Cheap Labour May Soon Be a Thing of the Past

Posted on by Stuart Murray
Migrant Worker Style. By Matt Ming
Migrant Worker Style. Photo courtesy of Matt Ming.  (In communist China, being a labourer is considered dignified, hence they often wear nice coats)

What would happen if the world ran out of cheap labour?  It’s a threat, or an opportunity, depending on your perspective.  But it could happen in our lifetime.  In an earlier post I described how unemployment was low but wages weren’t rising.  If job growth were to continue all around the world, we could soon be surprised that there are few people left on earth who will work for low wages.

In a January 2018 New York Times article from January 2018, the article points to a global economic up-swing.  The reason why the economy is improving is different in every country.  The global economy has been recovering for a decade, since the 2008 recession arising from the sub-prime mortgage fiasco in the U.S.  This time around, the thriving economy is different.  Economists note that because the growth is broad-based, there are fewer star performers.  If any one country slips into a recession, the rest of the global economy could keep things going strong.  The world economy is forecast to grow by 3.9 percent in 2018 and 2019.  This growth includes a lot of developing countries.

However, this may be a house of cards about to come crashing down once you factor in the “Lewis turning point.”  The Lewis turning point describes when a developing country grows enough and creates enough jobs that there is no more surplus labour.  That means that in order for businesses to grow they must offer higher wages than other employers to draw people away, such that economic growth causes wage growth.  Before the turning point, investors grow their businesses taking for granted an unlimited supply of cheap labour.  After this turning point, the country sees notable changes in their society.  People suddenly stop working in the very lowest-paid jobs.  Employers offering benefits and job-permanence develop an edge over the competition.  Workers get picky about where they want to work.

In this interesting article on a website called The Diplomat, researcher Dmitriy Plekhanov looks into the speculation that China’s era of cheap labour has come to an end.  The methods of measurement are complicated and confusing, but in brief:

“No matter which indicators are employed, they all point out that wages have more than doubled since the year 2009. Such a pace of growth obviously has serious implications for the Chinese labor market and its international competitiveness in terms of relative wages.  The pool of cheap labor has definitely dried up.”

These changes narrow the wage gap between Chinese labour and the rest of the world.

There has been an active debate for some time about whether China has reached, or is about to reach, the Lewis turning point.  One paper from 2011 asserted that it had already happened.  Over at the International Monetary Fund a paper in 2013 estimated that the turning point “will emerge between 2020 and 2025.”  The paper notes that demographics will be a major issue.  Due to the aging of the population and their drop in fertility a few decades ago, China’s labour market is now at its peak size and will start to shrink in the near future.

It’s important to consider China in the context of the global economy.  For some time, globalization has been perceived to be a phenomenon of manufacturing job disappearing in the industrialized world and then re-emerging in China.  Yes, there were other low-wage countries to relocate to, but China was the big kahuna.  If this low-wage option disappears for investors, they must suddenly look to other countries with fewer workers.  Switching countries for a second, an article from January 2017 notes that India needs to create 16 million jobs to reach the Lewis turning point.  The article interprets that this is a lot of jobs, but that’s almost nothing in the global scale.  We’re not very far away from both China and India running out of surplus labour.

This means that investors must go farther afield.  The Times article describes a major investment being made in Rwanda, which might have been a no-go zone in years gone by.  In those cases where investors stick with their domestic populations, they need to change their perspective and seriously consider hiring ex-convicts, people with limited education, people with disabilities, and those who have experienced prolonged bouts of unemployment.  Employers can find contractors in the gig economy, but those contractors can also become scarce given that gig workers are part of the labour market.

All around, it is employers themselves that must put on a good show at the selection interview.  So if you ever thought human resources was a support function, think again.  Your competitive pay position, the quality of the employment experience, and the effectiveness of your recruiting function might become critical to business success.  Oh, and by the way …don’t tell the unions.

