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Archive for August, 2015

The ‘Gig Economy’ Revolution

The Labor Department issued guidance aimed at cracking down on employers who misclassify their employees as subcontractors, however this is primarily aimed at traditional employers such as the construction and hospitality industries.

Politicians and Silicon Valley prospectuses are all atwitter over the perils and promise of the next big thing, the gig economy.
Hillary Clinton warned of the downsides of this informal workforce in a recent economic speech, including the potential erosion of workplace protections. Eyeing an opening, Jeb Bush used the ride-hailing app Uber to get to a meeting with Thumbtack, a company that helps people hire everyone from handymen to DJs. Companies like these have been portrayed as the “race-to-the-bottom economy” and “the industrial revolution of our time.”
Harder to find so far is proof of the revolution.
Far from turning into a nation of gig workers, Americans are becoming slightly less likely to be self-employed, and less prone to hold multiple jobs. Official government data shows around 95% of those who report having jobs are accounted for on the formal payroll of U.S. employers, little changed from a decade ago.
If Uber and its ilk were fundamentally undermining the relationship workers have with employers, that shift would be showing up in at least some of the key economic indicators. Hundreds of thousands of Americans, or even a few million, may have dabbled in the gig economy, but in the context of the 157 million-strong U.S. labor force, the trend remains marginal.
“It could be companies like Lyft and Uber look terribly important by their capital market valuation, but the actual economic activity they’re responsible for might not be all that great,” said Gary Burtless, a labor market economist at the centrist Brookings Institution.
Uber, with around 160,000 active drivers under contract in the U.S. at the end of last year, has sought to hold a funding round this year that would value the company at $50 billion. That’s approximately the market capitalization of General Motors, which sold 2.4 million cars in the last quarter alone.
Many workers cobbling a living from tech platforms in the gig economy should be classified as self-employed. But the share of Americans who are self-employed and unincorporated has slowly declined over the past decade, to about 6.5% of workers today, down from as high as 7.7% in 2005 and as high as 8.5% in the mid-1990s, according to Labor Department figures.

Made popular as a jazz term as far back as the 1920s, gig work defies easy definition. The consulting firm McKinsey & Co., in a June report, described it as “contingent work that is transacted on a digital marketplace.” McKinsey estimated that less than 1% of the U.S. working-age population fell into this category, including some people who already work a part- or full-time job.
The Labor Department collects data on workers in different ways: surveying the civilian population to ask if they have jobs, tracking the number of people paying into the unemployment insurance system and surveying companies on the size of their payrolls.
No discrepancy has emerged between people who report having jobs in a survey and the number of people companies report on their payrolls.
Some workers might have a primary job and do some TaskRabbit work on the weekend for extra cash, or sell artisanal greeting cards on Etsy as a hobby. But the share of people who hold multiple jobs is also in decline—only 4.8% of workers do, down from 5.5% in 2005 and 6.3% in 1995.
Alternate definitions seeking to measure the gig economy have produced a range of estimates. The Government Accountability Office recently estimated the “contingent workforce” makes up about 8% of the employed U.S. workforce, using a definition that includes agency temps and on-call workers.
From 1995 to 2005, the Labor Department tracked irregular work with a biannual Contingent Workers Survey. In recent years, though, Congress hasn’t granted the agency funding to carry it out.
Whatever its size, gig work has become a new political fault line.
New York City Mayor Bill de Blasio sought to squelch Uber’s growth in his city last week, prompting Republican presidential candidate Marco Rubio to boast about riding Uber around the city. GOP candidate Rand Paul has said such services stimulate the economy and lower prices. California has waged a legal battle against Uber over whether its drivers ought to be classified as employees, rather than contractors.
The Labor Department recently issued guidance aimed at cracking down on employers who misclassify their employees as subcontractors. But David Weil, the administrator of the department’s Wage and Hour Division, said that the guidance is largely aimed at traditional employers, such as in the construction and hospitality sectors.
“What we are really concerned about is its prevalence in the longest-established parts of industries,” said Mr. Weil.
Economists note that regular work and irregular work have always coexisted; some are skeptical of whether gigs arranged via a smartphone are truly novel.
The narrative of new apps upending the world may be seductive to coastal elites in New York, Washington and San Francisco, said Mr. Burtless of Brookings, noting that some have devised “big theories” based on “their own interaction sitting in the back of a car.”
But these theories, he worries, lack “hard evidence.”
By Josh Zumbrun – Wall Street Journal

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Looks like it’s time to acknowledge the move to digital

