The Harsh Reality of Corporate Employment Patterns in Canada: ‘Work more, with less, for less’ syndrome!
As I reflected over the holidays about all of the clients I worked with in 2014, and all of the stories I heard, I was amazed at the strong correlation of themes from so many of my clients. I’ve also seen some of my family members be personally affected by the shift from long-term employer-employee relationships to the now prevalent, “What have you done for me lately?” attitude of so many Canadian and US corporate employers.
How do you feel about taking a 25% to 35% cut in pay? I’ll explain this momentarily.
How about the “work more, with less, for less” syndrome? Well, that’s not completely accurate… there is way more stress!
With a higher frequency of unemployment, shorter-term employment cycles, and the simple fact that Canadians are living for longer than they were 30 years ago, the negative corporate employment patterns that have emerged now to be commonplace are creating significantly higher risk for our ability to meet current lifestyle requirements as well as creating long-term wealth so that they can have sufficient strength to carry them through their longer retirement years.
Since 2002, I’ve been working with mid and senior-level executives struggling with career change. Between 2002 and 2008, a lot of our clients were facing their first job loss after lengthy careers with a single employer. However, over the last six years, this is shifted significantly – today, the majority of our clients have experienced 2 to 4 job losses, especially if they are past the age of 50. The financial and lifestyle impacts of this “career turbulence” is starting to take its toll on the ranks of Canadian management, and many companies are experiencing significantly lower morale because of some of the conditions stated above.
The baby boomer generation grew up with the “career of a lifetime” mentality (I still remember the day when I was 19 and got hired by the TD Bank, my grandfather told me to “work hard, keep your nose clean and you will be set for life!”). Nowadays, unless you are in public sector employment or a union environment, the “career of a lifetime” opportunity is quickly disappearing, or already has! The youngest members of our workforce are coming out of post-secondary education only to realize that long-term employment is very difficult to find, and compensation levels are lower than they were even a few years ago, in part due to increased competition for the very jobs they are seeking. For everyone, the new reality that they have to manage is “a lifetime of careers!” A new way of career planning and career management has become reality:
Contract Employment or “Portfolio Career Management”:
Getting downsized or laid off used to carry a negative stigma, but it happens with such frequency that it has now become a relatively accepted norm. Where companies used to hire for 5 – 10 year career trajectories that often included clear progressions on the corporate ladder for the employee, this is unfortunately now rarely the case, and the corporate ladder is essentially broken. We hear from HR professionals and clients alike that the average length of employment for middle and senior executives these days is 2.2 to 2.7 years, and the average time in between jobs often exceeds 9 months (unless you have a very strong performance track record or are in a high-demand industry).
Another negative shift that has happened is that as shareholders expect more and more of the financial performance of the company, more and more pressure is put on senior management to deliver strong financial results in shorter periods of time. It seems like the most popular ways to do this is to cut staff and reorganize the workload among remaining employees, often without increasing the compensation for the extra work and responsibilities. What has resulted is the “work more, with less, for less” syndrome.
Working More: where we used to hear that a 50 hour week was a lot, now we regularly hear that a 60 hour week is expected… often at the expense of evening and weekend family time. May people are also “on call” and have to take their smartphones with them everywhere… much to the frustration of their loved ones!
With Less: many companies just spread the work amongst the remaining team members and expect them to still get the job done without sacrificing service levels. Employees have to do so with less human resources (salespeople, admin staff, production staff, etc.). Time resources are also taxed as the pressure to achieve performance targets within shorter delivery timelines continues to increase… along with the associated stress levels. We also consistently hear that corporate financial resources available to get the work done also continue to get trimmed.
For Less (the biggest frustration): a very common theme we hear is that people are being offered contract jobs at between 10% and 30% than they were previously earning from previous employers; this phenomena is especially prevalent past the age of 45. In addition, often because of the amount of downsizing and corporate restructuring, the amount of workload placed on the surviving individuals is significantly higher than even five years ago. Their levels of responsibility have increased while the level of compensation has not kept stride. I regularly hear of situations where 30% to 40% of the team is cut; the workload is added to the surviving team members and it’s just expected to get done… Rarely is there an increase in compensation, despite the savings the company has just realized by eliminating a bunch of positions. People are feeling taken advantage of, less valued, and increasingly frustrated.., it’s no wonder we hear about eroding employee loyalty and lower morale at all levels of the Canadian workforce.
An Employer’s Market:
Let’s face it, between technology, innovation, corporate restructuring and off shoring of jobs, it has really become an employer’s market in most industries – there are constantly lots of people in the ranks of the unemployed, so companies can afford to be more patient, pickier, and offer jobs with lower compensation package because they know they will eventually get someone to get the work done. They also know that because the employment market is far more difficult today, their current workforce would rather keep their mouths shut and buckle down…
So, in the Canadian way, so many people offer no resistance and silently accept more work and responsibility, without more pay… instead of saying something and risking being identified as a potential target in the next round of downsizing. Great for employers, but not for existing employees and jobseekers!
What we hear constantly is “I’m getting tired of this” or “this isn’t fun anymore”. One of our clients said it best:
“Corporate Canada is asking us to fund our unemployment with our retirement savings, while they take their sweet time figuring out if they want us or not!”
