Customer Experience & Operations
Many of us are now familiar with the Great Resignation—4.5 million workers (3 percent of the U.S. workforce) quit their jobs in November 2021, according to the U.S. Bureau of Labor Statistics. Admittedly, when I first heard about the movement last year, I was a little caught off guard, based on my personal experiences. At my company, we hadn't experienced any turnover. Asking friends and colleagues about their experiences affirmed to me the importance of having—and continually cultivating—a flexible and fulfilling work environment. I realized that there are a number of things that have kept my team happy in their roles: flexibility, open communication and empathy (areas we'll continue to work to ensure!).
First, my company, ARInsights has been remote since its inception. Yes, I haven't reported into an office for 10 years (no fighting gridlock or jostling elbows on the train at 5 p.m.); in fact, one colleague, employee #1, hasn't had a commute for 18 years! We hire driven people who are comfortable with and thrive in this type of environment; that's an important aspect of vetting the right candidates. In addition, we check in regularly to see how new hires are adjusting (especially if they are coming from an in-office experience) and across our staff, provide opportunities for face time and connection—such as through company meetings, monthly virtual social gatherings and more. Collaboration tools such as Slack, Google Drive/Google Docs, Zoom, Gather and more have helped us work effectively and drive productive (and fun!) relationships.
We also have a fairly flat organization (something that, I realize, is easier to manage at a small company). We appreciate having an environment where everyone feels free to reach out, talk to, get help from and give help to anyone in the company. This has been important in building a culture of collaboration and trust. It also makes cross-functional projects easier and very natural.
Over the course of the pandemic, I've strived to pay even closer attention to my team, both personally and professionally. I'd always been proactive in creating a digital equivalent to water-cooler talk, but in 2020, it became even more important. To that end, and while still driving productivity, we would share stories of our pets (who often photo-bombed Zoom calls), create Slack channels to track steps walked per day, and send funny gifs in our chats.
At a company level, we also strived to celebrate each other's accolades and recognitions. For example, we give each other shout-outs for hard work and a job well done with a #thankyou companywide Slack channel.
It's worth noting, too, companies have seen during these times that it's not just their own employees who are craving connections; it's important to show customers and partners more attention too. To that end, and to keep a pulse on what was going on for our clients and industry overall, I started a quarterly "open session" discussion for our clients to join virtually.
The Great Resignation can be a great wake-up call to companies today. We all can and should seize opportunities to better listen to employees and create environments that motivate and fulfill them. Data from Edelman shows that among people currently changing jobs, they're leaving/looking for a company that: better fits their values (59%), better fits their lifestyle (50%) and offers better compensation or career advancement (31%). As we enter a new year, and companies resolve to retain and attract top talent, these data points and the observations above can help make employee satisfaction a strategic and continual priority.
Founder and CEO
When we look back at COVID-19 in 5 or 10 years it will be clear that the pandemic was an accelerant. It poured gasoline on many existing trends, including globalization, widespread access to information and technology, and the multi-generational workplace. So much so that once the lockdowns hit in March 2020, (most) organizations were able to adapt.
The term the Great Resignation—like the Great Depression—connotes crisis, something to fear or to end. But we are not in a crisis. Rather, we are at a turning point.
The pandemic resulted in a fundamental shift in how we view work. It has forced us to acknowledge that the war for talent is over and the talent won. At least for the next few years. Let's also remember that in a supply and demand world, there will always be demand for top-level talent.
What's driving the Great Resignation is the realization that life is short and having purpose matters. Front-line workers had to make decisions about their safety and avoid getting sick. Knowledge workers, free from commutes to the office, had more time to rethink their lives while working from home. The ability to choose where and how to work has never been greater. As a result, millions of workers decided to quit and go elsewhere. Some decided to stay home (especially women who had to deal with childcare issues), others moved on to a new job and increasingly, many became their own boss.
Twenty-first century consumers are increasingly bombarded by choice, therefore, it should come as no surprise that workers are re-evaluating their options. We are witnessing the end of customer loyalty when it comes to brands and this trend is permeating the workforce. Millennials and Gen Z in particular are less loyal to their employer and more so to their team members and bosses. Human connections and networks within organizations seem to matter more than the organization itself. Additionally, personalization is no longer just a buzzword that applies to marketing but rather is part of the sea change of how we all want to be treated.
Organizations are worried about the Great Resignation because they aren't prepared for change. Most enterprises are built on structure (org charts) and defined roles. Maintaining the status quo means that employees need to fit into the existing structure, not the other way around. But with more available options, organizations must be flexible in order to attract and retain talent. This goes beyond compensation, benefits and perks. As Boomers and Gen X leave the workforce in the coming decade, companies will need to cater to their younger employees' needs and wants. Beyond flexibility relating to where they work, many want to do work that matters. They want to align their personal values with an organization that shares their beliefs.
The organizations that will win the future will need to create a flexible environment (likely a mix of in-person and remote) where employees (especially knowledge workers) can come together to collaborate and innovate, in real life or virtually. They will build cross functional bridges that break down silos and embrace the coming onslaught of artificial intelligence, machine learning, 5G, quantum computing and robotics that will continue to impact the workforce. So much so that the Great Resignation will signal the beginning stages of the Great Transformation. Hold on tight.