Love, War & Economics
Markets are conversations that are archived in the minds of the participants. That works fine in a village, but it doesn’t scale well to a global community. We need information about transactions that’s more fine-grained than the gross overview provided by magazine reviews or the glorified spin spun by the sellers.
Call me cynical, but I’ve concluded that NO seller will tell the objective truth about how his customers perceive him. It’s not necessarily a lie, it’s just human nature. Therefore, no data base controlled by the seller will tell the truth about the seller. That would be like a 15-year-old telling his buddies how uneventful the big date reaslly was.
That’s what forces Xpertweb to set up data-tracking web sites for all participants, whether they’re buyers or sellers. This requirement causes consternation from every knowledgeable observer of this design study, “Why go to all the trouble of setting up multiple web sites when it would be so much more efficient to centralize it? How can you hope to motivate all those people to learn how to set up their own servers? Besides, you could then profit from the traffic. Surely there’s some way to put in the safeguards for your users.”
It’s a valid point. No company is well enough managed to get all their employees to manage their own web sites – their training is just not adequate. But if the incentives were strong enough, then perhaps the most energetic employees would learn to do their own sites, and, if rewarded sufficiently for mentoring, could train the next most energetic people.
But let’s play Devil’s Advocate. Let’s imagine a centralized system set up to do what Xpertweb proposes to do: coordinate a rapidly growing body of proven experts in a wide range of fields. Perhaps the best comparison would be to a temp agency:
Jeff Greenberg had been looking for a “real” job for 16 months. Despite the supposedly excellent demand for skilled workers, Jeff’s skills didn’t seem to match what employers were demanding. Jeff was an excellent writer and a logical thinker, with practical technical and people skills, but he seemed to lack the elevated combination of a technical degree and deeply technical experience they wanted. His common sense and likeableness never showed up on their radar screens.
Finally he went to work for a temporary agency which placed workers with employers who chose not to increase their head count. The agency was one he’d not heard of but they’d had the most tasteful ad in the Yellow Pages, their web site didn’t insult his intelligence and he related well to the people he met there. It was called HumanTech.
He found it interesting that his interviewer, Mary Jenkins, described herself as a “player-coach” rather than a manager. She seemed sincerely interested in his work needs and interests. He couldn’t put his finger on it, but she came across as unhurried and unstressed. He learned that HumanTech had almost no office staff, but rather that the senior employees trained and supported “newbies” for extra compensation. HumanTech offered a good benefits package and even a retirement plan after a ninety day trial period. He was to work on technical documentation and marketing materials for companies that “HT” seemed to have a long history of serving.
Jeff had five assignments during his first three months, paying $15 per hour. He wasn’t bragging about it, but the situation felt comfortable, well within his capabilities, and he really enjoyed the vacation from office politics. He simply made sure that he understood his assignments, which he was then able to perform rather easily. He relished the project-specific nature of the work which he could dig right into, and he especially enjoyed leaving his work at the office.
After three months, Mary and Oliver presented his initial review, which proved to be more detailed than he expected. Reviews in previous jobs were usually an odd combination of vagueness and rigidity, focused on his work ethic and personal qualities, forced into a rigid rating table that didn’t bother with the actual issues of work skills and specific projects.
Instead, Jeff found that he had received a grade and a written comment for every one of the 27 projects he had completed, some as short as a half day. He was amazed that HumanTech could get their clients to rate him so diligently. His average grade was a gratifying 88.3%, and his comments were uniformly positive, with a couple of minor exceptions. He also learned that his scores were, on average, 1.7% higher than the average score given by those grading his projects, so he was deemed to be slightly above average vs. other HT employees, and 5.4% above the average score of other HT new hires.
Mary told Jeff that he was naturally valued at HT, and that he was now eligible for the benefits package. He also was invited to earn extra money for training and supporting newer employees.
“You’ve seen what I’ve done for you, which is about two-thirds of the job. The other third involves reviewing these project ratings and encouraging your trainees to listen well enough to their work supervisors at the client companies. We rely solely on the client’s ratings to judge ability, so there’s not the detailed kind of oversight that many companies get caught up in.
Mary paused and appeared to be reviewing Jeff’s benefits brochure. Jeff was calculating in his head and suffered a kind of disconnect. “I don’t mean to pry, but you’ve been very open with me. Are you saying that your bonus is 796 times 1% times, say, $2,500?”
“Their average income was actually $2,738, on average, last month,” said Mary with the slightest of grins. This conversation was the best part of her job, and Oliver seemed to be enjoying it also.
Jeff was talking out loud to himself, very slowly, “Whatever… call it $2,500 times 800 people… would be $2,000,000 of total income per month… times 1% would… be… You’re not saying you get more than $20,000 each month in bonuses?”
“You get the idea,” smiled Mary.
“I, uhh, how… Could you expand on all this a little? I’m really at a loss here…”
Oliver spoke up for the first time. “The founders of HumanTech are very creative people. They recognized that workers are getting smarter and very mobile, and they proposed to employ the smartest and most mobile of all workers – technical people working temp jobs. Since HT’s only asset would be its workforce, they didn’t want to wake up one morning and find their Company’s assets working for someone else. So they decided to create an employment structure so compelling that no one could even consider leaving it. Essentially, they created a co-operative.”
“5% of every employee’s pay is distributed in 1% pieces to the five people who are responsible for that person’s training and support. Mary and I ar
“However, HT’s also a great place to be, since the overrides bind us all together as teammates. I’m committed to the people who pay me a fee and to the people I pay a fee to, since they got me here. It’s not like we have bosses and employees, but rather a network of interdependent entrepreneurs, selling our skills to the clients. Of course it also helps that we don’t have to put up with each other every day. The only jerks we run into are employees of our clients, and we get to cycle through different environments. As you can see, high bonus levels make us less dependent on our paychecks, so we work for less than our competition, making it an unbeatable combination.”
