Dorian Taylor is a Techvibes Guest Contributor and this post was originally published on his blog.
It is difficult to get a man to understand something when his salary depends on his not understanding it. — Upton Sinclair
If you are employed full-time as a knowledge worker in a production capacity, that is, you personally generate the intellectual capital your employer ultimately sells, it is a safe bet you are getting screwed.
I understand that such an indictment is not one that is uttered lightly. It has indeed taken me a number of years to come to rest on my assessment, and to attempt to present it in a coherent and respectful manner. The examples and scenarios I give are from my own experience, but I believe they are far from exceptional.
A Call Option on Your Time
The foremost item to recognize as a knowledge worker and generator of intellectual capital working as an employee is that unless you have negotiated otherwise, your employer effectively possesses a call option on your time.
This means that for a predetermined price, your employer can help itself to as much of your time as it wants. It can demand that you show up early, stay late or work all night, work on weekends and holidays, get on a plane at a moment’s notice and so on. In my home province of British Columbia, Canada, an organization’s right to behave this way with regard to so-called high-technology professionals is protected by statute.
Of course you can refuse, but that kind of behaviour isn’t becoming of a team player. Unlike a consultant, who charges to draw breath, and whom the organization can typically only threaten with termination, an employee can be made to suffer in a myriad of exotic ways. These can range from boring or unpleasant assignments, to being passed over for bonuses and promotions, to pretty much any other inconvenience a disaffected manager could unceremoniously concoct.
But even if you negotiate compensation for every second you outlay to your employer, it is still in a position to demand your scarce time for its abundant money — and in that context it is probably in your interest to take it. Since most organizations narrow toward the top, there is significant competition for the rare prize of upward mobility. In this tradition, the first prize goes to the company, the second prize goes to the most conspicuously performing employee, and for everybody else it’s business as usual.
Of course you can quit, but it’s expensive to quit. It’s equally expensive to find a new job, not to mention rife with uncertainty that you will find a better deal or even a deal at all. In the meanwhile, you lose all your perks and goodies. Quitting looks bad on a résumé. You have car payments. You are expecting a baby. Et cetera.
A Heritage of Command and Control
The relationship between employer and employee has a rich cultural heritage: slavery, serfdom, indenture, and of course, the military. In each of these models, there exists an owner of assets and means of production who confers marginal benefits upon one or more individuals in return for them bearing the majority of the effort and risk associated with said owner’s exploits.
In a configuration of command and control, the operational information travels upward and the orders trickle down. Additional intelligence is gingerly dispensed from the top on a need-to-know basis. However, if you consider for a moment the reason why you’re even there, this disparity of information makes no sense. At least in principle, you are almost certainly the most equipped and informed person to do your job. The information that would be most helpful — the strategic plan — is that which is most likely kept from you.
But even though you may be the best-informed, it is entirely another issue to be able to act on your information. Unless you have some derivation of the word manager in your job title, it is difficult to avoid reverting to a pattern of continually pitching your method and asking for permission. Because if manager is what you are, it is curiously not your method under scrutiny but rather your results. Not being able to produce results directly, you have an incentive to ensure your subordinates stay in the safe zone, which means no risks and no methods you don’t understand. The head and the hands of the operation do not belong to the same person. This situation will never improve until those who personally generate intellectual capital are treated as managers in their own right, and possess the executive authority required to decide how best to deploy their time.
Bleakness and doomsaying aside, however, here is some good news: as a knowledge worker slash creative professional, you are the true owner of your means of production. It’s right between your ears — and there’s nothing anybody can do to take that away from you.
Right of First Refusal To Your Life’s Work
Well, actually that’s not entirely true. You can take it away from yourself, with a flick of the wrist called assignment of intellectual property rights.
I once worked at a company that offered a bounty for new patents that was around half of that which it offered for recruiting new employees. While this could be excused as operational neglect or even a clerical mishap — hey, patents don’t happen nearly as often as new hires — it had all the trappings of a sardonic joke.
