by Peter Cappelli
A couple of years ago, I started to write a book about how we actually manage employees—how we hire, how we determine pay, how we manage performance and so forth—because the reality is so different from textbook descriptions.
What I found in researching Our Least Important Asset … was a common theme to the contemporary approaches. First, they focus on doing things as cheaply as possible (e.g., we measure cost per hire carefully but not quality of hire) but only consider up-front costs rather than longer-term costs. Keep positions vacant as that reduces payroll costs, for example, and don’t worry about how the work gets done or the effects on turnover.
Part of the explanation for that shift has to do with financial accounting standards, which punish employment costs relative to other expenditures. I wrote about this in a previous column.
But there is another part of the explanation that has to do with changes in business leadership and the backgrounds of those who lead companies. It is based on the old scientific management idea that the way to maximize performance is to have experts figure out the one best way to perform jobs and then monitor employees closely to ensure that they do it. It is as if the last hundred years of management—from the Western Electric studies on—never existed. How did we get so far back so quickly?
A paradigm problem in people management
A generation or so ago, corporate leaders likely went through years-long “management development” programs when they were hired, where they were taught lots of things but mainly about managing employees. They were required to succeed at running smaller groups before running anything bigger.
Related to that is a striking rise in the number of engineers who now run companies. LinkedIn data suggests that almost a third of CEOs now are engineers by training where the optimization approach to problems is deeply ingrained. Even in business programs, majors like finance and accounting—let alone operations research—have the same cost-minimization focus.
To be clear, the goal here is not cost minimization, per se; it is optimization on numbers that are easily measured, such as headcount and payroll. That doesn’t include productivity, which is hard to measure, let alone employees’ discretionary effort or other big costs such as turnover. The problem is not what managers are taught in these programs, it is what they are not exposed to—anything about actual employees as humans. Continue reading
