In other articles we’ve covered reputation systems, truth, identity and authentication, and how hiveonline’s truth-based contextualised reputation system will address this. We’ve also observed a number of applications of similar approaches in fields as diverse as medicine, trade finance and community agriculture in developing economies.
We’re confident these reputation systems will become commonplace, and then standard, because they make sense. They’re based on facts and give trust consumers, for the first time, the ability to apply the filter of their needs to understanding a counterparty’s reliability within the context of what they want from that counterparty, without the skew of opinion-based bias. We believe this will have a profound impact on how organisations operate and interact, and that it will be one of the keys to the ecosystem economy developing successfully.
This is exciting and a bit scary for organisations, but what does it mean for individuals? In this article, we examine current trends in reputation based recruitment, implications for employment and career paths, and where we believe this will take us in the future.
Emerging labour models and associated challenges
While paid contractors have been around for a while, we’ve recently seen the emergence of micro-contract based services (the “gig” economy), powered by platforms such as Uber, Airbnb, TaskRabbit or Etsy, which provide a marketplace for interactions between individual providers and their customers for short-term, one-shot exchanges of service and value. This has revolutionised access to services and customers, although as we’ve seen the platforms, with business models unimagined by the authors of employment legislation, are subject to controversy and many workers are being paid poorly, are unprotected and lack clarity on their legal status as a result.
The pay problem arises from two sources: firstly, the desire of the platforms to build scale, which is critical for platform survival, by undercutting traditional businesses in the sector. As we’ve seen with Uber, current low prices are subsidised by the platform’s investment capital, apparently with the aim of putting competitors out of business, following which presumably fares will rise. Secondly, market economics will have an impact and the availability of workers in lower-cost countries forces down prices for similar workers in higher-cost countries. The first problem applies more to localised services, and the second more to virtualised services, but both can impact both localised and virtualised services.
The lack of clarity on legal status and lack of protection is more to do with the disparity between employment legislation and emerging service models, although there has always been a disparity between people on permanent employment contracts and those employed through a third party. In most developed economies, a large number of people have provided services as third-party contractors long-term to organisations, in some cases emulating or replacing permanent employees, but governed by different rules regarding employment protection, tax, holiday and sick pay. In some cases these workers are able to demand higher pay to compensate for their lack of status, and typically professionals such as IT contractors, accountants and engineers are able to command favourable rates because of their skills and a shortage in the marketplace.
However for less skilled workers, or for those where supply outstrips demand, working in contract conditions has and does depress rates, negatively impacting all but a few – freelance designers, actors and translators have always been relatively low-paid for skilled workers, while the growing numbers of those on “zero hours” contracts are generally unskilled and enjoying few benefits associated with permanent employees, with pay hovering around the minimum wage.
Meanwhile, there’s a growing number of people voluntarily delivering value for no financial reward at all – open source software, Wikipedia, YouTube guides, Medium articles – the list is growing. Most contributors (but not all) derive income elsewhere, and in some cases there’s an indirect benefit to them, but for the majority there’s no direct exchange of value that could be measured in tangible terms. This, again, risks forcing down the value of professional services, and journalists, in particular, have been hard hit by the proliferation of people providing free content.
We’re also now conditioned to expect content, particularly creative content, to be delivered to us for nothing – news, opeds, youtube videos, Wikipedia have all got us used to the idea that content is free. Of course, we “pay” via other means on most platforms – advertising being the obvious one, but also by providing data to organisations who can learn about our needs and target us with paid-for content.
But all of this has overturned our perception of, and in some cases the reality of, the traditional association between work and money, or labour and value – the Labour theory of value states that the value of labour is directly associated with demand and availability, which holds water to an extent with the depressing effect on unit value where labour is in high supply but lower demand. However, when quality content such as Wikipedia or the BBC news is available for nothing, this association is overturned not just for those sources, but also for other, less widely distributed sources, with consumers expecting to be given content for free.
Reputation as the new currency?
Before exploring what can be done with employment conditions to fix the problem for individuals, let’s consider what’s behind this disruptive behaviour. Why do all these people do stuff for nothing, deliberately disrupting the association of value and labour and potentially undermining their own value in the workplace? Why does a software developer willingly spend his weekend developing open source software or a plumber spend time demonstrating how to fix pipes on YouTube? Why do people write articles on Medium or release free songs, all of which have taken effort and time?
Part of the explanation can be found in Dan Pink’s influential RSA Animate short on Drive – if you haven’t seen it yet, it is ten minutes well invested. He demonstrates that for work requiring cognitive activity, once the need for money is “off the table”, i.e. we have enough to live on, we’re less motivated by financial rewards than by our need for autonomy, our sense of purpose and thirst for mastery. Incidentally, that video was made around 2010, before it became apparent that the traditional organisation was evolving into ecosystems, but many of Pink’s examples are actually of ecosystem economy behaviours. Somewhere in that combination of mastery and sense of purpose sits another motivator we’ve talked about a lot, and that is reputation.
