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The changing world of work: five megatrends you need to know

By Jim O'Connell, Ceridian executive consultant

The world of work has undergone profound change in recent years. Technology, the employer/employee relationship, skills requirements, immigration, offshore employment, employee benefits -- especially health coverage and pensions -- and global competition have had a significant impact on the workplace.

Five change accelerators, or megatrends, drive these changes and will help redefine the 21st century world of work. The uncertain economy promises to reinforce these trends, making it all the more urgent that business leaders and HR professionals know how to leverage change to maintain organizational competitiveness.

Productivity is king: the more with less economy
The productivity revolution has made the United States the most productive nation on Earth. Today, the U.S. economy is built upon a foundation of constantly doing more with less: more revenue, more output, more service -- always at less cost.

The 2008 economic downturn accentuates this trend by forcing many companies to reduce the size of their workforce. But surprisingly, during the first and second quarters, productivity numbers in the United States were healthy and rising! Why? Employers were able to generate more output for less cost because it was done with fewer people. In the April-June quarter, for example, business productivity rose a whopping 4.3 percent while hours worked fell 0.7 percent -- a huge decline. In short, U.S. employers were able to increase output with fewer workers!

What is the secret? Innovation is driving both our rising productivity and growth. If U.S. businesses want to maintain that growth, HR professionals and senior decision makers must continue to cultivate a culture of innovation in every facet of their business.

Uncertainty in the workplace: who can you trust?
Pervasive workplace uncertainty is the flip side of the "more with less" economy. "With less" invariably translates into less job security, less pension security, less affordable health insurance coverage, less pay. Combined with an unpredictable global and national economy, the loss of 20th century guarantees has spawned widespread uncertainty in the workplace.

Growing insecurity in the world of work has given rise to a new phenomenon that is unique to the more with less economy: an erosion of trust between employer and employee.

The dilemma for organizational leadership is how to motivate workers and foster engagement and resiliency in a no-guarantee world. What seems to be emerging in the 21st century world of work is a new focus on building and maintaining trust in the workplace. Fortune magazine's U.S. list of "100 Best Companies to Work For" features employers who have given high priority to building trust as a key competitiveness differentiator. The Great Place to Work Institute has developed key criteria for evaluating company effectiveness in developing an atmosphere of trust as an organizational cultural issue.

The new independence: from entitlement to ownership
It should come as no surprise that as the "more with less" economy drives employers to do away with old-fashioned safety nets and shifts more responsibility -- and risk -- to workers, uncertainty and individual-based benefits have created a new sense of worker independence from their employers.

For example, the 401(k) model of individual ownership, management and portability appears increasingly applicable to health care in the form of higher co-payments, deductibles and consumer-directed health. Few doubt that when it comes to employee health benefits, the United States is only in the early days of a tectonic risk-shift from employers to workers.

The 20th century entitlement culture that characterized the U.S. workplace for at least the last half-century is clearly evolving in the direction of individual ownership, responsibility, portability and, to be sure, independence. As the earlier ties that bound workers to their employers increasingly fray, benefits and skills will be focused on the individual and portable; workers will be individualist and portable -- in a word, independent.

This new independence coincides with a global war for talent -- putting great pressure on the ability of employers to attract and retain top talent. The collapse of group-based benefits entitlements and the retirement of the baby-boom generation are sure to elevate human capital management to the top tier of concerns in U.S. competitiveness.

Consumer-directed health: American Idol?
An American Idol contest is played out every day in every U.S. workplace to choose the star of our health coverage future. The favorite in this contest is consumer-directed health care that shifts more decision-making responsibility to workers.

The United States has the best doctors, hospitals and highest quality health care in the world. But a number of variables continues to cause an increase in health care costs. The average premium cost of family coverage in 2007 was $12,106. Of that amount, the average employer cost was $8,825 per employee and family for which an employee paid $3,281. Costs have more than doubled since the year 2000, putting employers under pressure to find new cost containment strategies.

It is too soon to predict whether consumer-directed healthcare will emerge as tomorrow's American Idol. But we can confidently forecast that 21st century employer-provided health coverage will be characterized by higher deductibles, greater employee decision making, a wider range of benefits choices and options, and more emphasis on employee health education, communications and wellness.

Health Savings Accounts (HSA), Flexible Spending Arrangements (FSA) and Health Reimbursement Arrangements (HRA) will almost certainly underpin future health coverage designs. And we can be fairly sure that the U.S. government tax policy toward employer-provided coverage will become more neutral with regard to employer-provided or individual-purchased coverage, giving a big boost to consumer-directed health care.

Retirement insecurity: pension deficit disorder!
The good news about 21st century retirement insecurity is that governments, employers and workers are beginning to appreciate the extent of the issue of pension deficit disorder. From the looming insolvency of Social Security to the extent of underfunding of state and local pension plans, from the inadequacy of 401(k) retirement saving to the 75 million workers who have no employer-sponsored retirement plan, Americans increasingly recognize the need to strengthen retirement security across the board.

The megatrends of the "more with less" economy, pervasive workplace uncertainty and the new independence will converge with 21st century demographics and federal budget realities. These will create a new form of retirement security based solidly on the principle of automatic enrollment, employee opt-out, individual savings accounts and a Social Security safety net.

Conclusion
These megatrends are the givens of the new world of work. How leaders respond will be the differentiators that will determine whether they excel or falter in the new economy.

Business unit and HR leaders can intersect these megatrends on two levels. At a macro level, they can discern how these powerful crosscurrents will redefine the world of work so they can be leveraged for competitive advantage. And secondly, they can commit to creating a culture based on two critical ingredients: innovation and trust. Successful leaders of business units and HR organizations will invest themselves fully in being part of a culture of innovation that drives change in every facet of the business and workplace practices. They will also elevate trust building in the workplace to be the defining quality of their corporate culture.

Business decision makers and HR professionals can help their companies and employees leverage change by understanding some of the key workplace megatrends influencing and being influenced by our changing economy. Ceridian, with broad-based expertise in human resource management, is here to help.

With more than 30 years of experience in federal legislative and regulatory affairs, Jim O'Connell focuses on HR and payroll policy issues, keeping customers informed about fast-changing and complex compliance regulations and workforce trends. O'Connell is a frequent participant in national and chapter HR and payroll industry meetings. He is an adjunct professor at Georgetown University in Washington, D.C. and specializes in international business-government relations. O'Connell has been with Ceridian since 1982. Before coming to Ceridian, he served in the U.S. Senate as chief legislative assistant to New York Senator Jacob K. Javits and later with Connecticut Senator Lowell P. Weicker. O'Connell holds a Ph.D. in economics from New York's Fordham University.