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The world as we know it officially ended on Dec. 24, 1969. That is the date when Curt Flood, an outfielder for the St. Louis Cardinals, sued to keep from being traded to the Philadelphia Phillies. Although the U.S. Supreme Court ultimately declared in 1972 that Flood lost his suit, others took up his cause. In 1974, pitcher Jim "Catfish" Hunter won the right to void his contract with the Oakland A’s and sell his services to the highest bidder. When he landed a multimillion-dollar contract with the New York Yankees, the age of free agency had arrived. For a long time, most of us just clucked our tongues at the idea that a lifetime .265 hitter could win a $5 million-a-year contract. (We would have been thoroughly outraged if we could just hit a major-league curveball.) Then, business executives came along and took the free-agency game to a whole new level. Forbes magazine recently did a cover story on executives who moved to new jobs and collected more than $100 million in stock as signing bonuses. There were a lot of these executives. All well and good for them, but what about the rest of us? How are we supposed to manage businesses at a time when even chief executives will jump at new opportunities and disappear overnight? Can we find new ways to generate loyalty throughout organizations and keep people at their assigned posts? Or should we just give up and move on to business models that don’t depend so much on having the same employees, day after day, year after year? For advice, Context turned to two experts: Randy Komisar, author of the recent book The Monk and the Riddle: The Education of a Silicon Valley Entrepreneur, has a background that illustrates free agency quite well. In what he calls that "strange place called Silicon Valley," Komisar has generally worked two to three years at any given job and has changed his responsibilities significantly every five to six years. His stints include executive positions at Apple Computer, Claris, and LucasArts Entertainment. Now, he acts as a virtual chief executive to help start-up companies get off the ground. John J. Clancy, professor of engineering and technology and the associate director of American Culture Studies at Washington University in St. Louis, has studied the idea of loyalty extensively. He wrote a book on the subject, called The Old Dispensation: Loyalty in Business. Clancy began thinking about employee loyalty while an executive at McDonnell Douglas, where he worked for more than 25 years before leaving to become president and chief executive of a software company. The two began with the question: Is loyalty dead in the age of free agency?
RANDY KOMISAR: There are still very important loyalties, based largely on relationships with people. These loyalties figured prominently in my own decisions as to where I worked and with whom. Even though my relationships with organizations have tended to be fairly short-lived, by and large I’m still working with the same people I was working with 10 and 15 years ago. But it’s true that loyalty to organizations is becoming less common for two reasons. One, we’re seeing the start-up mentality spreading out of Silicon Valley and intriguing a lot of people in the economy as a whole. This means people are more willing to try new things. Two, the tremendous downsizing in the ’80s and early ’90s caused even stalwarts to question the intelligence of relying on the organization long term for their careers. Everybody now has to be more independent and watch out for their own opportunities and welfare. I question whether the loss of loyalty, as most people define it, is really a problem. Loyalty comes with its own set of problems because it suggests that people have a sense of reliance, which can become a crutch that props up the status quo. Loyal people may not be watchful enough and may not adapt quickly enough to changing circumstances. I wonder whether retention should even be a corporate objective in the New Economy. Clearly, the relationship between an organization and employees needs a certain amount of investment on both sides, and it needs time to bring returns. But, if companies worry too much about retention, they end up retaining the wrong people. JOHN J. CLANCY: What you’re saying is consistent with my research, which is about trying to learn what happened to corporate loyalty. Where did it come from? Why did it go away? When did it go away? Loyalty originated in the 1880s, with the development of large corporations in this country. It started to disappear in the late ’60s and early ’70s, especially among younger people, along with a whole host of other social traits. At that time, people began generally losing their trust in others and their confidence in institutions and their leaders, as part of a profound change in American values. By now, the unthinking attachment that people once had to organizations—whether a university or a hospital or a business—is largely gone. Now, what do we do? If you look at the psychology of loyalty—which I did—you see that it’s instinctive. It’s a survival technique that dates back to our prehuman ancestors. It’s a profound psychological need. You can’t dispense with it. At one point, we projected loyalty onto organizations. Now, we’re projecting it onto other people. There can be other loyalties, too. Software developers are loyal to their product. They are willing to sacrifice for it. They feel fiercely proud of it. They reject outsiders’ manipulation of it, criticism of it, anything—just like an old-time loyal employee or loyal soldier. I think software developers should be a clue to management. Through organizational design and other techniques, management has to find ways to build on the natural tendency toward loyalty. Creating new loyalties is the best way to approach the loss of corporate loyalty—you’re not going to be able to make people loyal to good, old IBM or good, old whatever. What concerns me is whether this shift in loyalty creates an unstable situation for business and for society. De Tocqueville warned, in the 1830s, of Americans’ individualistic tendencies. Yet, when he was writing, people were still tied together by church, family, and voluntary associations. Those ties are now gone or going. People have become much more individualistic. How are we going to maintain a stable society when everyone is simply interested in No. 1? What we’re counting on is very similar to Adam Smith’s "invisible hand." You’ll recall that the way the invisible hand works is that everyone does precisely what is in his or her own interests and somehow, magically, you have a booming economy. In terms of corporate loyalty, I think people are saying, "Let’s not worry about any of this stuff. Let’s not care about the organization. Let’s just look out for our own careers and, by God, something wonderful will happen." Maybe. The other worry I have about free agency concerns the people who are apt to be left behind. Randy, like you, I’m a smart, dedicated guy. We’ll do well. The unfortunate fact is that the great majority of people are not like us. What happens to people of average intelligence who don’t have the gift of prodigious energy? KOMISAR: We’re deceiving ourselves if we think we’re all lone cowboys. I think of a business as a creative institution, not a financial one, because it is an opportunity to bring resources together to accomplish more than individuals could separately. There are many models for the New Economy that build on loose affiliations of people. One that gets