Reputation is, in several respects, the transactable element of sense of purpose and mastery. Through demonstrating both, you demonstrate value, and reputation is your reward. Your reputation is strongly associated with the quality and volume of work that you produce, much as in the traditional theory of labour and value, money was. And in traditional career paths, reputation is an important element when seeking career advancement, either by promotion or recruitment by another organisation.
That’s not to say that money is completely unimportant to professionals – we see a strong linkage between rewards and status, particularly in hierarchical organisations – and while it’s important to distinguish status from performance, status is also likely to enhance reputation, so there’s an indirect linkage there too. But, importantly, that assumes that more money equates to excellence, which as we’ve seen, is starting to be eroded by the proliferation of alternative working models.
Conversely, an area where the research presented by Pink shows a strong link between rewards and performance is straightforward, non-creative work. Obviously many of today’s jobs fall into this category, and a lot of these fall into our “gig” economy and zero-hours contract sectors. While you’re likely to be motivated by recognition to excel at something that produces results that can be evaluated against complex criteria, the base unit of recognition for these jobs may be as low as “done” or “not done” (although in nearly every role, in real life some element of skill or mastery is involved). We may be programming next generation software and laying down tracks for the greater good and our enhanced image, but it seems unlikely that anyone will voluntarily drive a cab, process invoices, build a wall, pick strawberries or empty bins for the sake of peer recognition.
However, reputation is also important in these roles – maybe not our reputation for excellence, but certainly for reliability, consistency of delivery and, in many cases, customer experience. Reputation systems such as Uber’s and Airbnb’s ratings are designed to fulfil exactly this purpose, with quality criteria applied to counterparties on both sides of the interaction. These gig economy reputation scores become the value criteria by which future customers and suppliers can evaluate their appetite for future transactions with those individuals.
The challenge with these platform reputation systems, as we’ve explored elsewhere, is that they may not be accurate. With platforms like hiveonline and other fact-based reputation systems addressing this, we are addressing this accuracy challenge. Is there, then, an opportunity to extend formalising fact-based reputation systems to other types of workers?
We think that there could be; using evidence of work done gives current and future employers an unbiased view of employees’ effectiveness, whether they’re one-off “gig” workers or long-term employees under formal contract. The advantages of this, over traditional evaluation procedures, would be significant for any groups currently impacted by glass ceilings and “mini-me” recruitment mentality. But that doesn’t address the employment conditions problem.
Square peg, round hole
It’s impossible to obtain accurate statistics about “gig” and zero-hours vs traditional employment because the means of measuring the two aren’t the same – consider, for example, a full-time employee who also rents out a room via Airbnb, or drives for Uber on Saturdays – it’s estimated that the non-standard sector now represents about a third of the workforce in the U.S. When one of every three jobs falls outside the “standard”, you’re not talking about exceptions to the rule, and governments everywhere are recognising the need to regularise conditions for people working in these conditions. But they’re struggling, because, like the traditional measurements, trying to apply the same employment conditions as a permanent employee doesn’t work.
Alternatively, given the disproportionate rise of non-standard employment, is it time to reconsider how we view employment across the board? Is there an opportunity to combine elements of traditional and non-traditional working arrangements to address the imbalance of rights and income? The reason that the rules are different for contract vs permanent employees is that contract employment is supposed to be short-term and temporary; that’s why there are rules about how long you can hire a contractor for before you have to start treating them like a permanent employee. The problem is, that just doesn’t work when a third of the workforce are in this “bucket”.
Let’s think about the assumptions underpinning permanent employment.
- The first assumption is that you work for one organisation exclusively, and that organisation is both responsible for paying you and for paying social fund to the state on your behalf; they’re also responsible for funding your days off (sick or vacation) and they have some rights to claim small amounts back from the state on your behalf. All of that works fine when there’s a one to one you/employer relationship.
- The second assumption is that you don’t move jobs frequently, or at all, which means that the benefits your employer accrues on your behalf, whether that’s paid leave, pension or redundancy, can be stored and used at some indefinite point in the future when you need them.
- This is linked to the third assumption, which is that your organisation doesn’t really change much over time, so there’s little or no need to build alternative or new skills in employees.
- The fourth assumption is that the employee works onsite, in an environment controlled by the employing organisation
As more organisations move into ecosystem supply chains and partnerships, however, all of these assumptions are challenged. Modern organisations need to adapt frequently to survive, which means changing business models, changing roles and changing legal structures. People change roles and organisations more frequently than ever, and this trend is growing in parallel with the rise of the gig economy.
Conversely, a contractor is assumed to be someone who effectively works for a company owned by themselves and is expected to treat themselves like a permanent employee of that micro-business. That creates a huge burden of administration and responsibility on individuals working in the gig economy, as well as massively increasing administration for tax authorities and governments.
Will there come a time when the permanent employment contract is dead? Possibly not, but we think it’s already time to regard the micro-job as a normal, standard model in how people are employed today. As things stand, governments are trying to apply old-world rules to new-world employment models, and it’s not working. Gig economy workers have limited access to things that permanent employees take for granted – holidays, sick pay, mortgages and training, to name a few, because these things have been designed around the permanent employee model.
