New kinds of employee-employer contract are appealing to the millennial generation. According to the Pew Research Center, nearly 57 percent of younger workers say it is not very likely or not likely at all that they will stay with their current employers for the remainder of their working life. Among Generation X workers, those numbers are nearly reversed: “62 percent say it is likely they will never leave their current employer, while only 36 percent expect to someday work for someone else” (Pew Research Center 2014). Baby boomers, many of whom are at or approaching retirement age, are even more settled, as 84 percent expect to remain with their current employer for the rest of their working lives (Bannon, Ford and Meltzer 2011). As mentioned previously, millennials have a lack of trust with regard to organizations. A distrust that previous generations did not have. This distrust has led many millennials to value employability more than actual employment. Because of this millennials are looking to gain skills, perform well, and hope for quick promotions. If quick promotions do not happen, millennials look for other opportunities outside of their current organization. According to a recent Wall Street Journal study only three percent of Millennials surveyed say they plan to stay at their job for more than five years, and 91 percent said they would leave their job if they were unhappy (Skapinker 2012). Millennials’ expectations of their employers are forcing organizations to reevaluate the traditional employee-employer contract.
One idea of how organizations can change the employee-employer contract to better meet the expectations of the millennial generation is to offer shorter work tracks—meaning that there would be an agreed-upon time of employment by the employer and employee. Harvard Business Review recently released an article titled “Tours of Duty,” which likens this new type of employment contract to military enlistments. The authors believe that offering 2-4- year employment compacts is the future of employee-employer relationships. Taking into account that the majority of employees, especially millennials, no longer plan to remain with the same employer until they retire, the authors advocate that both sides seek the mutual benefits of alliance. The authors state that “the key is that both the employer and the employee seek to add value to each other. Employees invest in the company’s adaptability; the company invests in the employees’ employability” (Casnocha, Hoffman, and Yeh 2013, 5). Another benefit to these tours of duty is that it establishes a realistic zone of trust. As research finds, lifelong employment and loyalty are simply not part of today’s world; pretending that they are decreases trust by forcing both sides to lie. Organizations that offer millennials this option may find that their trust in the organization actually increases.
The key to offering these types of employment contracts will be customizing them. Not all industries, roles, or even individuals will be good fits for this type of arrangement. It will be essential that organizations prepare for this and determine some, if not all, of these compacts on a case-by-case basis. For instance, if there is a position that has a 2-3-year learning curve, a 2-4-year contract may not be a viable option. However, maybe a 6-7-year contract would. The real purpose is to find a way that engages the employee from the beginning of the employment relationship. Ongoing evaluation of the relationship should occur minimally on a yearly basis.
Part of this type of contract is that employers have the option of signing a new contract if they believe continuing the relationship will be beneficial for both parties. If not, the contract allows the employee to leave on good terms leaving the company with plenty of time to find a replacement—as it is advisable that this conversation occur approximately six months prior to the contract end date.
One other approach that companies are using that results in shorter work tracks is paying employees who are not or are no longer a good fit to leave. Amazon, Netflix and Zappos are a few of the companies that believe that this practice is good business. Amazon offers its fulfillment center employees $2,000 the first year the offer is made and raises the offer by $1,000 each year until it reaches $5,000. As Bezos wrote in his shareholder letter, "the goal is to encourage folks to take a moment and think about what they really want. In the long-run, an employee staying somewhere they do not want to be is not healthy for the employee or the company” (McGregor 2014). If more disengaged employees are leaving on their own accord, rather than having to be terminated for being a bad fit, there is less risk of termination-related lawsuits and less risk of damaging employee morale. Offering money to leave an organization also provides an option for the millennials. As mentioned previously, the millennial generation likes to feel as though they have a choice and a level of control over their employment. Providing the millennials a choice of leaving in a manner that benefits both parties is a great way to empower the millennial generation. The aforementioned companies understand creating these types of unconventional options in the workplace actually help build trust and engagement in the workforce.
Organizations see the purpose of offering these hybrid work contracts as a way to create the most mutually beneficial relationship between an employee and an employer. It creates a relationship where the organization is still in control but allows the employee to feel equally in control. These types of compacts also allow organizations to perform better succession planning. Considering that the employer should check-in with the employee six months prior to the end of the contract, employers should have a minimum of six months to begin recruiting for the position. This allows companies a liberal amount of time to either find someone internally that fits the position or look outside for the fill. This arrangement also allows the organization time to see if there is a different position within the company that the employee may be a better fit for.
Although the new employer-employee compacts discussed may not be preferential for all companies or employees, millennials are indicating that they like the ability to have an option with regard to their employment. The suggested compacts allow for both organization and employees to better plan for their futures—a level of control that benefits both parties. The following will address the approach taken with regard to research and analysis of this Capstone paper.