Jeff still wasn’t satisfied. “That really sounds great – I’ve always wanted to work in that kind of environment, but I’m still unclear as to the mechanics. Mary, how’d you go from $2,500 per month to $20,000 in 3-1/2 years?”
Mary answered, “As you know, I’ve been working with you and Cicely Brown for the last three months. That’s pretty typical – I’ve been coaching for three years, so I’ve trained 22 people, counting you and Cicely. On average, those people have been working here 18 months, and they train at about the same rate I do. Actually they’ve trained 14 people each, for a total of 157 people at that level. Those 157 people have been here about nine months on average, each training about 4 people, on average, for a total of 617 people at the third level. 617 plus 157 plus 22 equals 796 total times $2,728 times 1% equals $21,714.88 last month. It works for me.”
Jeff was quiet for a long time, and Mary and Oliver let him be, since it was a typical reaction, as if he were afraid of popping a bubble. Finally he said quietly, “You know guys, I was once a very enthusiastic employee, but I’ve had eight jobs in the last twelve years. I’ve been conditioned to disappointment. Every company or division that seemed to have its act together came unglued after it grew too fast, changed management, got taken over or lost out to overseas competition. I’ve learned not to invest myself in anything that sounds great. My rule is, if anything sounds too good to be true, it is. When it comes to workplace enthusiasm, I guess I’m autistic.”
“So help me out here. How can HumanTech stay healthy long enough for me to get just a few $20,000 months?”
“There are no guarantees, but the right structure’s in place. As you know, HT is privately held, and it’s very secretive about its real numbers. If you sign this nondisclosure statement, we can tell you a little more.”
Jeff signed without a second thought, barely reading the score of repercussions, should he reveal HT’s business secrets, “Hell, I was only looking for a temp job anyway”, he laughed.
“Thank you. Do you know how big HT is?”
“No. It seems bigger than I’d expected. I never heard of it before I started looking for a temp job.”
“That’s typical. If we were a public company, we’d be no. 41 in the Fortune 500. That’s not unusual for the top tier of private companies, which includes other little-known companies like Bechtel, Morrison Knudsen, etc., but we’re big in terms of employees – 227,000 worldwide and growing fast. Companies like HumanTech are run by people who view the public stock markets as a way to make sound management impossible, for reasons we can discuss later. One of the key goals of public companies is to reduce head count by improving work flow and processes. Those are goals which their employees and middle managements fight at every opportunity, with good reason.”
“Enter HumanTech. We specialize in converting jobs to tasks. Then we assign a proven expert to each task for as much or little work the client needs. We often find that our clients’ employees have jobs with no responsibility except two or three one-day tasks a month, but they appear busy all the time, and their work takes up the entire month. If it weren’t so wasteful, it would be laughable. Once a client gets a taste of the HumanTech way, they can’t get enough of it, so we have an insatiable demand for new people.”
“Our goal is not to become the biggest company in the world. Our goal is to do all of the world’s work.”
“Whoa. That’s strong. How can it keep up? How can HT manage all this growth?”
“The system is set up to be self-managing. The IS department doesn’t massage the data, they just make sure the servers are big enough. All the data is just thrown on the hard drives as XML-formatted raw text, and it’s retrieved with a web browser when needed and organized into reports. We really only keep track of a few things: tasks performed, by and for whom and what grades and comments are earned. Also, of course, we track who is trained by whom, so the 1% fees get paid. We wouldn’t want to lose track of that.”
“No we wouldn’t,” Jeff agreed, “no we wouldn’t. So where does it end? Does everybody in the world go to work for HT and get rich?”
The Chain Letter
Mary laughed. “Of course not! It’s a chain letter! The whole thing quits escalating when we hit whatever natural barrier to growth is implicit in the HT system. The founders are very clear about that. They’re just not clear as to what the natural barrier is, since there’s never been such an organic work and growth structure. When we get there, despite the wiring of the globe and HT contracting with every electronic cottage and janitor it can, we’ll see no more growth. At any one time, only a small fraction of the HT people are making significant bonuses – 1% or so. The rest of them will simply have a better work experience than most people do today. As for the 5% fee deduction, none of us ever miss it. Have you missed it these last three months?”
“No. I can see that. But that 1% ratio makes me uncomfortable. Is that the system’s fatal flaw?”
Jeff enjoyed a success rate higher than the HT average. Four years later, he was earning $42,000 per month in fees, which turned out to be the highest level he would see. He had paid little attention to the event that ended his wild ride.
About two years earlier, when his bonuses were approaching $10,000 per month, one of HT’s three founders had died in a sailing accident, and his HT stock was distributed to his heirs, who were aggressively courted by a consortium led by EDS and Microsoft. A bitter proxy battle ensued.
HumanTech was forced to go public and its new management immediately started to “improve” the override fee formula, for the sake of the shareholders, naturally. It seemed that no responsible management team could watch $1.7 trillion in override fees flow through its hands without getting creative.
Six years after Jeff started with HumanTech, it had been broken up into several public companies and was shrinking rapidly as its once stellar team of employees retired or quit in disillusionment. The management team which had changed the fee structure had also moved on, to work their magic at other large companies. Several of them were celebrated on the covers
HT remained a leader among the many firms providing outsourced help, in much the same way that McDonald’s has remained a leader in the fast food industry.
And HT’s business model became just about as innovative as McDonald’s.