Khali Henderson's Blog  

Group Editor, Telecom Division and Editor in Chief, PHONE+
khenderson@vpico.com

From diapers to prepaid phones, we Americans love disposables. It wouldn’t surprise me if we invented the concept. Here today, gone tomorrow. Our landfills bear the filthy evidence of our love affair. Now, we seem to be extending this approach beyond consumables to the workforce. That’s the proclamation anyway of a recent Business Week story about the permanent temporary staff. There’s an oxymoron. Actually, the academicians quoted in the article are calling it something else: “the just-in-time labor force.”

The variable workforce, as it’s more commonly known, is the heart of outsourcing. That’s nothing new. In our own industry, there are very successful companies that provide such staffing for installation and maintenance services and for telemarketing.

What’s different about the so-called “era of the disposable workforce” is that it’s permeating businesses all the way up to the C-Level, according to Business Week. Rather than just outsourcing overflow customer service to a call center, as one example, companies are using independent contractors, temporaries, freelancers and part-timers at all levels of the company.

The advantages to businesses using this approach are obvious. They can grow or trim workforces more easily. And, the staff they have does not require as much overhead, e.g. insurance, payroll taxes, profit sharing, etc. And, with independent contractors, labor laws even prevent employers from providing equipment and office space. Ironically, this was meant (as I understand it) as a means of preventing employers from using the contractor status to avoid providing benefits to workers who are actually employees except in name.

None of these employment derivatives are bad in and of themselves, but their increasing use is cementing what we’ve all come to believe: Job security is a thing of the past. I suspect that’s why many of you already made the decision to abandon corporate America to pursue the dream of becoming your own boss, and presumably the master of your own paycheck.

So, what does this staffing shift mean for the channel? A few things, I think.

It seems logical that as companies look for ways to cut overhead by embracing the variable workforce, they would naturally also turn to independent channel partners who work on a pay-for-performance basis. I think this is true to some extent, particularly as they seek to penetrate new markets or high-cost markets where a direct employee may not make economic sense.

Also, culturally, the idea of having non-employees on the job may not have the stigma that it once did. And, perhaps the conflict between channels will lessen, particularly if the channel takes on a greater proportion of the work from downsized direct sales forces. Practically, a direct rep could continue doing essentially the same job as an independent agent. While in the early days this was by personal choice, the extensive layoffs by carriers have made it the default Plan B for a lot of telecom salespeople. While it may not have been an intended consequence, I suspect that’s A-OK with the carriers that have just unloaded significant fixed costs.

However, unlike the workers that make up the disposable workforce, the channel cannot be easily “turned off.” Sure, contracts can be cancelled, but the overhead – in this case commissions – continues on. This insulates partners somewhat from the downsides of this new era in the workforce, but it also makes them targets. As we saw in 2009, carriers who once embraced partners to build their customer bases became suddenly ungrateful when it came to writing increasingly bigger checks month after month, and they have canceled contracts and evergreen commission streams. They have found creative ways to justify these decisions with little worry of backlash (e.g. law suits) from the affected partners, who will just go away rather than risk losing more money in a messy court battle.

Before I get a bunch of hate mail, let me be clear: I am not saying every canceled contract was done so unethically or with ulterior motive. Many cancellations were probably long overdue – the result of leniency on the part of the carrier that cannot be tolerated in an “every cent counts” economy. However, the pervasiveness of the cuts both across carriers and within carriers seems to lend credence to the idea that carriers may be buying into the idea of the disposable workforce. In their efforts to cut costs, however, I have to wonder whether they have thrown out the proverbial baby with the bath water.

User Comments !

Your thoughtful comments are right on point. While it would be unfair to accuse all carriers of terminating commission payments without cause, legal or otherwise, there is also little doubt that many carriers have implemented indiscriminate terminations either without regard for cause or in the knowledge that cause does not exist. The cynical nature of some carrier conduct is apparent on the face of the termination letters they are sending, which frequently offer the right to return at a lower commission level but only following a comprehensive waiver of all claims for the commission stream that has already been terminated. Transparent, I think so. As you correctly note, it is also apparent that many carriers have chosen this path in the reasonable expectation that their agents will simply take it on the chin and not strike back. In effect, carriers expect that in most cases they will succeed in retaining commissions due to their agents and not to be held responsible for the damages they have caused merely by the unwillingness or the inability of their agents to respond effectively. While sad and cynical, history would suggest that this tactic is not economically irrational as, in fact, most agents do simply stand quiet and take it on the chin (often because they believe that they do not have the economic resources or the access to skilled counsel required to fight back). Is this time different? Maybe. For the first time, some agents are beginning to band together to defend themselves and to seek the recovery of what they are owed and the damages inflicted. If this apparent trend persists, perhaps it will help to dispel the notion that agents are feckless drones who will continue to provide value even in the face of carrier misconduct and never fight back. A little push back by the channel now could provide just the discipline that is required discourage the worst of the behavior in the future and to make the channel and its many hard working and honorable members a little less "disposable." One can only hope!

Posted by: Neil S. Ende | February 03 2010 07:05:49

Welcome to the world of global competition! I work mostly in systems integration, and it's been my experience that partnering with a larger supplier means losing a long-term customer. Larger supplies are doing everything they can to capture market-share, including taking over smaller suppliers' customers with one-time payouts (commissions on shared sales). Make sure your contracts make it clear that your customers are yours forever, and the larger supplier owes you a commission for the length of their relationship with your customer. Otherwise, your "partner" will assume that they have purchased your customer and ship any followon work to India and China to cut costs.

Posted by: Jeff Griffith | February 03 2010 10:53:03