Find a current events story that relates to one of the topics in Chapter Two of text and submit your discussion to the Discussion Board Find a current events story that relates to one of the topics in Chapter Two of text and submit your discussion to the Discussion Board
CHapter 2 topics
Millenials Redefine Entrepreneureship
Chapter 2 Topic below
The Decline of the Corporation as We Know It
In the next reading, Gerald Davis, Professor of Management and Sociology at the University of Michigan, considers the way the new economy is not only changing the nature of work but also rendering the traditional publicly-traded corporate form increasingly obsolete. Now that “it is possible to find multiple bidders for many essential tasks on the Web, many of the tools of organizing are available free or cheap online, and labor can be “rented” through temps and contractors,” he writes, “the public corporation … may be reaching its twilight in the United States.”
What Might Replace the Modern Corporation? Uberization and the Web Page Enterprise
Gerald F. Davis
It is worth detailing why the public corporation is in decline in the United States. I would start with a forty-year-old article that helped change the discourse about what the corporation was, from a social institution to a mere nexus-of-contracts. Jensen and Meckling’s 1976 article, Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, is one of the most widely cited publications in economics in the past half-century. Google Scholar attributes over 50,000 citations to this piece, putting it at the top of the field….
… Jensen and Meckling’s most enduring contribution is their metaphor of the corporation as a mere nexus-of-contracts. At the time that they wrote, this idea was preposterous. General Motors and AT&T had almost one million employees each, with seasoned workforces laboring in vast and highly tangible facilities. Corporations were quite obviously social institutions, and their employees were like citizens who received health care for themselves and their dependents, stable compensation, and pensions upon retirement. Denying that GM was a social institution was like denying that Canada was a country. But the “nexus” imagery served as a useful provocation, … and … became ever more apt during the 1990s, when the advent of the Web made it easier to outsource on a grand scale. At first, firms contracted out peripheral activities like managing the payroll. Later, even the most central aspects of the business were eligible for outsourcing. China’s growth as a manufacturing powerhouse made it feasible to outsource many of the lower-value-added tasks of production…. In combination, access to competing vendors in China and elsewhere over the Web made outsourcing irresistible for many corporations.
The ability to create an enterprise out of already-existing parts, without having to build them from scratch, enabled a disintegrated form of organization. Nike had demonstrated that design and production could be organizationally separated. The company doing the designing and marketing could be in Oregon, while other companies in China or Indonesia or Vietnam could handle manufacturing, and still other companies could manage distribution. This was “Nikefication,” a new model of post-industrial organization. And if it worked for sneakers, why not computers, or blood thinner, or “enhanced interrogations” of prisoners in Iraq?
In the intervening years, Nikefication has become pervasive. Almost the entire electronics industry was outsourced during the late 1990s and early 2000s, as U.S. employment in computers and electronics declined by forty percent. As practices of outsourcing became widely adopted, corporations came to look more and more like the nexus-of-contracts described by the financial economists, with the parts snapped together on a temporary basis like interlocking plastic blocks. The ready availability of outside contractors made hiring actual employees largely unnecessary and enabled the contemporary Silicon Valley model.
Widespread Nikefication has led to a vast reshuffling of organizational and industrial boundaries in the United States. Surprisingly few things that Americans buy today are actually produced by the company that manages the brand. Moreover, advances in computing power and telecommunications have radically reorganized work processes inside organizations. Tasks that are not currently outsourced can be controlled by algorithms and “workforce management systems,” which have been widely implemented across the retail, wholesale, and food service sectors. Today’s shopping malls and chain restaurants are high-tech successors to the assembly line, with GPS-enabled time-and-motion studies optimizing human capital deployment at every moment. Line management is unnecessary when the performance of every worker at every store at every moment is available to headquarters staff back at the Panopticon. Drones at HQ can push messages to your terminal or headset to let you know that you are not scanning SKUs fast enough; you failed to upsell that customer on the silk scarf; your last table gave you only three smiley faces on their embedded iPad; or you are only grabbing seventy items per hour at the warehouse temp job when your quota is 110.
We have turned the tasks of organization design and management over to programmers. Hiring, scheduling, performance measurement, and evaluation are now largely in the hands of algorithms written by people who may have no personal experience of the jobs they are designing.
Things are about to get worse, at least from the perspective of labor. The next stage in this evolution after Nikefication is Uberization: renting labor for specific tasks rather than hiring for jobs. Business authors in the 1990s published many tomes on the “death of the career,” arguing that companies no longer valued long-term employment and that smart workers were perpetual free agents, always on the prowl for the next opportunity. The job had replaced the career. Jobs were always temporary, even if they were not labeled that way explicitly.