Technology Can Reverse the Pecking Order

Posted on by Stuart Murray
Photographers expand horizons in 2010 Army Digital Photography Contest 110311. By U.S. Army
Photographers expand horizons in 2010 Army Digital Photography Contest 110311.  Photo courtesy of the U.S. Army.

It’s funny how a small change in technology can disrupt hierarchy.  As new technologies collect better information about employees, it puts management under increased scrutiny.  In my last post I summarized Josh Bersin’s 2018 forecast of disruptive technologies in HR.  While it is interesting to see that there are tools available that allow us to be more effective, there are dramatic implications to the way we work.

After much delay, it appears that the long-awaited labour shortage has finally arrived.  Bersin notes that this will make an appearance as a “war for talent” with recruiting becoming more competitive.  Chatbots are automating parts of the recruitment process, applicant-tracking systems are making things simpler, there is a wider range of tools for assessing candidates, and I would note that it’s possible to use technology to reduce bias (assuming the AI has been taught to not pass forward pre-existing bias).  Many of these technologies have been pioneered already, which means 2018 will be a year of diffusion.

I think there is a social element of this war for talent that warrants more discussion.  That is, when good employees are being fought over they are more likely to ask for pay increases, apply for promotions, and leave their current workplace for something better.  But it can get even more dramatic when employees are bold enough to sign union cards, tell-off their harasser, and speak openly about how to improve management.  These shifts oblige managers to change.  We can’t pretend that everything is normal.  Hiring managers must start treating employees like they are valued, respected, and deserving of growth.  That’s what it looks like amongst managers who are keeping pace.  By contrast, it may suddenly look odd that there are managers who lack this collaborative orientation.

In the discussion of continuous performance management, Bersin references goal-setting and coaching.  We can’t really slip these items into a discussion of performance management without acknowledging that ground-up performance conversations are not yet fully established.  If emerging research recommends that good managers take a coaching approach, what are the implications for managers using a prescriptive approach running off a forced-distribution scorecard?  Simply put, command-and-control managers need to change their style.

For decades, the research has been bubbling just beneath the surface.  The reality is that for employees, true motivation comes from within, and their ability to align personal motivations to their employer’s strategic environment is key.  Engaged employees achieve two-times or three-times the productivity of other employees, and leadership style is a major factor in achieving high engagement.  The new technology is designed to help managers with that leadership style, but there aren’t a lot of apps that will help advance an archaic style.

On the wellbeing side, there is a variety of new tools to monitor cognitive overload and nudge people to exercise, sleep better, and eat better.  We have so overburdened people with meaningless and counter-productive work obligations that we have to reduce workload to improve productivity.  Deloitte has a good model that describes how engagement, productivity, and wellbeing are integrated into a unified concept.  Wellbeing is not really about fruits-and-veggies advocacy any more; it is integrated into peoples’ ability to focus on their best work.

I’m fascinated by the way this trend up-ends the hierarchy.  As a result of the wellbeing imperative, the people who need to “work harder” are management and leadership who are obliged to clarify goals, cultivate a positive work culture, and encourage employees to seek growth opportunities.  Looking back, it seems like a manager-driven culture which obliges employees to follow orders and be happy with their lot in life is hopelessly archaic.

Thankfully, we don’t need to debate the best leadership style because transformational leadership simply out-performs the alternative.  Just wait a few years and the only teams left standing will be the ones that have stayed at the forward edge.  Lucky for us, this collaborative style makes work more fun.

In my next post we will explore how subjective and qualitative information are making technology and analytics whole.

Look at Her Go! Achieving the Perfect Quit

Posted on by Stuart Murray
Sigrid practicing. By Victor Valore
Sigrid practicing.  Photo courtesy of Victor Valore.

This is a provocative article suggesting that it’s a good thing if an employer loses good people.  To be clear, it’s not a good thing if an employer loses people who quit in disgust.  Rather, if you are cultivating an engaged work environment in which everyone is encouraged to move onward and upward, then there is a price to pay.  That price is that sometimes employees take advantage of external opportunities.

