One year or so out from the beginning of the biggest retirement surge in history, the United States could be about to experience a titanic shift that could turn Anytown USA into a quality-of-life locale and any home or small office into a workplace.
As the first wave of baby boomers start to leave organizations, labor experts are predicting that the workplace will be defined as whatever an individual can afford and desires as a lifestyle. And as the 76 million boomers, representing half the workforce, start to leave conventional jobs, they could create a worker shortage of unprecedented magnitude. Economists are predicting a buyer’s market for the Gen X and Yers, particularly those trained in technology, engineering, and the life sciences, along with opportunities for boomers and others to establish a consulting arrangement with their former bosses. They’ll work wherever they want.
Lots of factors are coming into play at once, spelling huge changes in the notion of how to define the workplace. For one, there’s the near ubiquity across the United States of Inter-net/Web use for communication, which is freeing employees to work anywhere they want if they choose to run a business. Publications like Network World, and many others, are citing the rise in telecommuting, which allows employees to work on flexible schedules from the home or the office. Energy costs are reportedly driving this trend. Although the data is still sketchy in terms of actual millions of participants, officials at the Small Business Administration believe there’s a boom in home-based companies that generate upwards of $102 billion annually for the U.S. economy.
The exorbitant costs of healthcare and corporate pensions are apparently making American business leaders re-think traditional work styles, as well. In the fall of 2006, Fortune magazine quoted managers complaining that baby boomers were staying on the job way past traditional retirement age, clogging the works for Gen X and Yers. Add to this reports from NPR and other sources, and it appears that corporate America is finding it more cost-effective to move baby boomers into consultant roles, cutting benefits and saving on energy, healthcare, and pension costs.
These trends match boomers’ desires to keep working, but autonomously, and spell a huge upsurge in the numbers of virtual companies created in the next decade. Sources as diverse as Newsweek’s “Boomer Files” and surveys published in Boston-based Commonwealth magazine have reported that as many as 70 percent of boomers want to build their own enterprises, according to a recent Yahoo poll. And the 2005 MassINC survey (“A Generation in Transition: A Survey of Bay State Boomers”) reported that almost two-thirds of adults aged 40 to 58 expect to keep working after they reach the traditional retirement age of 65, but only 6% plan to keep a full-time work schedule.
They’ll work wherever they want, and often that’s from home.
Welcome to the world of the virtual business owner, a trend on the rise that this author has been actively tracking for the last five years. Virtual businesses can be large or very small in terms of revenue, but what they have in common is a stripped-down operating style that, thanks to advanced technology, allows one or two principals to drive everything from manufacturing to design work in a small-office setting. Backup support comes from alliance partners, subcontractors, and sometimes employees, many of whom are scattered across the globe, working in whatever setting they prefer.
Although these are business owners, they depend on project work to make up their revenue flow. Many are not looking for job placement. Some are lifestyle entrepreneurs seeking to create an income commensurate to what they would earn on the job. Others are “Bill Gates” entrepreneurs seeking to create large-scale companies. This branch of the virtual workforce will be seeking employees, but people who want to work virtually.
Various industries are already responding to the rise of the virtual workplace. For example, the home building industry is reporting rising demand for separate office space in new homes. “The workforce is already changing. The question is how fast. Ten years from now, the workplace will look very different,” says Stephen Melman, director of economic services for the National Association of Home Builders, based in Washington, D.C.
Quoting the last NAHB American Housing survey, conducted in 2005, Melman cites a “significant increase” in the number of rooms used for business-only purposes, up from 8.1 million in 2001 to 9.4 million in 2005. Adding all the rooms in a home used at least partially for business, then the numbers jump to 14.5 million as of 2005.
The last NAHB Consumer Preference Survey, conducted in 2004, reported that 46% of respondents considered a home office desirable and 19% said a home office was a “must-have” item, according to Melman. That’s 65% of respondents who would put a home office on a preference list when either buying or building a home.
Melman says the NAHB’s last survey showed just over 5 million people running home-based offices. His members are starting to respond by building new homes with distinct offices, but he has no numbers at this time.
The Challenge for Recruiters
What this perfect storm of trends means for recruiters, not to mention their corporate America clients, is still uncertain. What is known is that developed countries like the United States stand on the cusp of enormous change.
Demographers and authors such as Joel Kotkin believe that the virtual-company population will grow with the baby boomer retirement, but Kotkin points out that “baby boomers are not likely to retire like previous generations. They may be consultants or part-time employees, but they’re seeking an environment where their friends and business contacts are. They’re likely to move to either a small town like Lincoln, Nebraska, or a suburban village environment like Bethesda, Maryland, or Fullerton, California – wherever it’s walkable and funky.”