What I mean is that as a condition of my employment, and barring a few specific items I disclosed at the outset, my employer was entitled to just about anything I could come up with — even inventions that drew on experience from years prior to the inception of our relationship. If I was to assign this intellectual property to them and they were to patent it, I would have had to pay them whatever they asked to use my invention commercially at any point in the next 20-plus years. Even if all they chose to do with it was file it away into oblivion.
My employer could expect this outcome because bolted to the boilerplate employment agreement was a clause that required it. To have contested this clause, of course, would have generated an atypical expense and put me into direct competition with those who don’t bother to read documents of this kind. The employer gets the IP for free. The aforementioned bounty is just a consolation prize.
This all amounts to a strong disincentive to invent anything of significant value while under employment; it also generates a strong incentive to defect. This isn’t a frivolous issue either, it has serious ramifications for an inventor’s future earning potential. Consider this: if you happen to be freshly employed at a given company when you manage to gel a merchantable idea that you’ve been mulling over for years, what’s stopping you from quitting, patenting it yourself, and starting a business around it?
Oh, right. The thing stopping you is the threat of the ruinous lawsuit implied by the non-compete clause which is handily bolted to the IP assignment clause in your employment agreement.
There Must Be an Up-Side
I have listed below, in order of increasing likelihood, some of the putative benefits of working under an employment contract, which apply equally to those who are tasked with generating intellectual capital as well as those who are not.
- Equity grants and stock options
It is important to understand that in the vast majority of situations, these assets are essentially lottery tickets. Furthermore, you are almost certainly not going to be granted equity unless you can count your employee number on one hand.
Stock options constitute an even greater fantasy, as they typically come attached to a litany of conditions that restrict when you can buy them, extruded out over a period of years. If you miss an exercise window or part ways before you vest, the options naturally become void. And then there’s the small matter of the number of shares you have the option to buy, the price at which you can buy them, and what they end up actually being worth.
But let’s say you do manage to get your hands on some company stock. Good for you! Of course the first thing you’re going to want to do is get rid of most of it, because it is imprudent to hold on to a significant parcel of undiversified investment. But where do you unload it? Unless the company is publicly traded, buyers are scarce and you have no reasonable way of knowing what the stock is worth. If you can’t find a buyer, you effectively have no option but to wait around until the company goes public, gets acquired, or tanks.
- Bonuses, commissions and profit sharing
I will distinguish between two kinds of bonuses: the kind that everybody gets, such as at the end of the year, and the kind that are awarded for performance, which includes bounties.
It is safe to assume that the first type of bonus is budgeted up front, and can be effectively understood as an interest-free loan from the employees to the company, who deploys a strategy identical to that of the United States IRS. The second type of bonus can be completely arbitrary, with no reliable way to trigger it.
Lastly, if for no other reason than morbid curiosity, I would love to see an organization that pays its production employees on a commission or profit-sharing basis, or for that matter anyone who isn’t in sales.
- Retirement savings matching
I admittedly have the least amount of experience with this type of benefit, but I assume it confers at least a tax break of some kind on the part of the employer. Moreover, you can bet that it is budgeted into your salary, so if you don’t rise to the opportunity, you’re basically gifting your employer by that amount.
- Health insurance
In the US I imagine this is a crucial offering; in Canada it is ultimately a convenience. In both countries it spells out to significant tax-free money. Likewise in both countries, the buying power of the organization drastically cuts the cost of insurance premiums. Depending on your employer’s preference, these are either displayed as a line item on your paystub or harmonized into your salary somehow.
It is also important to recognize that what is dubbed health insurance is more accurately understood as subsidized health expenditures for the duration of your employment. Insurance is insurance. This benefit terminates when your job does. Your job is not insured, therefore you do not have health insurance.
- Sick days and paid vacation
Yes, you still get paid even if you are bedridden, be it on a beach hammock or with the flu. But make no mistake, both of these conditions are in the budget. One is statistically accounted for, the other is typically set aside as an explicit percentage of your salary. With the appropriate equipment and discipline, you could replicate these conditions yourself.
- Stable income, regular paycheque
Of course, direct deposit every two weeks. I can scarcely think of a more effective way of engendering irresponsible fiscal behaviour. Perhaps you can arrange to have your employer deposit directly to your credit card account.
