2023 FUTURE OBSERVATORY
2023 FUTURE OBSERVATORY
One myth which is especially pervasive is that the large firms in general, and the multinationals in particular, are losing ground to small firms. John Naisbitt even made this theme central to his 1994 book, 'Global Paradox'; a theme which he quite simply summed up as the bigger the world economy, the more powerful its smallest players.
The apparent buoyancy of the small firms sector, at least in part, arises from a misunderstanding of what lies behind all these exchanges; which Bennett Harrison describes as 'concentration without centralisation'. The changes also reflect a concept, described in labour economics as 'core and periphery', where 'core workers', those who are essential to the business (and in whose training the organisation has usually made a significant investment), are well-treated - with high salaries and lifetime employment - and those 'peripheral workers', who can easily be replaced on the general labour market, are hired and fired as needed. The latter category are often shifted to sub-contractors; and have, in this way, fuelled the rapid growth of such small firms.
Taking the long-term view, it is possible to speculate that this may be yet another symptom of revolutionary pains. As more and more workers become ever better trained, and as labour becomes scarcer (in the West, at least, due to demographic trends and the demand arising from the long-awaited Millennial boom) the periphery is likely to shrink dramatically. Organisations will once more have to enlarge their 'cores' to protect their supplies of skilled labour; and lifetime (or long-term) employment will make a come-back.
On the other hand, following a rather different trend, there recently has been much debate about the emergence of 'virtual businesses'. These use the new ease of communications to bring together a number of sub-contractors - which may be different for each product involved, and may be scattered around the world - to create an offering without any dedicated production facilities; and with just a few administrative workers (most of even this function having been outsourced) supporting the handful of managers who put theses deals together!
On balance, therefore, the transnationals and multinationals will continue to be major drivers for change, as individual organisations; but they will operate in a fragmented manner and not in concert. They might, however, be susceptible to political pressures to become more active in this regard - especially at the global level.
Hammonds et al report that "A quarter of Americans employed today do so on a temporary, part-time or contract basis...Hundreds of companies have outsourced non-core operations." He goes on to suggest why this is happening "Outsourcing can work wonders for the bottom line: so-called contingent workers get pay comparable to full-time staff's, but without benefits that typically add 40% to labour costs...[it] is more flexible. When business sags, the temps go first." The Chatham House Forum look at it from the opposite point of view "The dominant force of the times - in part through the pursuit of a defensible core - is towards de-integration."
16 May 2003
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