Michael Teitz, professor emeritus at the University of California at Berkeley on city and regional planning, agrees with Kotkin. He says the lines between endogenous (growth from within) and exogenous (attracting from without) growth are blurring as baby boomers redefine the notion of retirement and, in doing so, “change the economic base of communities all over the place. We’re seeing whole chunks of the regions and subregions becoming lifestyle regions.” Teitz knows a colleague, for example, who has “retired” to a solar-powered straw-bale house in Grass Valley, California, where he is “deeply involved in new energy technology development.”
A longtime backer of endogenous growth, Teitz says it’s easy to dismiss the virtual-company trend “as pretty small and not amounting to much, but when you look at the vanishing of the conventional manufacturing economy and what that implies for site selectors, then [attraction] isn’t a very promising strategy. There will continue to be a lot of onshore new manufacturing of one kind or another, but the world has changed. It’s just not the way it was.”
“This is an exploding market-place filled with opportunities, and recruiters aren’t geared mentally, emotionally, tactically, and strategically to mine this marketplace. It first requires a mind shift and then a technology shift,” says Bill Vick, CEO of Vick and Associates, Plano, Texas. Vick has worked out of his back bedroom for 20 years and built four successful companies virtually. “Once you have the mindset of reaching out and touching someone electronically, it doesn’t matter where there is at. The bridge that’s happening is that companies are getting past the hesitation to hire a virtual worker and a lot of people are learning they don’t have to sit in an office and work,” he says.
Vick believes that, right now, 10% of American corporations are grasping this trend, another 10% never will, and 80% are “starting to wake up and realize we’re in a true global economy. There are still a lot of old-school managers who feel that they need to touch and see employees and employees who need the structure, but the electronic walls are becoming broader, bigger, and better.”
He says corporate America hasn’t entirely awakened to the fact that it’s facing a talent shortage as the boomers move from traditional work. But the question is how to capitalize on the boomer brains and willing-ness to work flexibly, and for some boomers, there will be a struggle to learn to work in a new fashion.
Vick says the sectors that are most attuned to the world of virtual work – and where this can be conducted most successfully – are anything “involving information and communication. Think sales, marketing/PR, and IT. The things that are more touchy/feely (that require more hands-on attention) are more difficult to outsource,” he explains.
Although there are many people who still crave face-to-face encounters, he says, there are plenty of recruiters waking up to the potential of the virtual economy, hence the success of Linked UP, elance, and other virtual recruiting networks. Vick envisions many recruiters leaving large recruiting firms and setting up shop for themselves, or offering the human touch to the large online networks, which he says “could be an evolving field.”
Already, the segment of the recruiting/placement market devoted to permanent placement “is shrinking rapidly because clients recognize they can do a lot of things themselves through online networks like LinkedIn and Jobster,” says Vick. “Companies are recognizing that many recruiters fall into sourcing and are turning to them to simply generate candidates rather than manage the process.” He says the online networks, or job boards, now represent about 15% of the market.
So far, the upper tier of the market – executive search, where knowledge of a candidate must be thoroughly researched – isn’t being affected by this rise of the virtual worker, says Vick, who finds this tier “viable and dynamic, growing and retaining itself.”
He predicts that “lots of talented people will exit the recruiting field and become virtual recruiters. And we’ll see corporations hiring the virtual recruiters in droves, which will compress the middle market.” It stands to reason, Vick says, that corporations will move more to outsourcers than full-service businesses once they see the cost benefits. It may be too soon to know how the rise of the virtual workplace – and the predicted boost from baby boomer retirements – will affect the entire recruiting/staffing industry, where 70% of all hires are still accomplished by word of mouth and referencing, Vick says. And boomers aren’t as attuned to the online world as the 20-something set.
One approach that has worked in pilot involves a small network named Hidden-Tech that this author created in Western Massachusetts to serve the virtual workplace. It combines online networking with live meetings to provide a variety of ways for people to both seek help and post project needs. There’s something for those who would rather seek work in person and those who prefer to work the angles from a computer.
For those recruiters seeking territories to maximize their outreach, there are guideposts to this new world of work in the making. Think affordable housing, abundant technology jobs, and employers that are flexible about hiring either teleworkers or consultants operating their own virtual companies, and you will get an inkling of how the notion of the virtual workplace is affecting not only how people work but also where.
Amy Zuckerman is an award-winning author of several books, columnist, and consultant specializing in the mechanics of international trade, including electronic commerce, supply chain management, international standards, and global communication. Zuckerman maintains an international strategic market research and information packaging business in Amherst, Massachusetts – A-Z International Associates. She develops events, programs, seminars, and classes that relate to business topics. See www.hidden-tech.net and look at programs. Also see www.a-zinternational.com (Marketing section) for listings of national programs she has developed or participated in. She is the first-ever recipient of the American National Standards Institute (ANSI) President’s Award for Journalism (2001); winner of the 2004 Dakin Award in the Professional Category from the Amherst Area Chamber of Commerce; and the SBA’s 2005 Home-Based Business Champion for Massachusetts/New England.