Squeezing Blood from an Onion

There is a new to the business paradigm that can be easily noticed if you pay attention to trends in the business climate that we see in the business news sections of our local newspapers. It's odd when we notice that even in good economic times, there will often be sudden waves of lay offs in businesses that we know are doing well.

Anybody who has been the victim of a lay off can empathize with the disruption and emotional trauma such a change can cause. Studies in business trends have documented that the phenomena of large scale business lay offs has been much more prevalent in the last ten years than in previous eras of the history of our business communities. So one has to ask, what has caused this shift in behavior by employers?

While economic conditions and sudden shifts in the marketplace can have a lot to do with how employers manage their staffing, that is not sufficient to explain this dramatic change of behavior in the business relationship between employer and employee. The real base cause of this change comes from a change in philosophy of employers.

The historic business model between employer and employee is one of a mutually supportive contract. Whether the contract is agreed to or just understood, the agreement is the employer will pay the employee and provide him or her with the basic needs they have to work on site for them. The employee will, in return perform his or her duties on time and well, come to work reliably and to be a loyal employee. This model is mutually supportive, creative and based on trust.

The business paradigm that has resulted in a lay off based model with a basic change to how employees are viewed such that…

§ Employees are viewed as a nuisance and a cost that many times the employer resents. This resentment is especially acute in regards to employee benefits such as insurance and vacations which the employer sees as not his responsibility.

§ Employees are expected to fulfill their role in the previous business model but to do so strictly from gratitude for the paycheck and no more. As such, the employer expects the same return from the previous model but they want to change the model in terms of employer expectations with no change from the employee side.

§ Long term benefits can be suppressed via a frequent turn over in the employee base. By replacing experienced staff, the need to see salaries rise and to provide vacations and eventually retirement benefits is reduced because the employer keeps the work force at the entry level status indefinitely.

§ The base assumption of this new model is that there is an inexhaustible supply of skilled labor "out there" in the unemployed labor pool. Therefore, current employees can be easily replaced with eager unemployed people so the human resource equation becomes exploitive.

While this business model does make some economic sense, like any equation, the base assumption has to remain perpetually true for the model to work long term. But this equation only works in a depressed economy where there are a large amount of skilled people on the labor market. This approach to human resource management can backfire badly if there is a shift in the labor markets that eliminate that abundant supply of replacement workers.

This exploitive approach to management of employees changes the assumption of trust between employee and employer to an assumption of distrust. It can have a devastating affect on employee morale so that even employees still being employed will deliver poor performance because they no longer are in a supportive relationship with management. The answer of "Well, then we will just fire those dead beats and get new ones" is not a working solution because once the employee morale is low, productivity across the work force goes down and stays down.

This affects the ability of the businesses to support current projects and deliver quality good and services to the marketplace. And as an exploitive attitude toward workers results in poor products and services for clients, the business will begin to lose market share which is the early signals that the business is destined for extinction. This is reason enough to reexamine the business model of employment and reconsider returning to a trust relationship with the employee base in our companies, for their good as well as for our own.

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Will DRM Save the Record Industry?

Without a doubt the single most influential agent of change in business trends in the last ten to twenty years has been the internet. There is virtually no business segment or market that has gone unchanged by this powerful force. But of all of the various businesses impacted by cyberspace, the music industry has to the one that has seen the most dramatic change and the greatest challenge to keep up, adapt and survive an onslaught of change unprecedented in its history.

The first major challenge that cyberspace brought to the music business was a complete shift to how music would be sold to music fans worldwide. In what can only be described as an avalanche, the music buying public virtually abandoned conventional record stores and retail outlets and took the majority of their music purchasing business online. But this mass influx of business could not be tracked to any one web site that was executing the revolution. Because of a revolution in how bands and Indie record labels do business online, the music audience followed and began buying their CDs and even concert tickets directly from artists or record labels online and getting those products instantly via downloads.

But as drastic as the market changes this paradigm shift in consumer behavior represented, it was nothing compared to what the internet had in store for the music world. The next wave of change represented a threat to the music business so serious that it had the potential of putting the music industry out of business forever. When music consumers began to share digital music electronically over the internet using file sharing software such as Kazaa, Limeware and BitTorrent, suddenly it was possible for a music customer to access all the music they wanted for free by simply downloading this music from another internet user's computer.

The plummet in music sales as result of these two forces was drastic and traumatic to the music world in general. At first, the music business executives were at a loss of exactly how to go about stopping the widespread file-sharing phenomenon. They tried to shut down the software services that provided the networks to users with lawsuits and other punitive actions. These litigations took a long time and cost a huge amount of money and all the while the flood of free music going out over the internet continued to increase. Worse of all, when they did slow down one file sharing network, it seemed many more cropped up to replace it which began to look like a nightmare scenario of constant lawsuits against a never-ending and constantly growing enemy.

Public pleas to the music loving public were another attempt to appeal to the conscience of the music world that if artists could not get paid, there would be no more new music. But the opposite seemed to be the case. As more and more Indie musicians began to capitalize on file sharing and using it as a method of marketing, the quantity and quality of good music only seemed to increase in this new music marketplace.

The final attempt seemed to be this technology called DRM. DRM is a digital "lock" that would be required to go on every piece of music released on the internet. Music with DRM would not be playable except to customers who had a legal right to use it. At first, this seemed like a viable solution. But even DRM didn't stop the flood of lost revenue through file sharing. And hackers seemed more than happy to learn to undo any technical locks the music industry could come up with.

So as we move into the last half of the first decade of this century, the music industry is learning to work with this new music marketplace rather than fight it. And by learning lessons from the Indie labels and how to serve customers in a digital world, there seems to be a new solution on the way but one that is dictated on the customer's terms rather on the terms of the big music labels. Somehow, that seems like it is the way it should have been all along.

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