The Big Business Fixation on Systems Over People – And The Unintended Consequences

Official claims are that the economy is improving. New numbers come out monthly about the economy gaining jobs instead of losing them. Despite this, the widely held unspoken belief is that any recovery which has occurred has done little to heal the economic scars our nation has been awarded for surviving the last six years or so. Have you ever wondered why there aren?t more jobs in this ?growing economy?, or more specifically, why there are so few good jobs?

There are very specific reasons for this.

Many of the new jobs being added are in industries which tend to have lower wages than the jobs which were lost. In addition, there has been a continuous low level of mergers, and larger firms muscling smaller operations out of the way to get business.

The Big Business Fixation on Systems Over People - And The Unintended Consequences
The Big Business Fixation on Systems Over People – And The Unintended Consequences
While this is something that happens to a degree in any economy, usually it is offset – in a truly strong economy – by a significant expansion of new, small firms entering the market to compete. With small businesses commencing operations at a historic slow pace, many large firms now dominate the market and swallow up their smaller competitors, insuring a continuation of survival of the biggest.

The end result for the employee: Systems over People

Once a business has gotten to a certain size, expansion becomes the great driver of profits. To expand successfully, either it needs to train its people rapidly (which is expensive!), or they need to standardize systems across the firm to allow anyone to be able to step in and complete for any given job. While some level of knowledge and experience may be required, most employers will focus on hiring those who have an understanding of the business, and also a reputation for operating within narrow limits.

Because this is immensely cheaper than schooling large numbers of new employees, it does have unintended consequences. For one, you tend to get a focus on learning the systems and only operating within the narrow channels of action these create. If the system only allows you to steer in one direction, one direction is all that you will go.

One great example of the systems over people is the fast food (?Quick Service restaurant? in doublespeak) industry. Since you can find one on practically any well-trafficked road, it is easy to observe the dynamics playing out in their workforce. Every single task or operation is boiled down to the absolute simplest task, so that ANYONE can learn it. Every action is strictly regimented, and since the restaurants have such thin margins, all of those who work there have their hours rigidly controlled through biometric clocks.

The rationale for these is often that ?it will increase efficiency and decrease workers stealing time.? But it also decreases the need for on-site managers who are knowledgeable and aware of their operations – in terms of payroll, financials and administrative tasks. All of these dynamics combine to drive down the overall compensation of those employed in these locations, as well as the quantity of the employed as well.

Don’t send in the drones!

As a nation, we pride ourselves on entrepreneurial spirit, and many companies profess a desire to locate and employ people who are driven to grow their business and make a fortune. Truth be told however, most who possess an entrepreneurial spirit do not fit in well in a larger company.

Much of this is due to the fact that a large company works hard to keep all of its operations highly standardized, as this keeps anyone from doing anything which potentially creates a liability. At the same time, thinking out of the box is what allows growth, creativity and ultimately success at times.

Too much thinking can be a hazardous activity in some companies. If you listen long enough at any company, you can find examples where someone decided to do something completely different in a bid to bring greater success to a company initiative, only to experience a sudden clamp-down. This has become rather common lately, as the litigious society we inhabit has painted companies with significant assets with massive bulls eyes. With the cost of legal counsel and the effort involving navigating the court system, throwing settlement dollars is often the quickest and cheapest way out of any kind of problem.

However, to better evade and reduce the chances, controls are tightened, policies become stricter and the channel in which one can navigate the world of business becomes tighter and more constricted. Because of this, companies often look to hire those who have a proven track record of toeing the line and happily cruising through the channel.

A side effect of this is the vast array of media mocking the corporate office and its various incarnations of the ridiculous. Shows like ?The Office? get a great deal of popularity due to the fact that people are able to relate with encountering and having to live with a great deal of the things which the show lampoons. The very repetitiveness and monotony of these environments has served to create a wide variety of media which mock them.