Hidden Pay Cuts: I would like to extrapolate a bit further and raise another aspect of the “for less” factor for consideration – people are often so focused on getting the next job, that they fail to consider the long-term implications of “contract employment”, so here are a couple of scenarios for your consideration:
|Scenario||Contracted annual income||Length of months in Employment contract||Gross income full employment term||# of months In job search||# months of Total employment cycle||# years of Total employment cycle||Net annual income For employment cycle||% net annual pay cut|
|#1||$100,000||30||$ 250,000||9||39||3.25||$ 76,923||23.1%|
|# 2||150000||24||$ 300,000||12||36||$ 3.00||$ 100,000||33.3%|
(note 1: total employment cycle = length of employment contract plus length of job search)
(note 2: net annual income for employment cycle = gross income full employment term/# years of total employment cycle)
While you would still have to factor in any unemployment insurance you might claim during the unemployment period, this clearly demonstrates that when we factor in a long-term picture, people are actually working for a lot less than they care to admit. Ignoring this reality creates a false sense of true earning power, and can seriously and adversely affect our retirement planning…
- Instead of doing your long-term plan based on your average/projected annual income while employed (which is what most people do), we recommend that you calculate your retirement savings power based on the net annual income for the entire employment cycle.
- While we’ve only showed one employment cycle in this example, you will want to estimate how many full employment cycles you are likely to experience in the remainder of your career, and what the typical length of your specific employment cycle really is, so that you can get a much more accurate sense of your true long-term earning potential and thus plan your future earning power from a more realistic perspective.
- A huge mistake that people overlook is that they fail to factor in the amount of money they will need to spend during their months of job search. This is actually a double-negative in long-term wealth creation planning because not only are you NOT earning money during these periods, most people have to erode their wealth by dipping into their savings to cover monthly expenses… The net result is that instead of savings accounts continually increasing, savings accounts dwindle during periods of unemployment, in some cases obliterating previous savings efforts.
- Ageism – a harsh reality is that the older we get, the longer it’s taking to find jobs, and the jobs that are being offered regularly have a lower compensation package. People have to “settle” and take a job below what they feel they’re worth, adversely affecting them both financially and in many cases emotionally.
- The consistent message these days is to treat the marketing of your corporate career as an ongoing sales job – constantly be networking and keeping important relationships current. If you have a two-year contract, you don’t want to start marketing for the next opportunity during the last three months of the current contract. Instead, constantly research for next-level employment opportunities, and stay in touch with important relationships and keep them updated of your progress; be willing to ask for introductions to potential employers, even if you are many months away from the end of your contract (remember, employers are taking much longer to hire these days; companies prefer employees who demonstrate productivity and self-responsibility versus those who hesitate and wait to react).
- Recognize the limitations of this new transactional versus relational employment engagement – how do you maximize your employer’s benefit of having you, while also maximizing your development and growth. Consider each job as a stepping stone on the career path that you want to define.
- If you are going to stay on the corporate career path, than you have to revisit your long-term financial planning and realistically factor in the net effect of your likely employment gaps and your diminishing earning power as you age; adjust your lifestyle and your spending accordingly
- Consider alternative means of generating long-term income. Investing in real estate to generate rental income is one way, self-employment is another option… when done correctly you can eliminate the employment gaps because you’d be in charge of how long you work. Franchising is a safer way to bridge the gap between corporate employment and self-employment, but it certainly isn’t right for everyone.
- This one is for Corporate Canada, AND those senior managers who have to make tough decisions about managing costs. A great quote from Michael Baisden comes to mind “never push a loyal person to the point where they no longer give a damn!” Unfortunately, we see too many employees no longer giving a damn, in part due to the reasons I raised in the “For Less” section herein; and in part to the toxic environments that result. A strong indicator in this is that over the last five years, I’ve seen the number of clients who are gainfully employed but looking for alternative career solutions through franchise ownership jump from about 5% of my client base to nearly 25% now… a clear indicator that if we have not reached the tipping point, were awfully close to it.
I’ll end with this thought: In the name of efficiency and ever-increasing pressure on increasing shareholders’ value, I believe that too many leaders in Corporate Canada will ignore solution #5 above; instead, they’ll continue to exploit its talent base, but in the process continue to lose some of their greatest intellectual assets along the way. We can only hope that at some point these same leaders will realize that cuts are becoming too severe, and they’ll start protecting and rebuilding their workforces while compensating their talent more fairly for their level of experience and responsibility!
Gary Prenevost is one of Canada’s leading franchise experts and has been an entrepreneur for more than a quarter century. He has been involved in a variety of successful non-franchised and franchised self-employed businesses. By exploring the ideal solutions that fit an individual’s desires and strengths, Gary helps senior and mid-level executives take a step back and objectively look at whether franchise ownership would be a viable and positive career choice. By playing to the individual’s transferable skills and passions, the franchise owner can enjoy less stress, greater success, more fun, and improved quality of life. For more information visit www.CanadaFranchiseExpert.ca or call 905-405-6300. In addition to being one of Canada’s top franchise matchmaking experts, also co-owns a master franchise and unit franchise for Alair homes, a custom home building and renovation company, so he is intimately familiar with the home improvement marketplace.