The Traditional Approaches - and Their Shortcomings

The Traditional Approaches—and Their Shortcomings

Three approaches have traditionally been used to ensure firms an adequate supply of talent and to provide workers with security, careers and identity. The first was at the core of the old American employment system and involves firms taking primary responsibility for meeting these needs. The second has been prevalent throughout most of Europe, and involves government playing a major role. The third approach, which characterized American employment relations at the start of the twentieth century and increasingly characterizes them today, relies on employers and workers pursuing their own short-term interests. Each of these approaches has significant weaknesses in the current environment.

In the old American system, employers assumed responsibility for recruiting and developing a pool of workers with the right skills, through internal training and promotion and by providing insurance and pension plans. This scheme is incompatible with the flexibility required to compete in fast-moving, innovative sectors.

In Europe, the state plays a large role in job training and mandates that employers pay for government-administered social insurance. This approach has mitigated income inequality, but has also resulted in high unemployment, frustration among young people who cannot find work or launch careers, and slower rates of innovation. Most European countries and businesses are seeking ways to introduce more flexibility into their employment systems, while still maintaining a social safety net for their citizens.

With the unraveling of the old employment contract, the American workplace has increasingly become a place where it is every man, and woman, for him or herself. The same holds true for firms, who often find themselves engaged in a "war for talent". Meeting the needs of workers and firms in coming years is likely to require approaches that depart from earlier practices. Just as today's organizational practices represent a departure from the past to adapt to new competitive realities, so the new employment system will have to leave the past behind to adapt to the new organizational practices.