The ‘Employee Value Proposition’ Over the Years: The Search for a Middle Ground

In her 20 years in the human resources field, Maureen Paradine has seen the “employment deal” take on new terms.

Paradine, who is senior vice president of HR at gift firm 1-800Flowers.com Inc., says companies used to focus on maximizing the performance of workers. Now, it’s more of a two-way street, where employees—especially younger ones—expect guidance and recognition in exchange for their efforts. Paradine, for example, gives her five direct reports coaching on a weekly basis, and the company is trying to offer the same combination of supervision and support to its overall workforce of about 2,000 employees.

“We want to be performance-driven,” she says. “And feedback-driven.”

The “social contract” surrounding work—sometimes called the “employment deal” or the “employee value proposition”—continues to change. The era of lifetime employment for loyalty prevalent in the ’50s, ’60s and ’70s gave way to a less paternalistic, more profit-focused corporate mind-set and reduced worker allegiance in the ’80s, ’90s and ’00s. But now signs point to a possible middle ground.

Organizations and workers see the benefits of longer-term connections. These may not always be in the form of traditional employment, as many workers and companies gravitate toward contingent labor arrangements. And the “deal” these days increasingly has become a personalized one, with workers of different generations and life circumstances prioritizing different kinds of rewards and benefits.

In many cases, a disconnect exists between what companies believe employees are after and what those workers want. And amid high unemployment, many companies are pressing their advantage. But experts say we’ve entered an era defined more by reciprocity.

“There is less of a sense of employees as disposable,” says Sarah Johnson, a practice leader at consulting firm the Corporate Executive Board Co. But at the same time, she says companies are “being realistic that: ‘We can only be together if we’re both being successful.’ ”

The “employment deal” refers to the generally agreed-upon rules for the bargain struck between workers and organizations. During the Industrial Revolution and the post-Civil War period, that deal was often turbulent, marked by hazardous working conditions, strikes and sometimes violent clashes. Scores of workers died in New York’s Triangle Shirtwaist Factory fire in 1911, and unsafe working conditions contributed to the tragedy. In 1920, the so-called “Battle of Matewan” took place when West Virginia miners sought union membership, which ultimately led to a deadly gunfight between private detectives and the workers. Ten people were killed including Matewan’s mayor.

However, it wasn’t all labor conflict in the first part of the 20th century. In 1914, Henry Ford famously more-than-doubled the pay of autoworkers to $5 a day under the theory that a wealthier working class would be able to buy the cars he was making.

After World War II, still greater harmony reigned as labor reforms provided basic protections around workplace safety and unemployment benefits and a kind of unspoken pact emerged. In return for enduring allegiance, organizations offered a near-guarantee of job security. “Company men” at IBM Corp.—think loyal employees in blue suits—and union contracts at Detroit’s automakers captured the spirit of the times.

But this paternalistic approach, with its emphasis on “employee satisfaction,” was flawed, says Kevin Sheridan, senior vice president at consulting firm Avatar HR Solutions and author of the book Building a Magnetic Culture. “Shiny, happy people holding hands” do not necessarily get the job done well, he says. Attention to quality and productivity sometimes suffered in organizations, symbolized by clunker cars made in the United States like the AMC Pacer and Chevy Chevette.

Partly because of quality problems and pressure from international competition, such as Japanese automotive and electronics firms, U.S. companies in the 1970s began moving away from their worker-satisfaction focus. In fact, employers took things to the other end of the spectrum. Companies in recent decades have treated employees to a greater degree as costs to be minimized. This shift also had to do with the rise of what might be called “shareholder capitalism” and a concentration on short-term results. Layoffs became widespread not only as a response to dire financial straits but also as an ongoing management strategy.

But this focus on business performance also had shortcomings. Wayne Cascio, a management professor at the University of Colorado at Denver, has shown that firms that downsize are not more profitable than those that don’t, and often end up hurting themselves in the long run. And evidence indicates that strong bonds with employees pay off in the form of long-term success. Companies that are better to workers outperform their peers in the stock market.

Meanwhile, corporate social responsibility and sustainability have become increasingly important to consumers and investors. And the public defines a good company in large part by how it treats its employees. For example, research shows consumers increasingly want to do business with companies that show “kindness” in their operations.

Many employees share this concern for corporate responsibility. And in the wake of the deep recession and continued tepid economy, they have been seeking job security.

As companies update the employment deal for the 21st century, they are not promising lifelong employment as in decades past. Few observers expect them to in a global, competitive economy. But many organizations are offering an alternative route to employment stability: a strong commitment to training and career development.