bandied about a lot is an "e-lance" setup similar to that of an independent film company. Everybody comes together, makes a film, and then goes back off and reconstitutes themselves in different ways to make the next film. That’s nice for the film industry, but I don’t think it necessarily works that well for many other, larger projects, which require more constant dedication and longer time frames. The start-up model, where I focus my energy now, works better. It rides off the idea that there are tons of great ideas drifting around that need to be tested before we build them into businesses and institutions. In the early start-up stage, it is very common for us to bring together a group of regular employees, who probably have come out of jobs in the start-up world. Experienced people like me provide guidance but may be associated with more than one venture at a time, because no one idea has proved to be worthy of taking all our time yet. When you finally find there’s a reason to finance an idea at a higher level, then you begin to bring another class of employees—more senior management and more production workers. Once you’ve proved that there is an opportunity to build a steady business, you raise the ante again, raise more money, and bring in even more qualified leadership to expand the company into what, you hope, will be an institution. Firms in Silicon Valley are also experimenting with the hybrid model, which brings together independent but highly experienced managers and leaders on a short-term basis to prove a business concept and lay the foundation for the building of the company. Hiring them for the long term at this stage would be difficult, given the level of risk in the deal. Like the independent film model, they are assembled for a project. After proof of concept, some of these professionals move on, while others commit for the next phase of building the business. Additional, full-time, regular talent is brought on to complement the core team. This is like the start-up model, but the difference is that many of the original leaders have peeled off to prove the next concept rather than commit for the long term. The initial set of leaders are often considered "acting" in their roles. I have carried my role to an extreme, providing leadership for a handful of fledgling companies as virtual CEO. I agree that there is a need, in all types of corporations, for mechanisms that increase attachment. One thing that works in Silicon Valley is that we spend a lot of time identifying the leaders in our organizations—in each of the specific groups—and making sure that we specifically and proactively address their needs, in spades. By keeping these leaders attached to the organization, you keep the people who naturally associate with them on their projects attached as well. You still don’t wind up having people envisioning lifetime job security, but at least you can have stability and predictability on projects. CLANCY: Outside Silicon Valley, or in larger companies, there are things you can do to help people feel attached, to give them the feeling that they’ve got a stake in the business. I’ve worked in big organizations that try to act like smaller ones by limiting the sizes of units. Hewlett-Packard is a good example. The basic organization that you are relating to when you work there is no bigger than 1,000 people or so, and work groups are small. Those are good ideas that seem to have stood the test of time. KOMISAR: I’ve been involved in numerous situations where large organizations tried spinouts. Claris is one that I did at Apple. I actually went to run LucasArts Entertainment with the intention of spinning out the product side of that business. In both cases, the spinout idea didn’t work all that well. The strategic interests of the parent corporation—at least in both those circumstances—changed radically when the spinout ventures succeeded. The ventures suddenly became much more important to the mother ship. Consequently, the spinouts were never allowed to separate completely or were rolled back into the parent organization. You could argue that from the mother ship’s standpoint, the ventures achieved their goals. Both of them built great value quickly. But employees walked away feeling used. In fact, I was offered a chance to do a third spinout and was finally smart enough not to do it. You have to pay extra attention to people’s feelings these days because of the market we’re in. We don’t have a ready supply of the talent we need for staffing new ideas and new companies. I see it in the Valley now, where there’s a sense of filling out the roster rather than hiring great people. A company will just say to a recruiter, "I need a vice president of marketing. Get me one." Because of the dearth of great talent, people with a modicum of success and a reasonable track record are able to negotiate unbelievable terms. Just look at the chief-executive business. When I started in Silicon Valley, a CEO of a start-up company would be awarded between 1% and 3% of the stock. Right now, it is not uncommon for a strong CEO candidate with a good background to be able to get as much as 15% at the same stage, with the same sort of backers. CLANCY: You’re absolutely right. Bargaining power has shifted. But what does that say about where we’re going? We’re in a uniquely tight labor market. Are we building in practices now that will be difficult to sustain when conditions change? What happens when there is a glut of people on the market? Do we rapidly change back to an older time when people were chasing jobs rather than the other way around? I don’t know. KOMISAR: I worry, too. The expectations and experiences of many young people are based on this incredible economy. They’re in control. They move from job to job at the end of their vesting cycles. Their CEOs do fundamentally the same thing. That sort of chaos at the top and the powerful negotiating position of even the rank and file—particularly young people who don’t know any different—argues to me that we’re not going to see the dynamics switch back easily to what they were before. There’s going to have to be a crisis that restores the traditional order to the labor market, if that order ever comes back at all. There is a ray of hope out there. I don’t know how real it is, but I see the statistics that suggest that what a lot of the younger work force is looking for as they look at new jobs is flexibility in their work style and their hours. They value an opportunity to balance their lives against their work. If that’s truly a trend, and I like to believe that it is even though I don’t see a lot of it here in the Valley, it could be a control. People may begin to say, "Yes, I do have this power to negotiate for better terms but I’m going to start to look at qualitative terms, not just quantitative ones." If you ever want to see loyalty spring back in people, watch an organization go out of its way to take care of crisis in a person’s life. When somebody’s child is deathly ill and they’re given months off with pay and given help in dealing with child care or health care, my goodness, you’ve got a loyal employee. You have to work hard to disenchant that person. I don’t want to be Pollyannish about this, but maybe there’s a governor on this decline in loyalty. Maybe money will begin to trail off in ultimate importance, and things like flexibility, lifestyle, work style will become more important. Maybe that change would begin to keep people more solidly placed in organizations.
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