Yet, suspiciously in every company there is always a certain level in the food chain where from there and above the insistence will always be to the tune of ?That’s funny but we are NOTHING like that here!? On the other end there is the current media obsession with zombies, which may be attributable in part to certain jobs turning people so pale and lifeless that they start to resemble zombies.

What Happens When a Large Company Achieves Critical Mass

Meanwhile, there are some businesses which have reached the holy grail of the business world. These companies have grown, expanded, and finally reached that critical mass whereupon their operation becomes almost self sustaining in terms of customers.

Many of these companies have reached the point where any services or courtesies rendered to their customers are purely optional. A great example is Wal-mart, the current king of the retail industry. It?s larger than several entire countries in terms of workforce and GDP. They have unrivaled purchasing power and the ability to wield an outsized influence and wages, prices and profits in the American economy.

The clearest example of customer service being optional is to visit a Wal-mart store and scope out the check-outs. People often joke about how there will be 25 people and only one cashier, but at Wal-mart, it is often the norm. Long lines at the check-outs are nothing new at Wal-mart.

A former colleague of mine had once managed a Wal-mart super store prior to moving on, and he told me that every year there would be a litany of demands to deal with it from senior management, yet anytime stores asked for additional payroll to deploy more cashiers, the answer was a resounding ?NO?.

Payroll is considered the biggest controllable expense in many companies. If a business needs to produce a certain dollar amount in sales per hour of payroll spent, then adding payroll to a function which will not necessarily increase sales is not likely to happen. If one cashier can ring out 25 customers in line and force the rest to go do it themselves at the self check out unit, why bother to hire and pay for the second cashier? After all, one attendant at a self checkout machine allows 4 customers to check themselves out for the same price.

Given these dynamics, what incentive does Wal-mart have to hire to ensure a better customer experience? Their prices are cut so low (which is another topic entirely) that people are guaranteed to come shop there for their needs. No customer service is required!

Similar scenarios are playing out nationwide at a variety of places. And if you?re an employee of such a company, your job is made harder by the whole ?lean and mean? mindset of companies who?s game plan is to squeeze ever more production out of fewer employees. This is often why people who are laid off from large companies aren?t necessarily the ones who are most unhappy. It?s often the ?survivors? who suffer most.

Economies of Scale – Why Bigger is Better in Today?s Economy

Yet another of the reasons that a large company can easily devour the small is that they have achieved economies of scale. The larger the company, the more efficiently it can administer its operations through a high level of specialization. This often leads to entire departments dedicated to functions in which a small business might only have one person doing, or two people sharing the work of two different functions.

If the larger of the two decides to buyout the smaller company, odds are those employees in the small company – who handle multiple duties – will be dispensed with quickly, as there are whole armies who handle what they do, but with greater efficiency. Instead of handling accounting/finance for one location in the chain, one office handles it for several hundred locations! This helps to explain why mergers almost always result in job eliminations, often on a grand scale.

However, if sales and revenues drop, the economy of scale function can bite back hard, multiplying the job loss effect.

When you have a business geared towards achieving a certain level of output, the production capacity gets built up to that point – hiring, expanding, and standardizing. We can think of it as the factory model of running a business. But if the inputs (sales) suddenly drop due to economic distress, the company is in trouble quickly. Since their entire business model is based on a high level of sales, they contract quickly. They?re unable able to afford the level of staffing and infrastructure they had, but likewise unable to redeploy themselves to chase business opportunities which may differ from their norm.

This leads to companies operating in an extremely defensive manner in their hiring. When one person quits or is fired, often the replacements will be quite a long time in coming. After all, if the workload can be distributed out with only minor ill effects short term, you can save on payroll, taxes and insurance all at once. In a smaller business, the loss of one talented person who could handle multiple competencies is potentially crippling. By the same token, a larger operation can almost cherry pick the candidate it desires with exactly the qualifications they want.

