Welcome back. I’m Carolyn McGourty Supple, a former journalist and business consultant who now heads the Center for Ethical Leadership in Media. I write a monthly column focusing on evidence-based ways to build a better workplace.

The pandemic and labor shortage only hastened this change as employees seek more work-life balance through remote and flexible options.

About one-third of employed respondents now identify as being independent workers, including a quarter of whom are white-collar workers, according to a McKinsey & Co. study on the changing American workforce published in August. What’s more, so-called quiet quitting, where workers do the bare minimum required of their position, and remote arrangements driven by the pandemic are further upending the workplace.

This shift in power from employers to employees has implications for a postpandemic world, said Kweilin Ellingrud, a senior partner at the consulting firm and a director of the McKinsey Global Institute. “A desire for flexibility is driving some of this trend. A lot of workers are quitting and for the first time, about a third of them have no other offer in hand. We have not seen that historically.”

In short, workers have gained more leverage than they have had in years to command a say in their professional trajectory while balancing their personal lives, and the successful companies of tomorrow will embrace the need for autonomy by workers.

Companies are already moving to adjust. The McKinsey researchers found that during the pandemic, many permanent jobs became more flexible, which reduced independent work’s monopoly on flexibility. Indeed, companies appear to be more open to independent workers amid the uncertain economy and labor shortages. A survey conducted by gig-employment company Fiverr International Ltd. and research firm Censuswide found that 78% of business leaders are more likely to hire freelancers and contingent staff over full-time employees to fill gaps in their labor force.

But it doesn’t need to be a zero-sum game for companies. Gig and independent workers can help provide expertise and bolster labor at both small and large companies that may not have the budget or need for full-time employees, through seasonal or project-based work, for example. It also allows them to access skill sets not needed on a full-time basis. 

Researchers report gig and independent workers are more likely to express more hope for their futures. Staff employees, in contrast, report being unhappy despite having more leverage to get better pay and benefits than they have had in decades amid the labor shortage and broad-based inflation. In a 2022 Gallup poll, 50% of American workers said they are unengaged at work.

For gig and independent workers, these arrangements provide flexibility, variety and, in some cases, more control over their schedule. “From a brain-science standpoint, we as humans always crave a sense of control over our own destiny,” said Christy Pruitt-Haynes, head of talent and performance practice at the NeuroLeadership Institute, a business and human capital consultancy. “We are seeing a greater desire for employees to manage their own future.”

Author, historian and Columbia University professor Nicholas Lemann says that with the changing face of American work, it’s clear there is a dramatic shift happening with real consequences for political, social and economic life. “One of the fundamental questions is, to what extent do people want to be freelancers and self-reliant and to what extent do they not?” said Mr. Lemann. “My guess is that the average person would rather have a job with a salary than be a freelancer with all the freedom that implies.”

These trends leave human-resources leaders and those designing workplace policies at a strategic inflection point: How can you give more autonomy and flexibility to in-house workers to keep them happy and engaged, while instilling in them a sense of control over their future?

Ms. Pruitt-Haynes says a few techniques, based on brain-science research, can be helpful:

• Highlight employee-led decision points. Can workers decide when they work in the office or at home? Can they decide which and what type of projects they want to work on? Can employees influence what their development activities look like? Mandates, in contrast, can activate the threat areas of the brain and break down trust and engagement, Ms. Pruitt-Haynes says.
• Focus on outcomes more than process. Encourage leaders and managers to zero in on what employees produce, as opposed to how they produce it. Articulate the goal, and then provide latitude to let employees achieve that in ways that work best for them. Provide resources and be available for information. Don’t micromanage.
• Explain the “why.” In certain scenarios, such as safety or oversight, mandates are necessary and direct feedback on the process is needed. Effective communication, then, becomes critical to win trust, by providing the rationale and cause and effects of a decision. Investing in workplace relationships, especially with subordinates or those from different backgrounds, can help build trust and ensure the information is received with good intent. 

Ms. Pruitt-Haynes said her company puts these principles into practice by allowing people to work the hours that fit best for them as long as they are available during selected hours during the day for meetings. The company also provides a monthly stipend for co-working spaces and offers full benefits to part-time employees to keep them engaged.

“People don't like the idea of being told they aren’t capable of making the best decision for themselves. And when that happens, even if they agree with the decision, they will likely be repelled from the process,” Ms. Pruitt-Haynes said.

Here's last week's column on the advantages of traditional organizational structures. 

Researchers Rebecca Johannsen and Paul Zak designed a neuroscience experiment to determine if increasing workers’ autonomy has an effect on their performances. They noted in their paper, “Autonomy Raises Productivity: An Experiment Measuring Neurophysiology,” published in May 2020, that they were trying to see if empowering workers with autonomy would result in these employees putting in more effort to execute projects. “This will increase productivity, while at the same time resulting in improved mood,” they wrote.

They found that perceived autonomy can affect both effort and productivity. They suggest that “workplaces that seek to apply such an intervention should increase actual rather than perceived autonomy in order to achieve more than transitory productivity gains.”

They also found that pay and earnings didn’t correlate with performance or mood, suggesting that autonomy, rather than pay, motivated the increase in productivity, and positive mood.

Access the full report.

A persistent economic puzzle is why labor is still so tight amid slowing growth, high inflation and growing fears of recession.

Gross domestic product growth slipped into negative territory in the first half of the year. Borrowing costs have risen steeply as the Federal Reserve boosts interest rates in an attempt to reduce inflation. Even so, monthly payrolls have grown an average of 438,000 from January through August, nearly three times their 2019 prepandemic pace.

Many employers say they continue to struggle with large staffing shortages that built up during the pandemic and are reluctant to cut head count. In many cases, they are still hiring.

“I don’t think we’ll see mass layoffs,” said James Knightley, chief international economist at ING. “We are going to see companies prefer to hoard their labor rather than do a quick fire and then rehire because the challenges of hiring right now are incredibly intense.”

In Eau Claire, Wis., Jim Fey normally buys five to eight new buses each year for his privately owned school bus service. He doesn’t plan to purchase any in 2023 because high inflation and interest rates have put the price of a bus out of reach. He worries about a recession. “There’s going to be a lot of hurt,” he said.

Yet Mr. Fey is looking to add about 15 more school bus drivers to his staff of roughly 185. He and some of his office employees have had to drive routes since the start of this school year due to a shortage. “I can’t have my office staff out driving every single day,” he said.

• Small Businesses Get Creative as They Still Struggle With Hiring
• Police Departments Are Dangling Bonuses to Attract New Cops

• The Great Resignation Is Spawning a New Workforce Trend (TechRepublic)
• Workers Don’t Feel Like a 9-to-5 Job Is a Safe Bet Anymore (Harvard Business Review)
• Nontraditional Workers Exhibit High Levels of Financial Literacy (The Pew Charitable Trusts)
• Uber Drivers and McDonald’s Franchise Owners Have a Common Enemy (Slate)                                  
• Norman Rockwell’s Economy Is Never Coming Back (The Washington Post)

Chitra Vemuri curated and edited this newsletter.

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