Temporary insanity

Not long ago, I received an offer to become a “temporary, part-time” faculty member at a local institution. The letter went straight to the shredder, but the thing I remember most was the section that emphasized what I was not entitled to:

  • Health care
  • Any other benefits
  • Physical space at the university
  • Tenure or progress towards tenure in any form
  • Membership in any faculty organization
  • Right to call myself “adjunct”

Other than that, welcome to the team.

The new permanent temporary?

Michael Schrage of MIT says to get used to it:

For most organizations, people are a means and medium to an end. They’re not hiring employees, they’re hiring value creation. If they can get that value — or most of it — from contingency workers, outsourcing, automation, innovative processes or capital investment, why wouldn’t they?

Sounds reasonable: If there’s work to do, and you can get that work done more cheaply through temps and part-timers, then why not?

This is exactly the point made by many in the restaurant business, according to an article in the Wall St. J. (paywall):

But a number of restaurants and other low-wage employers say they are increasing their staffs by hiring more part-time workers to reduce reliance on full-timers before the health-care law takes effect.

“I’d be surprised if the Affordable Care Act didn’t have something to do with” the pickup in part-time hiring, said Paul Dales, senior U.S. economist at Capital Economics. “Companies don’t want to pay for health care unnecessarily if they can avoid it, so they’ll try to avoid it.”

Think about that next time one of these no-medical-attention servers hands you your food.

And the big bucks they’re saving?

Rod Carstensen, owner of 11 Del Taco restaurants around Denver, began in April converting his mostly full-time workforce into one comprising mostly part-time help to minimize his health-care costs. He estimates the costs could have climbed by as much as $400,000 a year without the change.

So we’re talking about $36,400/year/restaurant that this guy figures he can put into his pocket by making sure his workers don’t get heath care. Certainly sounds like where I’d like to eat. It turns out though, that the trend to part-timers, at least in the restaurant industry, better reflects the general economy, than, as the Journal would have it, some mass movement to show Obama who’s boss:

In that sense, the heightened number of part-time workers since the onset of the financial crisis reflects both the weak recovery and its potential improvement. Yes, some existing businesses are willing to restructure their workforces to avoid providing affordable insurance to their employees, but so far these reports are largely anecdotal. (Fernholtz, writing in Quartz.com)

In all of this, though, whether it reflects economics or ideology, there’s one thing missing. Schrage dances around it:

The most serious question going forward is not simply whether or how more full time jobs return, it’s whether or how part-time and temporary workers become more valuable. Will employers invest in developing the knowledge, human capital and capabilities of their contingent workforces and independent contractors? Or is the new “permanent temporary” merely about a fair day’s work for a fair day’s pay?

I think the restaurant owners answered that one for you, Michael.

Kumbaya aside, is it good business?

The big question is what type of organization are you going to get? You can use Boyd’s framework to answer that. Schrage has already done one component, Fingerspitzengefühl, for you. But it might be better to start with the foundation, Einheit. For example: How fired up will our temps and part-timers be, who according to Schrage could form 75-80% of the workforce, when they’re told that no matter how well they’re doing, no matter how much customer satisfaction they’ve provided, they can’t work one minute more this week because otherwise the boss would have to shell out for health care coverage? In a competitive arena, how will such an organization fare against someone who invests in and values all team members?

I’m not saying that it’s impossible to improve the EBFAS climate with a workforce consisting largely of temps and part-timers, although any organization with two castes of employees is going to find Einheit a challenge. Not one of the articles I’ve read on the subject of temps and part-timers, however, suggests that employers are converting full-time positions to part-time in order to make their organizations work better.

As an aside, “part-time” is different than “temp,” of course. Part-time work shouldn’t be an issue, even in an organization run according to Boyd’s framework, if a couple of simple criteria are met:

  • Everyone on the team is a full team member, with all the rights and privileges appertaining thereto; and
  • Rewards/compensation are generally seen as fair by all team members, which should mean that they are commensurate with output (contribution to achieving the team’s purposes and objectives) and not just to input (e.g., hours/week). You may have to exercise some leadership here, but that’s why you get the big bucks.

I wouldn’t (and haven’t) hired temps.

It might be worth pondering that Toyota’s problems came to light about the time that the company began relying more on temps and less on their highly trained, permanent workforce.

Schrage wraps up with a witty aphorism from the “brilliant” (his description) Larry Summers*: “In the history of the world, no one has ever washed a rented car.” This is bullshit and shame on you if you nodded your head while reading it — driving around in a poorly maintained car reflects badly on me, whether I mail the check to the bank or the rental car company, and I’ve run short-term rentals through the car wash when I’m on the way to pick up a client.  Still, to give the man his due, it’s hard to believe that business will see investment in the skills of part-time and temporary workers as their best use of corporate cash.