Accepting the gig economy as a valid employment model is the first step towards ensuring that workers have rights; trying to lever permanent employment rules on top of it hasn’t worked, so it’s time to look at it from a different angle. Characteristics of the gig economy are:
- Income will vary over time and is based on results, rather than hours worked
- People work for multiple employers, possibly in different roles and almost certainly for many different customers / stakeholders
- Hours are not regular and may be greater or less than standard employment in any given week/month/year
- Places of employment vary and are likely to include more home working than standard employment
With these standards accepted, it’s clear that the traditional view of employment contracts between individuals and employers being closely tied to benefits passed on to employees on behalf of the state, is broken. States will need to start directly allocating benefits as detached from employment status, if they are to stop penalising people who don’t have a single, regular employment contract with a single employer.
Losing the close coupling between holistic responsibility and employers, would also enable governments to rebalance the inequality between companies paying social fund for “proper” employees and the current lack of social fund for “gig” employees. A blanket social fund associated with work paid for at the point where it delivers benefit would also simplify the arrangements for firms providing subcontracted services. By extension, this also implies that firms should be responsible for employee health and safety while onsite at company premises, regardless of their employment status, rather than the current rules which force employers to take responsibility for safety standards in sites such as employees’ home offices, which are both unpopular with employees and virtually impossible to impose.
Universal benefits – universal income?
Linking benefits to earnings, as they are in current employment contracts, becomes meaningless and unworkable where people are earning variable amounts of money from week to week and across different employers. This is the main challenge presented when trying to shoehorn gig economy workers into permanent employment style arrangements with employers. The logical answer if you’re separating benefits from jobs, is to apply a universal benefit across populations, rather than trying to differentiate them based on income. Not only would this significantly reduce administration costs and complexity, but it would go a long way towards equalising social perception of employees in different types of employment, and improve work/life balance significantly for contract workers. An obvious outcome of removing the link between benefits and employment status, is that everyone, regardless of whether they’re employed or not, could be eligible for the benefits.
Similarly, it makes sense to consider whether this could be a precursor to Universal Basic Income becoming a reality. We’ve seen a number of experiments with varying degrees of success being piloted in various countries, in both developed and developing economies. While the unit economics look more achievable in some countries than others, there is a clear opportunity to offset administration and social security costs against a simpler UBI, and the social benefits in reducing stigma and opening up alternative employment scenarios have been documented. As more positions, in particularly lower-skilled roles, become cheaper to automate and the predicted impact on employment rates across populations starts to bite, the unit economics and social benefits start to make more sense.
However, although this is an interesting and likely eventual income, we think the first step is to focus on benefits associated today with permanent employment; making these universal would be significantly less costly than UBI, partly because in most developed economies, there’s an element of state control or direct funding from the state already bundled in the benefits concerned.
Career paths or career portfolios?
One of the challenges to gig economy workers is that career structures are no longer fixed and linear for them, as they have been traditionally for permanent employees. We’ve also noted, however, that reputation is more and more important in determining career progression, with what you’ve done becoming more important than tenure, as careers even amongst permanent employees become more diversified.
We’ve proposed a potential mechanism for accurately documenting reputation using fact-based reputation systems, and these could be applied to portfolio careers across multiple employers or within a single employer, equally. Fact-based reputation systems don’t differentiate between the two, meaning that gig economy and contract workers wouldn’t be penalised for working for multiple employers. Fact-based reputation systems also level the playing field for employees working fewer hours, or in more junior positions, which in traditional employment structures may be overlooked in comparison to more senior, more visible positions, leading to an uneven distribution of attention as well as financial rewards.
Meanwhile, we’ve seen a trend in recruitment where networks such as LinkedIn have enabled employers to extend the traditional “word of mouth” reputation based recruitment across industries and continents; more frequently, employees are being found and finding roles through recommendations and reputation, as much as through more traditional CV-based matching. Isn’t it also time to formalise this into fact-based reputation systems, levelling the playing field for less visible workers?
At hiveonline we’ll be enabling this for workers within certain sectors, as we build our reputation system not just for builders, restaurants and farmers, but also for the people who work for them. These fact-based reputation profiles will help employers to understand who’s a good fit, as well as their reliability. While there’s a clear gap in the market here – there’s no LinkedIn for builders – isn’t it also time to consider applying similar approaches to support the emerging reputation-based career portfolios we see emerging today?
The emergence of the gig economy has accelerated existing trends towards portfolio careers, highlighting the need for the way people are rewarded to catch up. Trying to shoehorn portfolio careers into traditional employment structures doesn’t work, and unfairly penalises the growing population of workers in non-standard employment situations. It’s reaching a tipping point where we can no longer treat these employment conditions as aberrational, and there’s an opportunity to change the relationship between states, employers and employees to recognise new normals in employment.
Benefits, rewards and reputation can all be managed at a portfolio level, and with emerging fact-based reputation systems we have the opportunity to reduce the unfair penalisation of lower-paid workers with multiple employers, levelling the playing field and improving both working conditions and social acceptance of these now-standard employment models.