The Desperate Search for Yields

All of these things do not merely happen on their own. All companies exist to make a profit. Those which have grown large and profitable enough have to do more than just make a profit – they need to exceed investor expectations. That?s how you raise your stock price, and that?s the real payoff with any publicly traded company.

With the regular interest yields on cash being so low, investors who seek yield are heading for equities. This of course helps drive the price up these up, which in turn requires a greater profit to hit the desired target.

Being entrepreneurial can have big payoffs, but big risks as well. Sometimes instead of attempting to expand on their own, a larger company will simply open its jaws and snatch a smaller one up to enjoy its strong cash flows and established customer base. This reduces the large company?s need to learn what it?s doing, but also guarantees that jobs will be lost by someone, somewhere.

With profit expected and risk feared, the quickest and cheapest ways to boost the bottom line will always be taken. So rather than hiring and expanding, they will often turn to various accounting shenanigans to boost the profits to satisfy investor demands. While this may make the shareholders quite happy, this does little to boost the economy or create more jobs. This is why there seem to be so few jobs, especially good jobs. Corporate America has figured out how to move forward without them.

With these dynamics operating in companies around the country, it is no wonder that the job market and the economy at whole is barely struggling along. With companies standardizing, automating and carefully avoiding any who do not fit very specific criteria, the job market is becoming a more hazardous and difficult place to navigate than ever before.

At the same time, we live in a time where a variety of forces have made companies desperate for yield on invested capital, to the point where accounting shenanigans are almost expected to boost the numbers for each and every quarter. With small, successful companies often being devoured or crushed out of existence, finding meaningful employment has become something of a grail which many of us seek.

Creating Your Own Strategy to Deal With the Systems Over People Economy

If you are employed by a company that values drones over free thought, don?t despair. Most bigger companies are slowly morphing into systems over people mode. Remember that you are a normal human being caught in the maelstrom of a business world which has gotten out of control. If you feel anger, use it to drive yourself forward to something better. If you are depressed by it, you MUST create a light at the end of the tunnel to push towards.

Start looking for new and interesting ventures to start outside the job. There are lots of different one-off ways to make a few bucks and meet interesting people in the process. The key here is to figure out where they gather in your community and go create value for others to enjoy.

Start a side business of some sort and follow your passions: If your job has little life in it due to your company being too big to have a soul, it?s time to start working on your own thing. You should not quit until you have alternative (reliable!) cash flows built up from other sources to replace your current job.

There are lots of small, home based businesses which are easy to get into and require low up front costs. Blogging, online storefronts, creative arts, small item repair, sewing/alterations. Just about any business you may venture into will require some level of effort and mental energy to learn and become skilled at.

Learning and teaching. Always be learning and teaching. It keeps your mind fresh and vibrant, and can often help ward off some of the mental stagnation that working in a drone oriented business can create. Do not be afraid to share any newfound knowledge, especially if you can find a way to do it in a productive way which helps others.

Support your local small businesses. These are the true drivers of the economy in your area. The larger companies merely function as a siphon, draining off money in multiple areas into the pockets of executives and shareholders. At least when you purchase from the locally operated company, you are making someone nearby a living, who is likely to re-spend much of that in the local economy as well. Think of it as economic recycling.

Stop feeding the monsters. This is somewhat trite, but sometimes the key to eliminating the monster is to simply stop feeding it. While this may not be practical at all times, do your best to make the extra effort to avoid feeding into the system where possible. Sometimes budgetary concerns may force you to patronize the monsters, but every time you direct a dollar locally, there it will most likely stay. If the monster is un-phased, you can be sure that the local folks will respond happily.

Do you ever get the sense that the economy – and the job market in particular – are being restrained by something that isn?t always obvious? Do you think ?systems over people? has something to do with it?

J.R. Candon is a freelance blogger who has been around the corporate block a few times, and shares his ideas and strategies around the web.

( Photo by Phil and Pam )

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