22 Mar The "Big Squeeze" – Look for a job or be an entrepreneur?
Many corporate executives seem taken aback by the anger engendered by their rush to offshore outsource. But they should not be surprised at all. US workers have been relentlessly and brutally downsized and reengineered for over two decades. The past four years have been the worst. Many people who lost their jobs during this period have experienced great difficulty finding equivalent positions. Not surprisingly, they are bitter and scared. Many survived numerous previous rounds of downsizing. Each time they took on increased workloads to pick up the slack of their fired co-workers. It’s little wonder that productivity has been surging. Technology has played a part, but there is nothing like the fear of losing one’s job to get people to produce at extraordinary levels. Executives who discount this reality are kidding themselves. And just when you have squeezed staff to the limit, you fire the lot and replace them with workers overseas earning a sixth of what you were paying your now former employees.
Is this good business practice? Wall Street seems to thinks so. As downsizing and outsourcing has accelerated in the past two years, stock prices have climbed raising the pay of top executives – rewarding them for cutting costs (i.e. people). The Department of Labor reports corporate earnings rising by 25% in 2003. At the same time executive compensation is up while the pay of the average professional, technical, factory or service worker is flat or down. To compound matters, the media has been filled with stories about unethical, overpaid, and in some cases, criminal CEOs. The perception of the average American worker is that the guys at the top only care about lining their pockets in the short term – and at their expense.
So the furor surrounding offshore outsourcing should surprise no one. Many workers are not buying the claims that everyone will eventually benefit as costs are lowered and resources freed up for new and more productive uses. They have a more pressing concern – finding productive uses for themselves right now. Workers are also acutely aware that many of the executives responsible for making decisions about what to do with the expected savings from outsourcing are the same CEOs that have been obsessively shrinking their companies over the past two decades. They know viscerally that most large companies now treat hiring new workers as a business practice of last resort. “The goal of companies is not to hire,” says Larry Geiger, a vice president of the American Management Association who supervises the association’s surveys of corporate executives. “The executives are focused instead on fattening profits to push up stock prices and recover ground lost in the market plunge that started in 2000.” Why hire new workers when you can continue to squeeze or offshore the ones you already have?
Despite two years of recovery, our economy is not producing anywhere near the number of new good-paying jobs needed. How then can America begin to redeploy and grow our human capital and economic assets? First, stop depending on big corporations for job growth. To create more jobs we need to start more businesses. Business ownership needs to be as much a part of the American dream as home ownership. It is vital to encourage entrepreneurship and help displaced workers to venture out on their own or join with others to start businesses.
There are other benefits to democratizing business ownership. Trust between workers and top management is gone and can’t be restored simply or easily. Instead, new kinds of companies and organizations must be created that blend people-centered management practices with commercially sustainable business models. These principles need not be mutually exclusive, but can be synergistic engines of economic growth and human development. They define what we call Next Generation Companies. America’s future depends on our ability to renew and redeploy our economic, human and knowledge assets and to move away from the dysfunctional behaviors and practices so prevalent in mainstream business
Tony DiRomualdo is a business researcher, writer, and advisor with Next Generation Consulting. He works at the intersection of people, business strategy, and information technology to help companies create a committed and high performance workforce. Tony can be reached at email@example.com.
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.