The rise of the knowledge entrepreneur.

The traditional "job" will fade in the U.S. economy. Knowledge entrepreneurs will replace service and factory workers in the more-flexible workplace of tomorrow.

A "knowledge economy" will likely develop in the United States during the decade of 2000-2010 as automation reduces the need

Blue-collar workers should dwindle from 20% of the U.S. work force in 1995 to 10% or less within a decade or two. At the same time, the automation of office tasks will probably reduce the number of nonprofessional white-collar workers from about 40% at present to 20%-30%.

The remaining 60%-70% or so of the work force may then be composed of knowledge workers: skilled manufacturing teams, information system designers, managers, professionals, educators, scientists, and the like. Meanwhile, productivity, living standards, and the quality of life will soar to unprecedented levels.

American business invested $1 trillion in office automation during the 1980s. Initially, there was little gain because technology was simply laid over outmoded organizational structures. But the payoff came finally in the 1990s as managers learned how to redesign organizations.

Now the focus is on breaking down large organizations into small, self-managed units that provide some well-defined service. Intelligent information systems can integrate all operations into a working whole, with local area networks (LANs) or groupware systems assisting all phases of work and also allowing people to telework from any location.

Each unit of a business can be managed by a self-directed team of knowledge workers that is given almost total control--from product design to manufacturing, sales, service, and disposal. Computerization permits so much flexibility that products can be customized to suit individual customer needs; indeed, the product cycle begins when a customer specifies exactly what sort of product is wanted.

Management holds teams accountable by allocating budgets, pay, bonuses, and other resources in proportion to performance but allows each team to run its affairs as it thinks best. Typically, a team chooses its own members and leaders, selects its operating systems and tools, and works with suppliers and other units, usually doing a better job than formally appointed supervisors.

The Traditional "Job" Disappears

Today's organizations are moving away from the old concept of "pay-for-position," under which workers were paid for fulfilling specified duties such as arriving at work punctually and being cooperative with others. This system maintained a sense of orderliness but had little to do with productivity. Now, "pay-for-position" is yielding to "pay-for-performance"--a more businesslike arrangement in which employees are paid for what they produce.

"Performance pay is growing like wildfire," one executive comments. Already, roughly three-quarters of American workplaces use incentive rates, merit bonuses, profit sharing, and other types of variable-pay plans.

These trends appear to be leading toward a new employment contract that links employees' rights with their responsibilities. For decades, theorists have advocated "participative management," but we now see that as unworkable unless workers' rights are linked to responsibilities: If employees enjoy freedom in their work, good pay, and other rights without being accountable for results, the organization may not survive. Conversely, if the employees bear the burden of responsibilities without commensurate powers and benefits, they will be neither willing nor able to carry out their duties.

Under the new employment contract, organizations are assured of performance; workers have an opportunity to earn more and to control their work situations; and the system lends itself to complexity and change.

Pay systems may grow even more diverse in the future. Some people like incentive plans, while others prefer salaries. Some plans now reward people on an individual basis; others focus on teams, while still others are companywide. Many organizations use all three levels of incentives.

Whatever the pay system and the organization, the central idea is to ensure a sense of equity between the contributions each individual makes and the rewards he or she receives. Since equity is subjective, the optimal pay system can only be determined by the people involved. However, a wide variety of systems can be perfectly workable.

Teleworking

As information systems become user-friendly and inexpensive, they offer convenient ways to substitute tele-work for face-to-face meetings. Rather than permanent employees working 9 to 5 in the same building, electronically mediated work will increasingly transcend the previous restrictions of time and place. And with accountability established under the new employment contract, teams can use infotech capabilities to work wherever and whenever they think best.

Working at home thus becomes a feasible option, and it has already become trendy. Pick up any magazine and you will see photos of lavish home offices equipped with the latest information systems, beckoning the high-pressured executive to unwind in a tranquil setting and release the creative intellectual within.

There are drawbacks, of course, to working at home. "You can't leave because it's always there," says one saleswoman. Employees working at home often worry that they are not noticed being productive, and supervisors get uneasy not being able to supervise. A manager at Bell Atlantic says some telecommuters are "afraid to go to the bathroom for fear of missing a phone call from the office."

Information systems will not replace direct interaction with other people but will become a viable alternative to the real thing. As information technology becomes increasingly convenient, we will use it to augment our face-to-face contacts.

A 1987 survey found that 56% of workers would continue to go to the office every day even if given the choice of working at home electronically. At the same time, 36% would split their time between home and office, and only 7% would work at home exclusively. Recent studies that I have conducted show similar results but with a somewhat stronger leaning toward combining office and home work.

Compaq Computer automated its routine saleswork in 1993 by offering clients toll-free information lines for inquiries, and then shifted all its salespeople into home offices to make them more effective. Each salesperson was provided state-of-the-art information systems, such as fax, copier, high-powered PC notebook, and cellular phone, as well as other needed support. Revenues doubled while the sales force dropped by one-third. IBM is making similar changes. Today, so many managers are routinely connected to their offices by portable information technology while traveling that a new term has developed: the "perpetual motion executive."

A happy compromise between working at the office and working at home is the telework center, a satellite office containing information equipment that enables employees to work in their neighborhoods. The U.S. government established such centers around the Washington, D.C., area, and Pacific Bell has been operating centers in California for years. Similar centers are being tested in European countries and Japan.

Contingent Work

A trend related to telework is the surge of people into the contingent work force of temporaries and part-time employees. The contingent work force comprised one-third of American workers in 1994 and is growing so rapidly it should include roughly half by the year 2000.