The author of the article is Drew Falkman from a firm called Modus Create, a technology services company with a soft spot for people development.  He suggests that if you are losing good people it is a sign of an engaged work environment that attracts transparently ambitious people.  Ambitious people will regard your workplace as an exceptional diving board into the pool of life.  These can be good people to work with.

What do you think? Could your new employer brand be “diving boards are us”?  The reason I ask, is that most people are only familiar with what competitive diving looks like moments after the diver has taken flight.  But in the years prior to jumping the diver will have put much effort into developing courage, strength, and skill. Would you have a better workplace if a larger fraction of your employees were constantly building towards a visible and transparent goal?  This spirit of growing and striving would be a great workplace culture for employee and employer alike.

This change of attitude on the employer’s part redefines performance excellence as an act of motion amidst a growth mindset, not a final accomplishment that presumes a fixed state.  A workplace that is always striving performs better than one in which managers treat their best staff as collectibles.

Managers are notorious for trying to hold onto their top-performers and keep them at their current level.   It’s so convenient for the manager, having excellent people who are prohibited from seeking new opportunities, locked into place just-so, delivering double the productivity.  These people practically manage themselves, and the manager doesn’t need to spend extra hours training them or replacing them when they leave.  If the manager can cultivate a team like this, perhaps the manager should get the biggest bonus.

But thinking about the whole institution and the economy in general, locking-down high performers is a recipe for stagnation.  Perhaps the millennials were right?  Maybe we should stop tolerating mediocrity and take for granted that generalized career ambition is part-and-parcel of performance and workplace engagement.

Employers are increasingly desperate for good hires into the senior ranks, and they’re blunt that they should always be free to bring in good people from other institutions.  So, as a society, the “correct” opinion is that employers and employees alike should be moving everyone upward and onward.  Therefore, career-growth exits are a good thing.

But it gets better.

Falkman suggests that former employees are valuable to your organization as well.  Former employees can speak highly of their work experience at your organization, improving the employer and customer brand.  Supportive former employees can also become committed customers, suppliers, or investors.  You can go the extra mile and organize this resource of boomerang employees, building current staff to eventually be part of an alumni pool who continue to grow, keep in touch with their peers, and make themselves available as boomerang employees.

Every now and then a contrary opinion comes along that you really need to take seriously.  This is one of the good ones.

Hippos Need a Devil’s Advocate

Posted on by Stuart Murray

Hippo II, by Andrew Moore
Hippo II.  Photo courtesy of Andrew Moore.
Hierarchy is the enemy of information-sharing.

In this Linkedin article by Benard Marr the author identifies that people are extremely reluctant to express views contrary to Highest-Paid Person’s Opinion, or HiPPO for short.  Marr cites the book Web Analytics: An Hour a Day, by Avinash Kaushik, in which that author describes the dynamic;

“HiPPOs usually have the most experience and power in the room.  Once their opinion is out, voices of dissent are usually shut out and in some cases, based on the culture, others fear speaking out against the HiPPO’s direction even if they disagree with it.”

Marr references the Milgram experiment in 1963 in which obedience to an authority figure overpowered peoples’ personal conscience.  There is an additional study that finds that projects led by senior leaders fail more often, because employees “…didn’t feel as able to give critical feedback to high-status leaders.”

What is the solution?  Marr asserts that relying on data is critical; we must line up the data to inform a decision prior to gut decisions being expressed by high-ranking people.  There is also an example of Alfred Sloan of General Motors who insisted that a decision should not be made until people have considered that the decision might not be the right one.  Sloan fosters the devil’s advocate in the process of decision-making.

I think this critique and the related research implies that modesty is mission-critical.  It’s an important contrary idea because it implies that confidence might not be a leading indicator of effectiveness.  We wish our leaders were strong and brave and looked the part, but it’s far better when our leaders are right… because they thought twice, and waited for new information, and new opinions, from people with less status.