But now the task may be replacing the job. “Job” implies an employer (often a corporation) and an employee. But platforms like Uber, TaskRabbit, and countless other “sharing economy” apps provide a means to contract for specific tasks rather than hiring for jobs. Thanks to ubiquitous smartphones, it is now possible to create markets (and therefore to discover prices) for all kinds of human tasks on all kinds of schedules…. This is the “gig economy,” or the “on-demand economy,” or the “TaskRabbit economy.” A better term that remains agnostic about what is being provided via these impromptu markets is platform capitalism, where platforms enable transactions.
Uberization renders the corporate employment relation increasingly dispensable. Why do companies hire people in the first place? One rationale is that work requirements cannot always be specified in advance, and so it pays to have employees on hand who are willing to do a broad range of tasks more or less on demand. But this often requires firms to be fully staffed even if the expected demand is not realized. The company has to pay employees even if it doesn’t have anything for them to do, which is an abomination for profit-driven firms. Recently, food service and retail firms have been under fire for their erratic scheduling practices that call in hourly employees for shifts and then send them home early if there is not sufficient demand, or require them to be available for shifts even though they might not get called in at all. The risk of variable compensation week to week is borne by the employee, not the firm, and is one of the common grievances of low-wage workers. Uber, in contrast, does not have shifts. Its driver-partners are not required to work at any particular time. They log in to the app on their phone and hang out an electronic shingle. If an opportunity comes along, they can take it (and get paid); if not, no one is to blame. If demand is expected to be high, as on New Year’s Eve or when it is raining, they can receive surge pricing. Pay is by the task, and there are no guarantees.
Now imagine an Ayn Rand world in which the employment relation is on a “buyer beware” basis. Walmart or other employers could offer training and certification for particular fungible tasks (cashier, shelf stocker, greeter, returns clerk) and, using the hypothetical Walmart YouServe app, recruit for the day or the hour as needed for each task. Self-employed “quasi-associates” could log on to the app and bid on shifts available at stores within a commutable distance for their certifications. If demand was high, the app might implement surge pricing; if not, the quasi-associates might compete against each other to offer the low price, everyday. Now, the hapless precariat has been transformed into a nation of micro-entrepreneurs … charting their own destiny….
The architecture for this enterprise of the future is already in place. It is the enterprise as web page, in which the “firm” is a set of calls on resources that are then assembled into a performance…. When Circuit City was liquidated in 2009 and its 34,000 remaining employees shown the door, a Long Island company bought the brand name, logo, and web domain and connected it to an essentially automated order fulfillment system. On the Web, it looked the same as it always did, but behind the scenes in the physical world Circuit City was no more. Like a hermit crab inhabiting a discarded shell, the new enterprise did what Circuit City did, without tangible real estate or human employees. The web page was the enterprise.
… Like dockworkers on the waterfronts of old, or impromptu work crews assembled in Home Depot parking lots at dawn, we now face the prospect of a smartphone-enabled precariat scrambling for shifts on a daily basis….
… If long-lived investments are unnecessary to do what a firm does because the inputs to production—including labor—can be rented on an ad hoc basis, then corporations will not be the most cost-effective way to organize.The Decline of the Corporation as We Know It
In the next reading, Gerald Davis, Professor of Management and Sociology at the University of Michigan, considers the way the new economy is not only changing the nature of work but also rendering the traditional publicly-traded corporate form increasingly obsolete. Now that “it is possible to find multiple bidders for many essential tasks on the Web, many of the tools of organizing are available free or cheap online, and labor can be “rented” through temps and contractors,” he writes, “the public corporation … may be reaching its twilight in the United States.”
What Might Replace the Modern Corporation? Uberization and the Web Page Enterprise
Gerald F. Davis
It is worth detailing why the public corporation is in decline in the United States. I would start with a forty-year-old article that helped change the discourse about what the corporation was, from a social institution to a mere nexus-of-contracts. Jensen and Meckling’s 1976 article, Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, is one of the most widely cited publications in economics in the past half-century. Google Scholar attributes over 50,000 citations to this piece, putting it at the top of the field….