As for organizations themselves, their mean lifespan decreases every year. Furthermore, from bailout to blowout, there is no shortage of good reasons to go looking for redundancies. Stability is an illusion. It is entirely plausible that you could be sent home this Friday evening with little more than a two-week severance cheque.
What Does the Alternative Look Like?
I want to underscore that I do not believe that those in the employer’s position nefariously plot to exploit the poor, downtrodden working class. The situation is more indicative of a naïve progression from industrial to post-industrial realities in society, organizations and management, with nobody stopping to evaluate the side effects. Moreover, you can bet that the aforementioned concessions that employers have made were spurred by employee demand — they’re trying, they’re just not doing very well.
I once worked at a company where an executive was caught saying something in the order of “if we paid everybody what they were worth for every hour they worked, we’d be bankrupt three times over.” While this remark initially sounds crass and somewhat repellent, I believe it was an honest report on the state of that company’s infrastructure.
At this point it is understandable to envy hourly wage-earners — at least they get paid for their efforts. It is important to recognize that employment is a long-term, high-risk arrangement. It is not only expensive for individuals, as I mentioned, to quit or be let go, and then to find and negotiate a new job. It is also expensive for organizations to hire people, let them go, find replacements and leave desks empty. Moreover, a sloppy hire can easily do more harm than good.
The question to ask then is why don’t more creative professionals work independently? You own your means of production and with the Internet you have direct access to markets. Nobody tells you how to do your job, you can choose when you work and with whom, and you get paid in cash for every hour you put in. You can also write off all sorts of work-related expenses that as an employee you pay taxes on, such as housing, bank fees and interest, telecom, gear and supplies, entertainment, professional dress, travel, professional services, association memberships and training. I don’t know about you, but that list represents, and has historically represented, a significant chunk of my income.
Likewise, why would such a configuration thrice-bankrupt an organization purchasing your services? It wouldn’t have to manage a payroll or HR department in the same capacity. It wouldn’t have to manage health and retirement benefits to the same extent, spend as much capital on equipment or even take out nearly as much real estate. It would also gain back the countless hours you otherwise spend pitching your boss. The sheer act of paying you is a tacit vote of confidence.
But most importantly, an organization would not be subject to the risk associated with hiring a new employee. There is only one form of discipline: you’re fired, and that is only concomitant with a failure on the part of the professional — or the organization — to perform. The stakes are low and severing a suboptimal arrangement is cheap for both parties. Independent operation diversifies a creative professional’s time investment, rendering it more resilient. Likewise is an organization’s investment in that person’s style and perspective.
Creative professionals are also free to organize in corporations or cooperatives of their own, including what can be effectively cast as single-person corporate avatars. It is not a totally trivial undertaking, and would require a modicum of responsibility and initiative, but legal entities like these are cheap and accounting software is plentiful. Furthermore, they do not necessarily compete with or obsolesce their erstwhile employers — the former still need outlets for their work, because it is often wildly esoteric. Those who do not incorporate can use professional associations as surrogates for health benefits. As for risks to cash flow, dry spells can be absorbed earlier on by credit lines and later by cash reserves. Slow payment and non-payment, while a painful reality to the small player, can be kept to low figures through a stringent billing policy.
Why This is Important
My overarching interest in writing this piece is that I believe creative and problem-solving work is at the core of where we are now and where things are going. The problem of yesterday was how do I make a million bucks? The problem of today is what do I do with my million bucks (once I make it)? It is the problem of effective deployment of resources, and it cuts across every discipline.
I am firmly convinced that the conventional model of employment, as it can be found in all but the most innovative of organizations and agreements, erodes the capacity of creative professionals to do their very jobs. Its incentive model is out of joint with what is useful to these people, trading scarce time for abundant money in the best situations. It chills otherwise wildly productive individuals with a mountain of risk. Government, as expected, is an age behind. My characterization is harsh and my prescription is drastic. It by no means may be the only one. I tender here a sketch for going forward, and I am eager to see how it resonates.