Move over Adkins. It’s time to leave South Beach. Berry sorry, Acai — we don’t need you anymore either. My new, superior diet is guaranteed to leave those unwanted pounds behind.
I call it the Semiotic Diet. It’s simple in concept and even simpler in execution: Rather than prepare and eat actual food, you draw symbolic equivalents (we’ll have an iPad app shortly). Then, while focusing on each food symbol in turn, you envision yourself stuffing your gullet with whatever delicious treats you’ve chosen.
The U.S. workforce has been on a diet for decades. Other than partial coverage for increases in health insurance premiums, non-executive compensation has steadily decreased; other than bubble-created (and bubble-burst deleted) jobs, employment has been flat.
And if this point isn’t clear to you it should be: Most U.S. companies consider employees to be a colossal pain in the tush, and the bigger the company, the more that’s likely to be the case.
Employees, after all, require places to sit, equipment, training, performance feedback, policy management, and oversight. If they think you’ve treated them poorly they can be the source of aggravating lawsuits or complaints to the EEOC or OSHA. They’re the reason executives have to spend excessive time communicating, paying attention to the company culture, and otherwise taking their eyes off the ball of doing business and making money.
It’s a lot more convenient to outsource what you can, sending the rest offshore where workforce rules are simpler, employee protections are limited or non-existent, and in any event you only have to deal with one person — the head of the offshore division, who is now responsible for dealing with all those pesky employees.
Add to that the dominance of the financial sector as our economy’s driving force and we’re left with an uncomfortable question:
What is the future of work in the United States?
Opinion: Unless the government institutes some sort of strong industrial policy that creates strong incentives for creating stable, well-compensated jobs … unlikely in today’s political climate … the future of work, both inside and outside IT, is going to be a steady shift from employment to contract staffing.
Contractors are, after all, much more convenient. Need someone to do a job? Call a staffing agency, give it the specs, and get who you need, for exactly as long as you need them. When you’re finished with them there’s no messy termination or layoff procedures to attend to, no risk of legal action, no sniffling farewell parties, no announcement that thus-and-such has left the company to pursue other interests.
Nope — it’s an arm’s-length contractual relationship between mercenary and paymaster. No muss, no fuss.
This is, of course, a spectacularly bad idea, but since most of the logic favoring employing people instead isn’t financial, the business case is difficult to make.
If you’re on the deciding-whether-to-follow-the-trend side of the transaction, here are some reasons employees can be more valuable to you than contractors, and on-shore employees more valuable than their off-shore brethren:
- Incentive: Employees do better when their work gets done faster. Contractors do better when their work takes longer.
- Innovation: When employees spot ways your business can operate more effectively, they want to let you know about their ideas. When contractors spot ways your business can operate more effectively, they’ll expect you to pay them for their insights.
- Trust: The single biggest determinant of process efficiency is trust among the participants. Without it, processes break down into unnecessary re-work, arguments over quality, and recriminations. Employees have the time, opportunity and reason to build relationships with each other. Contractors will be gone soon, replaced by other contractors, so employees have less reason to make the time or take the opportunity.
- Institutional knowledge: Real organizations (as opposed to textbook ones) are complex networks of interpersonal relationships. When you need to get something done, understanding these networks is the difference between success and frustration. Over time, employees learn them and become adept at navigating them. For contractors, there is no “over time.”
- Culture: Good employees fit into and reinforce the company culture. The rest generally don’t survive. It’s one reason among many that the ability to hire and retain strong employees is the most important skill business leaders must develop. Contractors rotate in and out of the organization more quickly, so at any given time more of them will be poor cultural fits than an equivalent group of employees.
This assumes, of course, that you provide the employees with strong leadership and competent management.
It is, admittedly, a too-often unwarranted assumption. Which brings up this question:
If the problem with having employees is poor leadership and incompetent management, which is the better solution: Hiring fewer employees, or better managers?
This is so dead on, it is painful At the same time, the “ideal world” would have “contractual arrangments” vis-a-vis any given task, but “employment arrangements” vis-a-vis the person. One way to accomplish this is to pay to a great degree in “long-term” stock (ie, stock that ‘vests’ immediately but cannot be sold for a period of years). But the human instinct for the employer and the employee to both think “I/he/she am my job” is very hard to overcome.
Excellent piece. Here’s a sixth bullet.
Intellectual Capital: Your workforce becomes more powerful when employees learn new skills, customer satisfaction techniques and problem-solving approaches. If your contractors bother to grow, they’ll carry those skills out the door at the end of the engagement.
I now work in a large company that celebrates “Leadership” and acts as though it’s dedicated to eliminating all non-managerial jobs.
Setting aside my non-managerial self-interest, it’s hard to find the business benefits of some of the changes. Until you recognize that more managers are required to sustain, coordinate and fire-fight outsourced and contractual relationships.
Elevating the LQ (Leadership Quotient) by both growing the numerator (Leadership) and slashing the denominator (salaried headcount) must truly leverage the company’s value.
It may be irrelevant that many managers dislike managing employees. Outsourcing & offshoring are their way to serve the shareholders while focusing their talent on important business challenges.