From Wells Fargo IT/BPO Services Weekly – Thought of the Week:
Separating From the Pack. This week highlighted that while discretionary demand remains strong, particularly in “digital” (e.g., omni-channel, mobility, analytics, etc.) areas, not all providers are benefitting from it equally. Those doing well have been ahead of the curve in investments (both organic and inorganic) to reposition their businesses to these emerging areas of demand and are led by Accenture (ACN) and Cognizant (CTSH), in our view. After two years of uneven discretionary spending, clients appear to have placed a higher priority on digital initiatives and have become more consistent in their deployment of budget dollars. Much of the current digital work is helping clients to “digitize” their existing systems, architectures and processes, along with some digital front-end development and agency/creative work. While clearly requiring foresight and investment from providers to position their businesses (both with the right skillsets and appropriate demand-creating front-end resources), digital enablement seems to us to be a natural evolution of IT services work as technology architectures evolve. It is the next phase of digital (for clients: allowing them to explore new business models and turn the significant amount of data now being captured into a business advantage; for providers: building increasingly IP-enabled [intellectual property] solutions) where we believe there will be even more separation amongst providers as a new approach will be required, in our view.

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War With Uber Hurt de Blasio With Allies

Read this and then think about what will happen to the employee independent contractor issue….

Aides to the mayor say they weren’t prepared for the force of Uber’s campaign-style attack of TV ads

Mayor Bill de Blasio’s summertime battle with Uber exposed vulnerabilities in his political operation and has given rise to resentment among many of the allies he will need to advance his agenda at City Hall.
The mayor’s office was caught flat-footed by the car service’s potent blend of local politicking and multimedia ad buys that aimed to kill a City Council bill to constrain the growth of the city’s for-hire car fleet, according to City Council members, City Hall aides, business leaders and longtime political observers. Many council members were drawn into a fight they considered unwinnable and unnecessary.
And Mr. de Blasio alienated one of his important liberal allies, Council Speaker Melissa Mark-Viverito, who lashed out at him for suggesting he could unilaterally put the Uber cap back on the table.
“City Hall had a deep miscalculation on this issue,” said Mitchell Moss, a professor of urban policy and planning at New York University. “What this showed you was the power of an intelligent, sophisticated campaign. You never see a business take on City Hall like this.”
Uber launched a “De Blasio’s Uber” feature on its app to protest the New York City mayor’s proposal to limit the number of Uber drivers on the city streets. Photo: Tom Vigliotta/The Wall Street Journal
It all ended July 22 when the mayor’s aides dropped the proposed cap on the service for now. Uber, in turn, agreed to participate in a traffic study and discuss other issues.
“Despite a $10 million surprise attack campaign launched by Uber as good faith negotiations were still under way, the city won significant concessions that Uber has refused to provide to other cities,” said Karen Hinton, a spokeswoman for the mayor.
The city said Uber will now share data it previously hasn’t and will be part of a larger conversation on drivers’ wages and accessibility for disabled riders.
Aides to the mayor said they weren’t prepared for the force of Uber’s campaign-style attack of television ads, which began to air on July 14, the day after they met with Uber officials to negotiate.
Uber also ran a sophisticated digital strategy, with more than 40,000 people emailing the mayor and almost 20,000 sending him twitter messages.
City Hall repeatedly stumbled when it tried to fight back.
Aides managed to send emails to thousands of Uber users, saying they were only trying to slow the car service’s expansion—while studying the issue—but were flooded by many people incorrectly accusing them of trying to totally ban the service.
When the mayor’s office stopped talking to Uber for several days, company officials continued talks with Ms. Mark-Viverito. They also huddled with state officials and many members of the council, who were supportive of the company, according to people familiar with the matter.
By July 17, aides inside City Hall realized they had to shift their message. After initially arguing the cap was largely about congestion, they began to portray Uber as a corporate behemoth that didn’t want to play by the rules. While some of the new arguments seemed to work, the changing messages allowed Uber to advance its contention that City Hall had no real reason for banning them.
City Hall’s arguments were largely lost in the noise, said Brooklyn Councilman Steve Levin, who sponsored the bill.
“By the end, it was like, why the hell are we doing this,” said a liberal City Council member and ally of the mayor. “The messaging was just all over the place.”
Another council member said he decided to vote against the bill because City Hall couldn’t articulate why he should support it after a series of meetings. Neither council member would discuss the mayor’s political operation on the record.
After Uber staged several large rallies, the mayor’s office aggressively tried to find supporters. But a rally on City Hall steps had fewer than 200 people, and many other officials didn’t want to enter the fray.
Many of the city’s influential black leaders were already backing Uber and had appeared at a July 14 news conference. Aides to the mayor were furious. “It was the African-American ministers that turned this fight,” said Kathy Wylde, president and CEO of the Partnership for New York City, a pro-business group.
By last Tuesday, Mr. de Blasio’s aides had at least 27 votes, according to City Council members—enough to win approval from the 51-member council—and had said the council vote would happen two days later.
Many on the council said they would vote for the bill but thought a vote was unnecessary and wanted to slow the process. Many also already disappointed in the mayor for picking other fights that hurt them politically, such as his proposed ban on horse carriages.
Ms. Mark-Viverito, frustrated at how the mayor’s office had handled the situation and in a difficult position with her members, decided last Tuesday a vote wasn’t worth it. So when Uber and the mayor had a final conversation Wednesday, the mayor’s office had no choice but to offer a deal Uber liked far more. The company quickly accepted.
“No one comes out of this looking good, neither the mayor’s office or the council,” said Bronx Councilman Ritchie Torres.
– Wall Street Journal