I also think that a properly organized social network of knowledge is usually superior to the thoughts of any one individual.  With education and access to information, it should become evident that you barely know one percent of what could be known.  However, if you aspire to having a diverse network of people with different backgrounds, contexts, professions, and knowledge, you can bundle together better insights from those who each know a different one percent.

Finally, a pro-social spirit of dissent is key to getting the information moving.  When information goes up the hierarchy there are problems of posture, reprisals, hubris, and corrosive office politics.  If you love knowledge, you should develop a sense that all those things are silly little power games that have nothing to do with wisdom or effectiveness.  To be good at your job, is to regard your superiors as capable agents of decision-making who are morally your equal.  And it’s your job to make them stronger, whether they like it or not.

It’s a troublesome attitude, but that’s part-and-parcel of disrupting decision-making with new and relevant information.

Is This the Face of a CEO? It Should Be.

Posted on by Stuart Murray
toothless
Toothless.  Photo courtesy of Chris Penny.

In order to become a CEO you need to “look like” a CEO.  And it’s not about wearing the right suit, climbing mountains, or having a cruel handshake.  No, the main indicator of whether you “seem like” the CEO type is that you have a complete absence of baby-face.

The research paper is entitled “A Corporate Beauty Contest” published in July 2016 in Management Science.  The research was entirely about men because status-quo data is already sexist to begin with.  The authors are John Graham, Campbell Harvey, and Manju Puri, all from Duke University.  There’s a good news article about it in the Wall Street Journal, but I’ll summarize it more briefly:

  • Survey participants can easily identify if two people with identical demographics are a CEO and a non-CEO.
  • People judge the CEOs of larger organizations as being “more CEO-ish” than the CEOs of smaller organizations based on the same facial features.
  • Those executive with more “mature” facial features were paid more than those with less-mature facial features. To clarify, even within the arbitrary demographic category of tall straight white able-bodied males with a bit of grey hair, there is an additional category of pay discrimination based on genetics: mature-face.
  • The authors found the findings surprising because it is assumed that CEOs are selected by corporate boards based on metrics and expertise.   The main driver of a successful executive search is metrics about the shape of the executive’s face.
  • Just in case you’re about to ask if super-effective people tend to develop a mature face over the years, hold your horses. “The look of competence isn’t correlated with superior [business] performance,” says co-author John Graham.  That is, discrimination based on looks can forgive corporate performance altogether.

We just throw certain types of people into high-level jobs regardless of how good they are at running our economy.

What to do?  First, thou shalt laugh.

Second, you should actively recruit people who don’t look the part but who have good formal indicators of competence.  In the book Moneyball, Billy Beane relied exclusively on metrics to decide which baseball players to recruit into the Oakland A’s.  He ended up with an team of weird-looking people.  One guy pitched under-hand, some people had a lot of moles and birthmarks, and there was a legend about that once you look at the numbers, overweight catchers tend to be selected because of their great batting performance.  We’re not selling blue-jeans.

If you could identify the most baby-faced darlings who had exceptional corporate performance, those might be your best candidates for CEO.  And their salaries would be a total bargain, too.

Quitters May Be Your Most Valued Resource

Posted on by Stuart Murray

209365 - What Goes Around... by Adam Wyles (=)
209365 – What Goes Around… Photo courtesy of Adam Wyles.
Do you ever get that strange feeling when someone leaves your workplace that the work friendship is finished?  It’s an odd feeling, but you need to get past it.  That’s because the relationship continues to be  important even when your former colleague is working elsewhere.

“Boomerang employees” are people who have left a workplace and then come back.  Boomerangs are an emerging trend because people are changing jobs more frequently.  It’s posing new challenges in the way we think about work.  Several of the major insights about boomerangs are reviewed in a study from September 2015, from the Workforce Institute at Kronos Incorporated and WorkplaceTrends.com.

