Are Employees Your Organization’s Greatest Asset or Just a Necessary Evil?
Ever since I was introduced to the writings of Peter Senge and his ground-breaking book, The Fifth Discipline, I’ve tried to apply a systems perspective to my interpretation and analysis of business, economic and social trends. So it’s from that point of view that events in the U.S. economy concern me so much and lead me to the conclusion that our political and business leaders are losing sight of a fundamental pillar of this country’s storied economic success of past generations. What’s good for people is good for business. As the current economic landscape (and recent history) would suggest, the opposite is not true…at least not if it disregards the first.
The featured article in a recent edition of BusinessWeek titled, The Disposable Worker, is a must-read analysis of the plight of U.S. workers. Through interviews and sound trend research, authors Peter Coy, Michelle Conlin and Moira Herbst describe the gradual, but painful decline of both pay and job security for the vast majority of American workers. More importantly, they hypothesize about the potential consequences for both employees and employers, at least at the macro level. A couple of highlights:
• Rather than rehiring permanent workers, most companies that laid off workers this past year are restaffing with temporary or contract employees in an effort to reduce fixed costs to the absolute minimum.
- According to a recent Princeton University study, 22-29% of all U.S. jobs will be “offshorable” within two decades. Already, companies like Boeing, Microsoft and IBM have significant portions of their high technology work performed overseas.
- A great education and solid job performance are no longer guarantees of reliable and sustainable employment.
- Adjusted for inflation, 80% of the U.S. workforce is now earning 9% less than it was in 1973, while the gap between these workers and those at the top continues to widen (a function of compensation structure trends).
- Of those Americans with full-time employment, a Conference Board survey released in January, 2010 indicated that a mere 45% of respondents were satisfied with their jobs…the lowest percentage ever recorded in the 22 year history of the survey.
- Changes in the perception of job security are wreaking havoc with the mental wellness of workers at all levels. One study conducted by McGill University in 2009 concluded that temporary workers were at far greater risk of developing severe mental health problems due to the lack of job security, healthcare benefits and social ties to the rest of the workforce. The National Alliance on Mental Illness similarly found that workers subjected to forced changes in their employment were twice as likely to report symptoms consistent with severe mental illness as those who did not.
The article concluded with a sobering quote from former IBM executive Ralph E. Gomory. Testifying before a U.S. House panel in 2007, he stated,
“In this new era of globalization, the interests of companies and countries have diverged. In contrast with the past, what is good for America’s global corporations is no longer necessarily good for the American people.”
What’s most chilling to me about this statement is not the implication (which is certainly unpleasant), but its very premise. The notion that companies and corporations are self-directed entities, emotionally disconnected from the people they employ, customers they serve, and communities in which they are based is patently absurd and is a thin masquerade for the truth. In reality, companies and corporations themselves are merely veils for the leaders and managers who direct their activities. They are people who eat, breathe and get dressed like everyone else. The same is true for every elected or appointed official who directs the activities of portions of our government. The question is, do they recognize and act on this reality or pretend otherwise and try to rationalize systemically harmful decisions because of the “needs of the business”?
Human beings are social creatures, biologically and neurologically wired to operate in communities. We even have specific centers in our brain designed solely to help us understand the emotional experience of those with whom we interact. In other words, we need each other…literally. We also have the unique ability among all other species to reflect on our past actions, decisions, intentions and emotional state and redirect our future activities. One could reasonably argue that these capabilities are, in fact, the essence of our humanness. When a small number of people at “the top” put the needs of a company ahead of its people, something has been tragically lost.
When we invent entities called corporations, companies, governments, they are just that…inventions. The structures themselves do not have brains, emotions or feelings for others. And when leaders of these structures make decisions that benefit the structures themselves…and not the total range of stakeholders they serve…then they have lost their way. Should it turn out that the decisions made also happen to be self-serving (protecting their own bonuses, value of stock options, etc.), then they have demonstrated callousness and greed and should not be in positions of leadership at all. I’m not suggesting that layoffs are never necessary, but part of being a great leader is being willing to sacrifice not the same as, but more than those whom they lead.
In his stinging analysis of the herd mentality with wide-scale layoffs, Stanford Professor Jeffrey Pfeffer’s recent article in Newsweek, Lay Off the Layoffs, lays bare the hard facts about layoffs:
- Companies that announce layoffs do not enjoy higher stock prices than industry peers – either in the short run or over time.
- Layoffs do not increase productivity. While labor cost/employee do decrease, so do sales/employee.
- Layoffs do not increase profitability. In fact, quite to the contrary, those companies that downsize remain less profitable than those that do not.
- Layoffs do not [reliably] reduce costs. When factoring in the costs associated with severance packages, increased unemployment premiums, intellectual capital loss, unintended resignation of top talent and subsequent rehiring when business improves, layoffs almost always cost more than they save.
- Most business leaders dramatically underestimate the degree to which layoffs damage [remaining] employee morale, decrease engagement, increase fear and trigger widespread distrust of management.
- While it may seem obvious, unemployed (or under-employed) people do not buy big-ticket items, stifling the economic growth all companies rely upon.
So here we are at potentially one of the most important crossroads in U.S. business history. At stake is nothing less than the viability and sustainability of America’s middle class and the long-term prosperity of our economy. Corporate profits are important and, over time, provide the fuel for growth. But there are times when the best interests of the entire system dictate a different priority. Will business leaders be guided by the self-serving and myopic views of Wall Street bankers and analysts or, instead, do what’s right and invest back into that precious resource that made their success possible in the first place…the American worker? If you’re really a leader, now is the time to stand up and be counted.