How We Got Here: Rise and Fall of the Traditional Employment Contract


The "traditional" U.S. employment system is actually a recent historical development. At the turn of the century, most American factory laborers worked in small crews under the authority of foremen, who could hire and fire at will and frequently resorted to violence to cajole their teams. Job security was low, and work rules and practices varied widely, even within the same factory. In the face of this arbitrary and often unjust system, labor activists, social reformers, and a new group of professionals inside corporations—personnel managers—attempted to introduce more uniform and equitable employment policies across firms and industries (Jacoby 1985, Cappelli 2000a).

Fitfully, over the course of the first half of the century, a new set of practices emerged. Firms hired entry-level workers, slotted them into clearly-defined positions, trained them in-house, and promoted those who performed well. Formal procedures governed the entire process. This system defined most work in America throughout the post-World War II era into the 1970s. While some Americans were left out, notably women and members of minority groups, the new employment system still represented a major improvement over the arbitrariness and uncertainty that characterized work life earlier in the century.

In the 1970s, this system began to unravel, a process that accelerated markedly in the 1980s and 1990s. Two major factors led to the erosion of the old employment system—competition became much more intense, and new information-driven ways of competing emerged. The effect of these developments was a change in the characteristics that gave firms a competitive edge—where scale and stability had been the keys to success before, speed and flexibility were now increasingly favored. Due to these changes, American business organizations of today are very different from their mid-century predecessors.[1]

One trend has been outsourcing, when tasks formerly done in-house at large firms are contracted out. The outsourcing movement began with support functions like housecleaning and catering, then extended into corporate staff activities like human resources, information technology, and finance. Today, even work formerly seen as central to any firm's mission, like product design and manufacturing, is commonly outsourced.

Another development has been the widespread restructuring of large firms. Nearly every big American corporation has restructured during the 1990s. This typically involves breaking up large divisions into numerous operating units that run more or less independently; the creation of autonomous work teams; and elimination of layers of supervisors and managers. The overall direction is toward giving greater responsibility to front-line workers and relying less on directives from the top.

Another development has been increasing reliance on temporary teams, when workers are brought together to work on a specific project and then are reassigned when the project is done. Such an approach has long been common in law, accounting, and consulting firms and is gaining increasing acceptance at big corporations.

The most radical new organizational form, the virtual corporation, involves small firms and free lancers, or even e-lancers—electronically connected free lancers, who post their qualifications and find assignments on the Internet (Malone and Laubacher 1998)—joining forces on a temporary basis, working together on a project, then disbanding when the work is completed. Virtual corporations of this sort have long characterized film production and construction and are increasingly prevalent in the most dynamic and fastest-growing sectors of the economy— computers and telecommunications, entertainment, biotechnology.

[1]For more on these changes, see chapter 1 of this volume and Cappelli et al. (1997); Osterman (1999); Cappelli (1999a).




Inventing the Organizations of the 21st Century
Inventing the Organizations of the 21st Century
ISBN: 026263273X
EAN: 2147483647
Year: 2005
Pages: 214

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