This trend marks a major shift to an independent, more mature mode of self-employment. Contingent workers are becoming true knowledge entrepreneurs who take charge of their careers by running their own to company as contractors. About 20% of all professionals now work as temps, including lawyers, doctors, and even executives.

Many individuals like the freedom and excitement of being on their own, while companies like working with small suppliers with minimal costs and bureaucracy. AT&T buys goods and services from 100,000 small companies. Large companies increasingly troll through information-service listings to find small suppliers and consultants. A company representative, describing his experience finding specialized consultants over the Internet, says, "I can get 50 responses in a few minutes."

A useful way to grasp this upheaval in work is to see that employment has now spread out along a continuum. At one end is the traditional full-time job, while at the other end is the self-employed entrepreneur. The new employment contract lies at the middle of this continuum, offering a loose association with the employer but also the autonomy of the entrepreneur.

Sadly, a large class of unskilled workers may be unable to compete in the demanding new world of knowledge work. Even with good educations and remedial social programs, many people are likely to become chronically marginalized, leading to unemployment, crime, and other disorders. In The Bell Curve, his controversial book on intelligence, Charles Murray warns that a "cognitive elite" may rule in the future, and something approaching a caste system will develop.

The threat is real but not inevitable, because our growing power to spread knowledge should allow anyone to be educated effectively. Human nature is far more malleable than we commonly think, and sophisticated information systems can support people in doing tasks that would otherwise be beyond their abilities.

Working with Flexibility

Future organizations will need an exceptional degree of flexibility. Self-managed work teams will be essential to create interchangeable modules that can be added to meet a rush of demand for a product or service, quickly dropped during a slack period, or radically restructured to obtain a vastly different mix of skills.

Employees also will increasingly need flexibility to cope with the hectic nature of modern life. Now that the two-career family is the norm, both men and women must choose their time and place of work in order to balance the demands of job, family, education, and who knows what else. Flexibility will also be indispensable in handling the unique needs of old people, young people, minorities, the handicapped, and countless other groups of workers.

Most of the "indispensable" trappings of the traditional job may disappear. Annual reviews, supervisors, step grades, training programs, and so on are all declining in use. Why should anyone want to engage in this ancillary busywork when the point is to get one's task done effectively?

The bottom line is this: The Information Revolution is transforming organizations into a web of small, automated systems, managed in real time by changing assemblies of self-employed teams. This historic transition promises to eliminate the drudgery long associated with work, thereby freeing people for the more sophisticated tasks that now form the principal challenges facing a knowledge-based economy. For most people, the prospects for work in the future look both more challenging and more exciting.

RELATED ARTICLE: Work 2000: A Day in the Work Life of Vera Pace

Vera is Asian Representative of Biotronics, Inc. She awakens by the persistent beep of her personal assistant, Vera-2, lying on the night table. She asks who it is and hears Azmi Ibrahim's undulating voice announcing that he has a serious problem at the bio-plant in Sarawak.

"The Malay Union of Pipefitters has struck the factory, and nothing is getting done," he wails. "They are offended at being forced to work on a Moslem holiday."

She asks Azmi to arrange a meeting with the union leaders at 10:00 a.m. over the hotel's video-conferencing system, and at 10 a.m. promptly, Azmi is patched through while Vera sits at the desk in her room at the Hong Kong Hilton.

"Good morning, Ms. Pace," he intones formally. Looking up at the wall monitor, Vera attributes his unusually diplomatic mood to the three union leaders seated with him at the Biotronics plant in Sarawak, Malaysia. "Please allow me to introduce Mr. Seri Anwar, chief of the Malay Pipefitters Union, and his associates," he says, bowing slightly.

Azmi speaks good English, but the three union leaders rely on the automatic system to translate between English and Malay. "Blessed be Allah," they say when greeting Vera, who returns the salutation in English.

"Mr. Anwar," Vera continues, "please explain the cause of your unhappiness and I will do what I can." After an hour of discussion, it is agreed to release the work force for the three-day holiday with half pay and to jointly plan a schedule that would avoid Moslem traditions in the future. Vera and the union chief then sign the electronic agreement on the screen using pen entry systems at both ends of the video conference. After the goodbyes are automatically translated from English to Malay and from Malay back to English, the screen dims.

Vera calls her New York office to tell her team about the incident. Her colleagues are out, so she tells her assistant, Vera-2, to locate them and to transmit a brief report of the union agreement culled from the video conference the machine has been monitoring. She then calls her youngsters in Portland to make sure they are using their new IBM Personal Tutor to go over the lessons assigned by their teacher. Sure enough, they have been goofing off in Virtual Reality.

RELATED ARTICLE: Nurses Replace Clerks

Travelers Insurance has automated two-thirds of its office work, so the bulk of employees are no longer clerks but professional nurses who supervise accounts.

They use medical databases and expert systems to determine whether a second or third opinion is needed in any given case, question costs or procedures that appear unreasonable, and coordinate between clients and medical staff. Ultimately, the company expects to have 2,000 nurses working in this capacity.

William E. Halal is professor of management, Department of Management Science, George Washington University, Monroe Hall, Washington, D.C. 20052. Telephone 202/994-7375; fax 202/994-6382. His article draws on his book The New Management: Democracy and Enterprise Are Transforming Organizations (Berrett-Koehler, 1996).

His last article for THE FUTURIST was "Telelearning: The Multimedia Revolution in Education" (co-written by Jay Liebowitz), which appeared in the November-December 1994 issue.