Strategy you can use

One of the bedrocks of Boyd’s framework is that you don’t have to be perfect, only better than your competition. So if your competitors do dumb things, now is the time to pounce. In that vein, Schrage closes with an intriguing thought, “My bet? Underemployed assets are frequently undervalued assets. Undervalued assets attract savvy investors and entrepreneurs. Prepare for the next New Permanent Temporary.”

He neglects, unfortunately, to say what that means. So I will. It means that organizations that see employees as a “means to value creation,” along with raw materials and rent, costs to be minimized in other words, will lose out to their smarter rivals.

I’ll end with a better quote than Summers’s: A mind is a terrible thing to waste.

—-

*As Clinton’s Deputy Secretary of the Treasury and then as Secretary, Summers was a driving force behind deregulation of the derivatives market and the repeal of Glass-Steagall, two measures widely blamed for the financial crash (and massive bailouts) of 2008-2009.

7 thoughts on “Temporary insanity

  1. A great post. Reminds me of my time spent as a government contractor. Sure, let’s get to know each other at our get-to-togethers, only you will do it on your own time, and pay for your own meal, and not feed from the same troth provided to the government workers. As I was making less than half of what the government workers were making, I was probably considered a very non-social person, by most of my fellow, but government, workers.

    The owner of the company that I was employed with and provided contractors like me to work for government installations (BPA) bragged once that his company would be able to provide the cheapest contractors in all America, and would be able to compete as the cheapest help in the global community. I believe he was correct.

    When I listen to some ass-hole like Chris Brogan claim “I sold big businesses on the concept of being human,” http://www.humanbusinessworks.com/empires I think, yep, yep you sure did Chis.

  2. $36k/restaurant in his pocket? Have you seen his income statement? Do you know that the company has that much profit margin on his operations?
    While your point on the value of respecting employees is absolutely vital, some businesses simply can’t afford to bear this additional cost. In good times it might be possible, but in hard time they’ll likely have to layoff or take other measures to break even.
    It’s not as simple as money “in his pocket.”

    • Andrew,

      Thanks for the comment. The restaurant business is brutal and I can sympathize with the plight of owners. I have had students in the business, whose families own hundreds of units, so I do know a little about it.

      But the very nature of the business opens opportunities, and that was the point of the post.

      Income statements consist of two parts, revenue and costs, and remarks like “It will cost me $400,000” consider neither. Are you thrilled with the levels of customer service, cleanliness, and quality in your favorite fast food restaurants today? Will adding more even less-trained employees make you want to go back? Because even fewer employees will have access to health care, more of them will simply work sick. Appealing to you? Think it’s going to improve productivity? And finally, turnover, which is already an endemic problem in the business, will be even worse, and there are costs associated with turnover, both directly in what little training they get (and the incentive, as Schrage notes, will be to do even less) and indirectly in such things as poorer maintenance of the facility, damage to equipment, and waste of materials. And my suspicion is that part-time, temporary employees have neither the training nor in most cases the motivation to engage in continuous improvement, the real source of cost savings.

      So the “$400,000” sounds like a suspiciously round, off-the-top-of-the-head, guesstimate based on cost-per-employee times number of employees and assumes that nothing else in the business changes. The most important factor that it doesn’t consider — this was the point of the whole article and I don’t know how I could have stressed it more — was that restaurants that start replacing full with part-time employees just to save money leave themselves vulnerable to competitors who consider all employees as members of the team and invest accordingly.

      This is not just theory. Lean enterprises, and treating people like people is a good definition of “lean,” routinely replace competitors who use the methods you suggest — think Southwest, or Toyota when it was actually using the Toyota Production System. We see the same thing in the military. Forces who invest in developing maneuver warfare capabilities defeat their industrial-era competitors virtually whenever they meet, regardless of the size differential.

      Over time, lean enterprises continually reduce their costs, even though they generally pay individual employees more than the competition, while at the same time they improve the quality and speed of their service, which, combined with improved morale, leads to enhanced revenue. Enhanced revenue combined with continuously lower costs juices up the income statement.

      Bottom line: So long as other restaurant owners in that area think like you do, then sure, replacing expensive full-timers with cheaper part-timers will save money. This is what Boyd was saying, and as the Fernholtz article points out, smart owners aren’t waiting for Obamacare, they’re doing that now. The point is that you leave yourself vulnerable to smarter competitors.

