Does Human Resources Have Impact?
Let’s Ship All the Jobs to China!
I had an interesting conversation at the recent Talent Management Summit in Las Vegas. I was having dinner with a vice president of human resources for a company when he asked a provocative question. “Does what we do really have any impact on an organization? Can organizations still treat people like crap and make money?” I have to admit the question took me initially off guard but, like all great questions, has really gotten me thinking. There are a lot of companies that treat their people as cattle and (at least in the short term) make money. The idea is to churn and burn. In other words, squeeze every last ounce of energy from a person and then, when they burn out, bring in the next set of people. 100 people out the door, another 100 in! There are always people who need jobs. For these organizations, talent management, training, etc. means “the floggings will continue until morale improves”. Heck, if they are making enough money I am sure there will be hundreds of consultants, academics and business writers touting their way of doing business as ‘the future trend in organizational development’, selling the ‘X company way’ to hundreds of other businesses looking to make money. Don’t believe me? Go back and read how many articles around the 2000 touted the ‘Enron way’. Remember the phrase ‘re-engineering’? All you had to do was tell 10 people to do the work of 30 and ‘viola!’ you were making more money. Let’s ship all the jobs to China! After all, we do not have to worry about such nuisances as decent wages, overtime pay, child labor laws or even environmental guidelines. 100 people out, 100 people in. If they don’t like it, they can try to find a job somewhere else. Heck, all we really need is a factory of trained monkeys and we would be in great shape. It is simply inputs and outputs, with people taking on the role of cattle.
The Rumors of My Death Have Been Greatly Exaggerated
Let’s be honest, many companies who have moved their manufacturing operations to China have made money. Usually this is accompanied by a solemn-looking old guy sounding the death bell on America’s place in the ‘new economy’ (it is always a ‘new’ economy no matter how old). “America’s days as the economic leader are over.” they solemnly warn. “A new day is dawning. The new economic superpower will be (choose one) China/Asia/Eastern Europe/the Middle East/etc. Yet the new corporate giants such as Google, RIM, etc. have come from countries that value people as assets and not liabilities. For instance, 90% of all biomedical technology comes from Israel – a place with a population of roughly 7 million people and the highest average wage in the Middle East.
People – Our Long-term Competitive Advantage
Doug Wilwerding is the former C.E.O. of Omnium Worldwide. Omnium is a debt collector that has between 800-1,000 employees who operate their call center and try to collect debts for Omnium clients. Debt collection is a very stressful job with turnover running as high as 150% a year. When Doug took over Omnium in 1997, human resources in the company was transactional and disengaged from business operations. In 2003, he undertook a strategy change for the company. He created an internal brand, calling it the ‘O’ factor or ‘Be O’ became the new catchphrase. ‘Being O’ implied a series of both results and ethics. It was something that people bought into and whose behavior was modeled at the top. The result? Turnover fell by more than one-third and the EBITDA was increased by 440% and the valuation of the company at the time of its sales increased by 400% from 2003.
The Lifespan of a Company
Arie de Geus in his excellent book The Living Company examined the list of Fortune 500 companies in 1977 and in a 20 year span found that over 1/3 of them no longer existed. For instance, out of the 10 companies that founded the New York Stock Exchange, only 1 is currently still in existence (General Electric). Why do some companies last only a few years (remember Enron?) while others, like G.E., are around for over 100 years? He found that there are four common components to living companies that exist over a long-term period. They are:
- A company’s ability to learn and adapt;
- Cohesion and identity or the ability of a company to build a ‘brand’ for itself that creates a community for the company’s employees;
- Tolerance and decentralization or an organization’s ability to build constructive relations both within the organization and with their clients. This also includes acceptance (and encouragement) of diversity;
- Conservative financing, or a company’s ability to control its growth and expenditures.
What is interesting is that 3 of these 4 are directly related to a strategic human resources approach. The issues that we write about, learning and development, leadership branding, diversity, onboarding, and culture, are directly related to the success of an organization.
“Yes, by squeezing everything you can from your staff you can make money.” comments Scott Fleming, President of Replacements Ltd. “But it is a short-term strategy. Companies that are successful in the long haul understand that their greatest assets are the people who work for them.”