Surviving in the new economy

In the past, there were no jobs. Children, fisher folks became fishermen, farmers begot farmers, etc. In the 1970s, James Watt and venture capitalist Matthew Boulton perfected the modern steam engine. That fueled the first Industrial Revolution characterized by a complex interplay of changes in technology, society, medicine, economy, education and culture. Mechanical work started to replace human labor. The era saw the birth of new capitalist practices replacing old notions in what had been an agrarian society all along. The concept of “job” was born. Production capacity increased. Trade expanded. A new middle class emerged.

New economy

When you think you know the answers, suddenly somebody changes the questions. As the world was getting comfortable with industrialization, a new economy is emerging. A new industrial revolution is likely to happen as a new economy emerges.

Kevin Kelly, Executive Editor of Wired Magazine, observed, “The new economy has three distinguishing characteristics. It is global. It favors intangiable things – ideas, information and relationships. And it is interlinked. These three attributes produce a new type of marketplace and society, one that is rooted in ubiquitous electronic networks.”

Truly, life today is defined by where we stand with respect to the Internt. For several years now, more and more people talk online – land line or wireless. “Offline” is the new synonym for “in private.” (I know of some managers asking for coffee from their secretaries through email, instead of walking a few steps outside their room.) Soon, we can’t enter heaven without the right user name and password.

Great progress in information and communicaiton technology helped changed the business of doing business, and in many other aspects of life, work and leisure. At the turn of the century, or millenium, foremost trend forecaster John Naisbitt has accurately predicted major trends in politics, culture and economy that haves staggering impact on our lives. In his book, Global Paradox, he opined, “The bigger the world economy, the more powerful its smallest players.

Since a decade ago, 50 percent of German and American exports were created by companies with 19 or fewer employees. Only 7 percent of US exports are created by companies with 500 or more employees. The Fortune 500 now accounts for only 10% of the American economy, while 90% of the US economy is in small and medium-sized companies. The same pattern is easily discernible throughout the rest of the world.

Two years ago in the Philippines, 613,287 or 90.46% of registered business establishments were micro enterprises, with 1 to 9 employees. Some 37,514 or 5.53% are small (10-19 employees), 21,138 or 3.12% are small to medium (20-99 employees), 3,067 or 0.45% are medium (100-199 employees), while only 2,973 or 0.44% are large companies (over 200 employees).

New ways of doing business

On page 293 of Atty. Cesar Asucena’s book, “Employment and Outsourcing Under Philippine Law,” I was quoted generously on my observations about new ways of doing business. I said, “Today, thousands of companies are selling products that they do not make, are enjoying the services performed by people who are not their employees but of their contractors, are able to delegate the “dirty jobs” to smaller companies of experts, are freed of the nasty task of attending to customer complaints because others make it their businss to handle business needs.

Today, outsourcing is the name of the game. Large companies are shrinking and passing on the work to qualified smaller outfits, so that they can focus on the business of doing business.”

In many parts of the world today, including the Philippines, job contracting and/or outsourcing is fast becoming the norm. Outsourcing is simply contracting with organizations outside your company for work that could otherwise be done by employees within your company.

Today, a company can contract out a department, bsiness function, project or position to an external provider. In reality, running or operating the whole company can be contracted out. In this sense, two organizations may enter a contractual agreement involving an exchange of services and payments. Off-shoring, on the other hand, is contracting out to an external provider in a foreign country.

Philippine scenarios

Job contracting in the Philippine Labor Code has been overtaken by emergent forms of contracting out of services and processes, through outsourcing. There is a dichotomous perception between contracting and outsourcing as if one is different from the other, but the Supreme Court sees them as the same. Job contracting in the Philippines is regulated by the Labor Code, DOLE Orders and Jurisprudence. Case law does not differentiate between outsourcing and contracting, but they are truly different when seen under the microscope.

As a result of explosive advances in information and communication technology in the 1990’s, outsourcing expanded to online business processes. Today, this is better known as business process outsourcing or BPO. Today, the Philippines is the leader and preferred destination for BPO services, dislodging erstwile leader India in the voice segment of the industry. Future growth of the BPO industry is seen in non-voice, backroom, and related services segments. Barring undue adverse or anti-investor legislations or anti-employer or protectionist judicial actions, outsourcing can provide more employment and great careers to millions more of Filipinos.

If properly nurtured in an environment that constantly recognizes changing market realities, the BPO industry can provide the Philippines with enough globalr revenues that can surpass the remittances (P18.7 billion last year) from overseas Filipino workers (OFW’s).

Market realities

The recent global financial crisis showed that size, longevity and incumbency are not irrelevant. Companies can no longer impose themselves or their products and services on their customers simply on account of being the pioneer in the industry or because they are the biggest player. In fact, many large conglomerates are forced to deconstruct their organizations and create networks of autonomous units to be able to compete with smaller and more agile players in the market. Their coping mechanism sounds ODD – outsourcing, de-layering, and deconstruction. Both CEOs and Human Resources managers must now rethink of the anachronistic practice of paying employees for incumbency, longevity or seniority.

The emergence of newer, smaller, more agile global competition was a wake-up call for economic giants like ABB, AT&T, GE, Coca-Cola, Benetton, Johnson & Johnson, British Petroleum, Honda, Xerox, San Miguel, Ayala, PLDT, etc. A University of Texas study showed that between 1970 and 1992, average longevity of American businesses dropped by half.

Today’s market has become more merciless and unforgiving. There are three ways in which the market changes constantly. First, it changes the rules of the game – resulting in new winners and losers, new villains and new heroes. Second is in the changes in the game itself – new kinds of businesses, new sectors of the economy, new kinds of games. Third is in changes in how change happens – it accelerates faster than before at head-snapping speed. Today, charge morphs into flux or creative destruction that provides no guarantees for profits or safety nets for decent wages, benefits or job security.

New meaning of success

Success for businessmen and employees alike has found a new meaning in today’s workplace.

S atisfying the Customer is the reason for existence. The market will dictate whether a businessman will have a business or whether the employees will have a jor or not.

U nderstand, internalize, anticipate and influence customer needs and preferences. Customers want to participate in the choice, design, delivery and pricing of the products and services they get.

C reate value that customers are willing to pay for. Both businessmen and employees must focus on creating value for the customers who give him profits and pay their salaries.

C onsolidate, collaborate, combine resources, rather than compete and demolish each other. The whole organization must integrate all stakeholders’ interests and resources in creating a more efficient chain to serve the customers best.

E nergize your organization and people. This is best done through educaion, innovation and reasonable dose of “paranaoia.” Sometimes, the fear of losing one’s business or job is a strong motivation to perform better.

S ystematize everything you do. Systems and standards make serving your customers easier and a way of life.

S peed in reacting to market changes and making decisions. Customers don’t wait anymore. The competition offers them several opportunities.

When the smoke clears, only the businessmen and employees who anticipate and react to market realities will survive. Opportunities will abound for those who have the skills that create value for customers. Of course, the free riders and fence sitters among the businessmen, contractors and workers alike will likely die in a natural death in a world of meritocracy that is market-driven and technology-empowered! –Ernie O. Cecilia, Philippine Daily Inquirer