Nonetheless, I’m waiting to see my employer’s share price reflect the value of years of relentless leadership. Maybe it’s time to outsource the shareholders since they fail to appreciate the deep wisdom of the corporate leadership.
The problem that Bob describes is real. The proposed solution (government industrial policy) will not help, but rather create another class of enterprises whose core competency is taking advantage of the policy rather than doing anything useful or solving the problem (e. g. the government-subsidized ethanol boondoggle).
If Bob is correct, the enterprises that go overboard on outsourcing and offshoring will be less capable and less efficient, and the competitive market will doom them in time. Of course, by the time the current fads fail, there will be a lot of human wreckage. But the proposed solution would be even worse.
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I agree on industrial policy. Though it takes a long time to starve a whale to death.
US auto industry – management & labor – spent about 40 years ignoring successful models in a focused drive to destroy their equity. They just reached rock bottom, with no choice but to alter counterproductive practices. And you’re right – they left an awful lot of wreckage in those years.
Outsourcing resembles farm subsidies or bio-fuels. There is little rational discussion or informed decision making. Too many influential players have a profit interest in the concept – outsource / off-shore providers, the consulting companies with practices to facilitate it…
Most importantly, management is seduced by the hourly wage comparison and then reluctant to recognize and acknowledge the downsides. Or face the extremely heavy lifting required to rebuild the internal capability.
A previous employer started at the shallow end of the pool approach. During the following year’s internal annual review presentation the President / COO publicly apologized to all employees for the mess that had been made of a non-value-add internal function. The company spent much of the next year fixing that function, then stayed in the shallow end of the pool.
Thanks for the idea Bob. I am trying the Semiotic Diet on my wife for clothes shopping.
A previous poster hinted a what I’ve thought the problem has been for a long time. Executives are rewarded for profits and wall street has a short memory. Outsourcing with back loaded costs allows for nice bonus checks and by the time the you know what hits the fan, the executive has “transitioned” to another position. (I am an executive so I am allowed to take shots at them!)
I routinely run into executives that do not understand the value of some employees — they believe they are interchangeable since we are just hiring a skill set. That frustrates me to no end.
Sorry, need to run. I have an iPad app to work on.
Yep, in the world of managment “Let’s Pretend”, where you get to take credit before a job is done, then move on and make your successor pay the price for the mess you leave, looking at employees as “The Expendables” is convenient for your power point projections.
Unfortunately, it also leaves the mess of a highly vaunted but not workable contract solution to your few remaning employees to do the “clean up on aisle jackass.”
For several years I have maintained that the ideal state which all companies strive to attain is this:
1) No employees, for all of the reasons mentioned by Bob and in the comments.
2) No products (very much like broad sections of the financial industry). This would eliminate pesky things like supply chains, marketing, R&D, and the very need to pay anyone, employees or contractors.
The ultimate company is one with no staff or contractors below the executive level, and customers who just give the company money for no reason and who get no value of any kind in return.
Can one patent a business model?
Yes, it is as bleak as that. On the bright side, the whale is much weaker than commonly assumed so things will get worse fast, an unfortunate, but necessary condition for the failed methods and regulations to be abandoned so things can get better. People with bad ideas hang on as long as they can …
Bob, I’ve felt this way since the 80s and the erosion of loyalty between companies and their core employees, thinking it couldn’t lead anywhere good. This is good enough and of broad enough interest that it belongs in a larger forum. Many of your articles have value for non-IT readers. Would you consider becoming a regular blogger for a site like Huffington Post?
Very flattering. But no. While I admire what Arianna Huffington has accomplished with the Huffington Post, it is nonetheless a “tribal” site that plays the my-team/your-team game for all it’s worth.
That just isn’t my game. I keep thinking there’s a market for a site that provides commentary that starts with the evidence and follows it wherever it happens to go. I’m not the guy to launch it for a variety of reasons (most of which have to do with my need to make a living). But I’d be delighted to post to a site like that should anyone find a way to create it and ensure its ongoing integrity.
That’s an interesting perspective on the choice organizations can make regarding IT staff: hire fewer employees and more consultants, or hire better managers. As you point out, companies seem to be moving in the direction of the former, likely to the overall detriment of the organization in meeting its longer term strategic goals.
Obviously, at any point in time, companies are faced with a shortage of specific IT talent to support near-term projects that are high priority and need to proceed. Changes in employee staff, particularly at the manager level, are not particularly fluid. So I think it’s a balance between meeting short term demands, using whatever resources are necessary to get the job done, and a longer term, more strategic process that builds the IT management staff with capable people. The organization also needs to commit to some level of training to build and maintain the management skills it requires.
Many firms can often provide consultants on a right to hire basis. That can be the best of both worlds for the client, as it allows the company to get first-hand experience with the individual and then decide whether or not to offer a permanent position. Frankly, we are surprised that companies don’t engage more project manager consultants with right to hire, as this would provide an excellent source of quality management staff.
thanks Bob – always enjoy your commentary and really enjoyed listening to you on the IBM/Cognos sessions… About employees vs contractors: I agree – maybe we should hire a consultant to give us a report on it…
Maybe? What do you mean, maybe? Of course you should!
when you hire employees by way of favoritism,nepotism,&politics they are protected no matter how bad there work may be or lack of it,such as seen @ n.j.transit
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