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The Culture Club

Let's Ship All the Jobs to China!

Michael Rosenberg
Contributor: Michael Rosenberg
Posted: 11/09/2008

I had an interesting conversation at a recent IQPC Talent Management Summit in Las Vegas. While having dinner with a vice president of human resources for a company, he asked a couple of provocative questions: "Does what we do really have any impact on an organization? Can organizations treat people like crap and still make money?"

I have to admit, his questions took me off guard initially; but like all great questions, these really got me thinking. There are a lot of companies that treat their people like cattle and (at least in the short term) still make money. The idea is to churn and burn. In other words, squeeze every last ounce of energy from people and then, when they burn out, bring in the next set of people. One hundred 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 the company is making enough money I am sure there will be hundreds of consultants, academics and business writers touting that 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 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 Voila! 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. One hundred people out, 100 in. If they don’t like it, they can try to find a job somewhere else. It’s simply inputs and outputs.

The Rumors of My Death Have Been Greatly Exaggerated

Let’s be honest, many companies that 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 China/Asia/Eastern Europe/the Middle East/etc. Yet the new corporate giants such as RIM have come from countries that value people as assets and not liabilities. For instance, 90 percent of all biomedical technology comes from Israel—a place with a population of roughly 7 million people, which offers the highest average wage in the Middle East.

People—Our Long-term Competitive Advantage

Doug Wilwerding is the former CEO of Omnium Worldwide. Omnium is a debt collector that has between 800 and 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 percent a year. When Wilwerding took over Omnium in 1997, human resources in the company was transactional and disengaged from business operations.

In 2003, Wilwerding undertook a strategy change for the company. He created an internal brand, calling it the "O" factor or "Be O," which 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, the Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) was increased by 440 percent and the valuation of the company at the time of its sales increased by 400 percent from 2003.

The Lifespan of a Company

In the book The Living Company, Arie de Geus 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 one is currently still in existence (General Electric). Why do some companies last only a few years (remember Enron?) while others, such as GE, 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 itsclients, which 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 three of these four 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."

How to Make a Difference

We can make a difference. It is the difference between a strategic human resources department and a functional one. A functional human resources department that is focused on benefits, salaries, hiring and firing and is disconnected from the business will soon be a thing of the past. Why? Because legal can handle firings, finance can deal with payroll and benefits and managers can hire their own reports. A human resources department that helps to manage talent and build a culture that attracts and retains the best people and is central to the business will be vital for its success. Here are some ways that human resources can make a difference:

  1. Understand the business. Doug Wilwerding had a sign in his office that said "Spectators will please remove themselves from the field of play." Explain how your proposal is not just a "fad of the day" but connects to the larger strategy of the organization and benefits the people who work for the organization.
  2. Measure impact. We value what we measure, yet we have to ensure that we are providing measurements that have real meaning. For instance, you can measure training with the "smile sheets" after a course and that will tell you if people liked it. The problem is that even if people liked but it they were unable to apply what they learned after the course, it had no impact. You may be able to get X amount more candidates for a job for less money by advertising in Y magazine, yet if none of those candidates were right for the job, then you really have not saved any money. A simple question to ask is "What does success look like with this initiative, and how will it impact the business?" Learning, for instance, is a means to an end and not an end in itself. If you are doing training, then what do you want it to accomplish and how will you know it has been successful? Show real ROI on what you are doing.
  3. Get executive support. There is nothing worse than an initiative that is undermined by the actions of senior management. Ensure that everybody is on board and that senior management is not just going to put words on a wall, but actually show it walking down the hall. Once senior management understands the business implications and buys-in, they must also demonstrate through their actions support for the initiative.

What about those companies that have shipped the jobs to China? How can we compete with them when they are paying people so much less than we have to pay them here? The answer lies in the business. Over the past year, for instance, numerous products have been recalled that were made in China because of their use of lead paint. Many consumers are now wary of buying products made in China, not necessarily out of patriotism, but because many of those products are made with toxic materials and break.

What we do does make a difference because with what ultimately makes a company profitable in the long term is having a positive workplace with highly motivated people each having the ability to utilize their unique genius to help build the organization.

Michael Rosenberg
Contributor: Michael Rosenberg
Posted: 11/09/2008