… Jensen and Meckling’s most enduring contribution is their metaphor of the corporation as a mere nexus-of-contracts. At the time that they wrote, this idea was preposterous. General Motors and AT&T had almost one million employees each, with seasoned workforces laboring in vast and highly tangible facilities. Corporations were quite obviously social institutions, and their employees were like citizens who received health care for themselves and their dependents, stable compensation, and pensions upon retirement. Denying that GM was a social institution was like denying that Canada was a country. But the “nexus” imagery served as a useful provocation, … and … became ever more apt during the 1990s, when the advent of the Web made it easier to outsource on a grand scale. At first, firms contracted out peripheral activities like managing the payroll. Later, even the most central aspects of the business were eligible for outsourcing. China’s growth as a manufacturing powerhouse made it feasible to outsource many of the lower-value-added tasks of production…. In combination, access to competing vendors in China and elsewhere over the Web made outsourcing irresistible for many corporations.
The ability to create an enterprise out of already-existing parts, without having to build them from scratch, enabled a disintegrated form of organization. Nike had demonstrated that design and production could be organizationally separated. The company doing the designing and marketing could be in Oregon, while other companies in China or Indonesia or Vietnam could handle manufacturing, and still other companies could manage distribution. This was “Nikefication,” a new model of post-industrial organization. And if it worked for sneakers, why not computers, or blood thinner, or “enhanced interrogations” of prisoners in Iraq?
In the intervening years, Nikefication has become pervasive. Almost the entire electronics industry was outsourced during the late 1990s and early 2000s, as U.S. employment in computers and electronics declined by forty percent. As practices of outsourcing became widely adopted, corporations came to look more and more like the nexus-of-contracts described by the financial economists, with the parts snapped together on a temporary basis like interlocking plastic blocks. The ready availability of outside contractors made hiring actual employees largely unnecessary and enabled the contemporary Silicon Valley model.
Widespread Nikefication has led to a vast reshuffling of organizational and industrial boundaries in the United States. Surprisingly few things that Americans buy today are actually produced by the company that manages the brand. Moreover, advances in computing power and telecommunications have radically reorganized work processes inside organizations. Tasks that are not currently outsourced can be controlled by algorithms and “workforce management systems,” which have been widely implemented across the retail, wholesale, and food service sectors. Today’s shopping malls and chain restaurants are high-tech successors to the assembly line, with GPS-enabled time-and-motion studies optimizing human capital deployment at every moment. Line management is unnecessary when the performance of every worker at every store at every moment is available to headquarters staff back at the Panopticon. Drones at HQ can push messages to your terminal or headset to let you know that you are not scanning SKUs fast enough; you failed to upsell that customer on the silk scarf; your last table gave you only three smiley faces on their embedded iPad; or you are only grabbing seventy items per hour at the warehouse temp job when your quota is 110.
We have turned the tasks of organization design and management over to programmers. Hiring, scheduling, performance measurement, and evaluation are now largely in the hands of algorithms written by people who may have no personal experience of the jobs they are designing.
Things are about to get worse, at least from the perspective of labor. The next stage in this evolution after Nikefication is Uberization: renting labor for specific tasks rather than hiring for jobs. Business authors in the 1990s published many tomes on the “death of the career,” arguing that companies no longer valued long-term employment and that smart workers were perpetual free agents, always on the prowl for the next opportunity. The job had replaced the career. Jobs were always temporary, even if they were not labeled that way explicitly.
But now the task may be replacing the job. “Job” implies an employer (often a corporation) and an employee. But platforms like Uber, TaskRabbit, and countless other “sharing economy” apps provide a means to contract for specific tasks rather than hiring for jobs. Thanks to ubiquitous smartphones, it is now possible to create markets (and therefore to discover prices) for all kinds of human tasks on all kinds of schedules…. This is the “gig economy,” or the “on-demand economy,” or the “TaskRabbit economy.” A better term that remains agnostic about what is being provided via these impromptu markets is platform capitalism, where platforms enable transactions.
Uberization renders the corporate employment relation increasingly dispensable. Why do companies hire people in the first place? One rationale is that work requirements cannot always be specified in advance, and so it pays to have employees on hand who are willing to do a broad range of tasks more or less on demand. But this often requires firms to be fully staffed even if the expected demand is not realized. The company has to pay employees even if it doesn’t have anything for them to do, which is an abomination for profit-driven firms. Recently, food service and retail firms have been under fire for their erratic scheduling practices that call in hourly employees for shifts and then send them home early if there is not sufficient demand, or require them to be available for shifts even though they might not get called in at all. The risk of variable compensation week to week is borne by the employee, not the firm, and is one of the common grievances of low-wage workers. Uber, in contrast, does not have shifts. Its driver-partners are not required to work at any particular time. They log in to the app on their phone and hang out an electronic shingle. If an opportunity comes along, they can take it (and get paid); if not, no one is to blame. If demand is expected to be high, as on New Year’s Eve or when it is raining, they can receive surge pricing. Pay is by the task, and there are no guarantees.