In brief, employers are developing more mature opinions.

“Based on survey results, nearly half of HR professionals claim their organization previously had a policy against rehiring former employees – even if the employee left in good standing – but 76 percent say they are more accepting of hiring boomerang employees today than in the past. Managers agree, as nearly two-thirds said they are more accepting of hiring back former colleagues.”

A majority of managers and HR professionals give high priority to job applicants who had left in good standing.  The warm feelings go both ways, with nearly 40 percent of employees seriously considering going back to a former employer.

Brendan Browne, VP of global talent acquisition at LinkedIn, notes in an article in Business Insider that “…jumping between jobs doesn’t mean that employees today are less loyal. Rather, the concept of loyalty has simply evolved. Employees might move around more, but they also remain much more connected to former employers.”

Getting The Best Out Of Boomerang Employees

What about the nitty gritty about how we would go about this?  First, there is the business case for favoring a returning employee.  According to Browne, Boomerangs are;

“already familiar with… [the organization’s] culture. There is an established employee-employer relationship that adds another layer of employee loyalty to the company, which in turn leads to increased retention. Boomerangs that have been away for a few years also have direct business value, as they bring with them new experiences, connections, points-of-view, and even potential customers.” (Emphasis added)

Molly Moseley in a blog post adds that “…you know their skills firsthand — strengths and weaknesses — so there shouldn’t be any big surprises.”  That assumes that the employer has a fresh memory or has kept the good records about the employee’s history.

There can be pitfalls, for sure.  Moseley asserts that employers must answer one question “Why did they leave in the first place?  …You must have this conversation, get a clear answer and ensure all parties have agreed on the resolution. Did they leave for higher pay, a promotion, shorter commute, better benefits? Whatever it is, are you able to amend that problem?”

Kevin Mason in an article in TLNT echoes this sentiment about knowing their reasons for quitting.  Mason also identifies a double-edged sword of employee morale.  If people were sad to see this employee leave in the first place, there can be a boost in morale when they return.  However, it’s also possible that people were happy to see them go, and their return can be bad for morale.  Mason says “It’s critical to get the pulse of your key players before bringing an employee back.”

Fostering Employee Engagement With Former Employees

How do you go about actively recruiting boomerang employees?  Browne makes a comparison to alumni engagement efforts with college and university students:

“While the idea of keeping alumni invested used to be confined to academia, it’s now a growing trend in the workforce. LinkedIn’s alumni program started out as a LinkedIn group that a few alumni employees created on their own in 2014. Today, our in-house alumni network has more than 3,300 members, which includes both current employees and alumni. That way, alumni can build relationships and feel like they are still part of the company.”

It’s notable that of all the social media button-click things we can do to cultivate this talent pool, the key concern is the underlying shift in workplace culture and opinions about employee engagement.

Joyce Maroney from the Workforce Institute says that “it’s more important than ever for organizations to create a culture that engages employees – even long after they’re gone.”  It’s the ultimate de-silo-ing of the people under your span of control.  You’re not just responsible for engaging those outside your own reporting relationship; you also need to engage those who have left the organization entirely.

This idea that a career is a series of adventures maps easily to Millennials.  Millennials change jobs more quickly (because they are younger) and are therefore more likely to be boomerang hires, according to Dan Schawbel of WorkplaceTrends.com.  And let’s not forget that if you’re a socially responsible leader, you’ll take an interest in mentoring these people regardless of whether it’s right for the corporate bottom line.  There is an onus on good managers to also be good people.

In the employee’s eye, former employers take on the status of old friends, places they have visited, and books they have enjoyed that they still keep on the shelf.  Wouldn’t it be great if we could all just stay connected, live a varied life, and seek meaningful work in which we’re encouraged to grow?  Employers will need to find people who want to put in the extra effort to cultivate this dynamic environment?  How about you?  Do you want to help build this kind of workplace?