In a job market where marketable skills can change quickly, employer willingness to invest in career development is vital to attracting and retaining talent, says Rusty Rueff, a member of the board of directors at employee feedback site Glassdoor. “That is the new security blanket,” he says.

The notion that employees want employers to help them advance professionally is borne out in a study from last year by consulting firm Deloitte that surveyed 356 workers at large global companies. It found that “lack of career progress” was the top reason employees would leave their organization. Similarly, the survey showed that “promotion/job advancement” was the top incentive employers could offer to retain employees.

One company that has seen the light on employee career development is solar-power service provider Sunrun Inc. The 200-person, San Francisco-based company is investing in training for front-line managers. Sunrun holds monthly discussions with a cadre of about 27 managers, says Beth Steinberg, Sunrun’s vice president of talent and organizational development. The supervisors are reading management books such as Daniel Pink’s Drive and hearing from guest speakers such as Hilary Krane, vice president and general counsel for Nike Inc.

Sunrun also is working to identify employees who could take on leadership roles in the future. The focus on management development prepares the company to grow, but it also is part of a company ethos of preparing employees for the future, Steinberg says.

“We’re really trying to arm people whether, frankly, they stay at Sunrun or go elsewhere,” she says. “That’s really part of our responsibility.”

Such corporate responsibility may be of growing importance to all employers, but the employment deal can come in many flavors. For one thing, the pact around work may not take the form of a traditional employer-employee relationship.

Many workers today are choosing to be independent contractors and temporary workers, though they still tend to want some sort of ongoing bond with the companies for whom they work. And for “regular” employees, a one-size-fits-all approach can backfire. The Deloitte study, for example, found that although “promotion/job advancement” was the top retention tactic among all age groups, it was more important for Generation X workers than for baby boomers or millennials. What’s more, while younger workers tended to list additional compensation, bonuses or financial incentives as next most important, baby boomer employees ranked “support and recognition from supervisors or managers” as second-most effective.

The sexes are divided, too. Deloitte found that men appeared to focus on financial incentives in terms of retention initiatives, while women were more likely to seek recognition.

Many companies are working to address such varied desires. 1-800Flowers.com, for example, has concentrated on feedback in part to meet the needs of millennials, Paradine says. To facilitate frequent conversations about performance, the company has tapped technology. It uses software from Work.com (formerly Rypple and now part of Salesforce.com Inc.) to allow managers and peers to recognize a job well-done, to provide coaching tips and track progress on goals. Work.com and other collaboration and talent management software products even have the look and feel of the social media applications that younger workers have grown up using. “It’s designed very much like a Facebook tool,” Paradine says.

Still, harmonious relationships between employers and employees aren’t the rule everywhere. Deloitte’s study, for example, found key differences between what workers want and what executives—polled separately—think workers want. Executives in the study thought “additional benefits” would be the best retention strategy for baby boomers—and it didn’t rank among the top three for workers in that age cohort. Similarly, leaders figured company culture would be the top retention factor for millennials while those younger employers didn’t rank it in the top three.

In addition, some companies are taking advantage of today’s slack job market to, in effect, bargain harder with employees. They are skimping on training spending and loading workers up with additional duties without a corresponding bump in compensation. But that’s a risky deal to offer. Disengagement is commonplace in the workplace—and with it reduced employee effort and passion. Some 63 percent of U.S. workers are not fully engaged in their work and are struggling to cope with work situations that don’t provide sufficient support, according to a July global study of 32,000 workers by New York-based consultancy Towers Watson & Co.

Many employees also are itching to leave their jobs. Deloitte found that just 35 percent of employees surveyed in March 2011 expected to remain with their current employers, compared with 45 percent who were committed to their employers during the recession in 2009. A major factor is the sense that companies aren’t doing enough for employees’ long-term prospects: nearly 60 percent of those employees who plan to leave their current employers say their companies do just a “fair” or “poor” job of creating career paths and challenging job opportunities. The pent-up desire to leave bodes poorly for companies at a time they say they’re having trouble finding specialized talent.

So yes, the relationship between employers and employees remains a work in progress. Still, times have changed. Compared with the employment-for-life days decades ago and the recent past where organizations were quick to give out pink slips and workers felt little remorse about leaving for a competitor, today’s employment deal is more mutual. Sunrun’s Steinberg says the pendulum swing to a middle ground is just about right.

“There’s really more of a reciprocal relationship between employees and employers. ‘We want to do good by you. You want to do good by us,’ ” she says. “It really should be a mutually beneficial relationship.”

Ed Frauenheim is Workforce’s senior editor. Comment below or email efrauenheim@workforce.com.