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In big move, Accenture will get rid of annual performance reviews and rankings

As of September, one of the largest companies in the world will do all of its employees and managers an enormous favor: It will get rid of the annual performance review.

Accenture CEO Pierre Nanterme told The Washington Post that the professional services firm, which employs hundreds of thousands of workers in cities around the globe, has been quietly preparing for this “massive revolution” in its internal operations.

“Imagine, for a company of 330,000 people, changing the performance management process—it’s huge,” Nanterme said. “We’re going to get rid of probably 90 percent of what we did in the past.”

The firm will disband rankings and the once-a-year evaluation process starting in fiscal year 2016, which for Accenture begins this September. It will implement a more fluid system, in which employees receive timely feedback from their managers on an ongoing basis following assignments.

Accenture is joining a small but prominent list of major corporations that have had enough with the forced rankings, the time-consuming paperwork and the frustration engendered among managers and employees alike. Six percent of Fortune 500 companies have gotten rid of rankings, according to management research firm CEB.
These companies say their own research, as well as outside studies, ultimately convinced them that all the time, money and effort spent didn’t ultimately accomplish their main goal — to drive better performance among employees.

In March, the consulting and accounting giant Deloitte announced that it was piloting a new program in which, like at Accenture, rankings would disappear and the evaluation process would unfold incrementally throughout the year. Deloitte is also experimenting with using only four simple questions in its reviews, two of which simply require yes or no answers.
Microsoft did away with its rankings nearly two years ago, attracting particular attention since it had long evangelized about the merits of its system that judged employees against each other. Adobe, Gap and Medtronic have also transformed their performance-review process.
“All this terminology of rankings—forcing rankings along some distribution curve or whatever—we’re done with that,” Nanterme said of Accenture’s decision. “We’re going to evaluate you in your role, not vis à vis someone else who might work in Washington, who might work in Bangalore. It’s irrelevant. It should be about you.”

Though many major companies still haven’t taken the leap, most are aware that their current systems are flawed. CEB found that 95 percent of managers are dissatisfied with the way their companies conduct performance reviews, and nearly 90 percent of HR leaders say the process doesn’t even yield accurate information.

“Employees that do best in performance management systems tend to be the employees that are the most narcissistic and self-promoting,” said Brian Kropp, the HR practice leader for CEB. “Those aren’t necessarily the employees you need to be the best organization going forward.”

”Brain research has shown that even employees who get positive reviews experience negative effects from the process. It often triggers disengagement, and constricts our openness to creativity and growth.

CEB also found that the average manager spends more than 200 hours a year on activities related to performance reviews—things like sitting in training sessions, filling out forms and delivering evaluations to employees. When you add up those hours, plus the cost of the performance-management technology itself, CEB estimates that a company of about 10,000 employees spends roughly $35 million a year to conduct reviews.

“The process is too heavy, too costly for the outcome,” Nanterme said. “And the outcome is not great.”

Interestingly, though, the decision to roll out an updated approach usually has little to do with reining in those numbers. Kropp said companies aren’t likely to save much time or money by transitioning away from their old ratings systems to a new evaluation process. Where they stand to benefit is, instead, the return on those investments. “The smartest companies are asking, how do we get the best value out of the time and money we are spending?” Kropp said.

That’s the question Accenture posed to itself. And its answer was that performance management had to change from trying to measure the value of employees’ contribution after the fact. It needed instead to regularly support and position workers to perform better in the future.

“The art of leadership is not to spend your time measuring, evaluating,” Nanterme said. “It’s all about selecting the person. And if you believe you selected the right person, then you give that person the freedom, the authority, the delegation to innovate and to lead with some very simple measure.
By Lillian Cunningham, Washington Post

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