CASE INCIDENT 2 Era of the Disposable
The great global recession has claimed
many victims. In many countries, unemployment is at near-historic highs, and
even those who have managed to keep their jobs have often been asked to accept
reduced work hours or pay cuts. Another consequence of the current business and
economic environment is an increase in the number of individuals employed on a
temporary or contingent basis.
The statistics on U.S. temporary workers
are grim. Many, like single mother Tammy Smith, have no health insurance, no
retirement benefits, no vacation, no severance, and no access to unemployment
insurance. Increases in layoffs mean that many jobs formerly considered safe
have become “temporary” in the sense that they could disappear at any time with
little warning. Forecasts suggest that the next 5 to 10 years will be similar,
with small pay increases, worse working conditions, and low levels of job
security. As Peter Cappelli of the University of Pennsylvania’s Wharton School
notes, “Employers are trying to get rid of all fixed costs. First they did it
with employment benefits. Now they’re doing it with the jobs themselves.
Everything is variable.” We might suppose these corporate actions are largely
taking place in an era of diminishing profitability. However, data from the
financial sector is not consistent with this explanation. Among Fortune 500
companies, 2009 saw the second-largest jump in corporate earnings in the list’s
56-year history. Moreover, many of these gains do not appear to be the result
of increases in revenue. Rather, they reflect dramatic decreases in labor
costs. One equity market researcher noted, “The largest part of the gain came
from lower payrolls rather than the sluggish rise in sales …” Wages also rose
only slightly during this period of rapidly increasing corporate profitability.
Some observers suggest the very nature of
corporate profit monitoring is to blame for the discrepancy between corporate
profitability and outcomes for workers. Some have noted that teachers whose
evaluations are based on standardized test scores tend to “teach to the test,”
to the detriment of other areas of learning. In the same way, when a company is
judged primarily by the single metric of a stock price, executives naturally
try their best to increase this number, possibly to the detriment of other
concerns like employee well-being or corporate culture. On the other hand,
others defend corporate actions that increase the degree to which they can
treat labor flexibly, noting that in an increasingly competitive global
marketplace, it might be necessary to sacrifice some jobs to save the
organization as a whole.
The issues of how executives make
decisions about workforce allocation, how job security and corporate loyalty
influence employee behavior, and how emotional reactions come to surround these
issues are all core components of organizational behavior research.
To what extent can individual business
decisions (as opposed to economic forces) explain deterioration in working
conditions for many workers?
Do business organizations have a
responsibility to ensure that employees have secure jobs with good 3536working
conditions, or is their primary responsibility to shareholders?
What alternative measures of
organizational performance, besides share prices, do you think might change the
focus of business leaders?
What do you think the likely impact of the
growth of temporary employment relationships will be for employee attitudes and
behaviors? How would you develop a measurement system to evaluate the impact of
corporate downsizing and temporary job assignments on employees?
Sources: Based on P. Coy, M. Conlin, and
M. Herbst, “The Disposable Worker,” Bloomberg Businessweek (January 7, 2010),
www.businessweek.com; S. Tully, “Fortune 500: Profits Bounce Back,” Fortune
(May 3, 2010), pp. 140–144; D. Ariely, “You Are What You Measure,” Harvard
Business Review (June 2010), p. 38.
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