      I’ll leave the damage done to society as a whole for another post.

  3. I’m in a peculiar situation, which in one way, is entirely contrary to this trend.

    After over 20 quite happy sucessfull years as a “freelancer’ in my industry, where I did not receive any benefits, but enjoyed a diversity of clients, work environments, and a certain flexibility in my monthly schedule, and work pattern. Industry consolidation, has now concentrated broadcast electronic media ownership into only four very, very, large corporate conglomerates.

    So, from the freelancers or full time workers point of view, in effect, there are essentially only 4 companies left to work for.

    Also Ladies and Gents, beware, that there are only 4 major sources, and perspectives, IE: “companies” producing mass media, and most importantly the “news” ‘entertainment” and “sports” that you watch, read, and listen to, outside dwindling independent sources on the internet.
    These corporate ‘entities” though on the surface in competition, have many shared financial, political and strategic interests. You can look to wall street and the banking industry as another
    example.

    Dan Rather, the famous TV newsman, speaks about this critical issue, and the very serious implications, he calls the “prioritization, and trivialization of news” , I urge you to look for it on You tube.



    http://www.cbc.ca/thecurrent/episode/2012/06/11/feature-interview-with-dan-rather/

    As a result, I have had to accept, basically full time employment, a schedule, and a benefits package with one of these giant corporate affiliated entities. I also work part time at a subsidiary of another giant company, on days offs, without benefits, but with some flexibility in schedule, and at slightly higher compensation, the Canadian Government however taxing the extra income at well over 50%.

    So here we are, welcome to 1984, the guy was right on the money, and only mis-timed
    the prediction by about 25 years.. This “insanity” that Chet alludes to, is not “temporary” at all,
    it will only get worse.

    Max

  4. Temporary insanity? Hardly.

    A few years ago… well around 1987, actually, I wrote a small book together with a good associate about the labor movement in the US. It was part of a series on labor movements in different countries published by the Danish Confederation of Labor Unions. Reading this about temps, I remembered that my research back then showed strong tendencies in that direction already in the late Reagan era. The health thing is just a fillip on top of many other reasons why large organized interests will be moving the temp way of employment to the center of their employment strategies. If an oligarchical industry sector goes that way, no competition will be able to arise and challenge or change the situation within the given context.

    BTW. I’m an Adjunct Associate Professor at the place I’ve worked for a number of years… (since 1974, actually.) I went that route after I retired; they still wanted me around, and I like working there.

    Since I Live in Denmark, I don’t have to worry about medical care, nor does my school. That’s taken care of through my income taxes, which are rather high, not to mention the 25% sales tax, as well. Even so, it looks like our state has enough money left over to be buy-in partners on the JSF.

    • Thank you Mr. Stromgren,

      As a pensioner of the Lockheed Martin Corporation, I would like to say that your support of the F-35 is greatly appreciated.

      However, you have dodged the primary issue: Will corporations that replace full-timers with temps primarily to reduce costs leave themselves vulnerable to competitors who attain higher degrees of Einheit and Fingerspitzengefühl?

      I know for a fact that you possess considerable Fingerspitzengefühl yourself, not to mention Einheit, so don’t think you can escape so easily.

      • “Will corporations that replace full-timers with temps primarily to reduce costs leave themselves vulnerable to competitors who attain higher degrees of Einheit and Fingerspitzengefühl?”

        Not meaning to answer for Mr. Stromgren, I am sure corporations will leave themselves vulnerable to competitors, if they don’t attain higher degrees of Einheit and Fingerspitzengefuhl (E&F), because of the fact they replace full-timers with temps.

        After working for corporations of both flavors, and with what little I know of Boyd (which is not much), corporations that replace full-timers with temps need more E&F not less.

        What temps actually give a corporation is greater D&C (Destruction/Creation) ability. Managers could, theoretically easily replace temps, but most likely they will not.

        But with that increased ability to destroy and construct a working tempo, the managers need greater ability in the E&F category to counter the effect of both destruction and construction.

        In other words, to quote Chris Brogan wrongly, corporations need to become more human, i.e, become an entity that has the ability to destroy and build quickly.

        So what they lose, by basically gutting the ethics (the internal forces of command and control that create the structure of the corporation) of the corporation, they gain in the fast transients, if they are able to take proper advantage of the temporaries.

        Which the proper advantage corporation have over temps is the increase of the implicit rule-sets that says you will follow the explicit rule-sets that we have laid down (construction), or you will move-on (destruction). So when you have someone like Snowden making 200,000/year moving-on, the whole industry is shaken, and that is where the fast-transits take hold.

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