Friday, November 02, 2007

CSR and "Non-pecuniary Perks" (Reprise)

The two very smart young men writing in Common Knowledge have inadvertently put two posts end to end that form the nexus of an issue that I have been thinking about for thirty years. Chris Coyne wrote about Corporate Social Responsibility last Friday and Scott Beaulier commented on "Non-pecuniary" Perks on Monday. I am sure that neither of them, like most people, would couple these two ideas as I have, but most people have not earned a living as I have either. From my corner of the economy, euphemistically called the "sevice sector," there is an easy to see connection as follows:


This post is a recycle from January, 2005. It came up is a Google search for "non-pecuniary perks" and I had forgotten about it. When all the links came back dead, I emailed both Chris Coyne and Scott Beaulier to see if either of them recalled anything about what they had written that inspired me. Both were kind enough to respond, but neither could remember much...which encouraged me. If these two bright young scholars' memories were as empty as mine, then my memory doesn't seem so bad.
Anyway, after reading what I wrote, it still seems to have worthy content so I'm reposting this morning. It rambles and is still messy, but I think what I'm complaining about is two things:
First, during my working life I have observed a clear trend to dishonesty and deception on the part of supervisors and managers. It is never easy to look someone in the face and tell them their shortcomings and how to correct them. It's uncomfortable, embarrassing and often painful for the subordinate. But of all the responsibilities of a boss, this is probably the most important and least practiced. The reasons are as numerous as the excuses, but because we live in such a feel-good world it is always easier to shift the responsibility to someone else. Even in face-to-face evaluations, the person doing the evaluating often looks for any excuse in the book to avoid taking personal responsibility for negative observations. "I know you think you are doing your best, but I know you can do better. I observed it myself when you [example here] and that's why you're getting a luke-warm evaluation from me." Honest, direct criticism is far more effective than assisting the employee in making excuses.
Second, there is a clear corporate trend to outsourcing that has accelerated and enabled a lazy management style that is typified by this reluctance to face and do the uncomfortable. It is easier to look for someone already trained and ready to take a job than to bring someone up through the ranks. Why take the time and trouble to help someone without a degree when you can kidnap someone already trained from another company who will look good on paper and already know the job? Why allow the learning curve to cost the company when you can find someone who has already been there and done that? Moreover, why bother to mess with Americans when outsourcing to another country will be more profitable in the end?
This last question is what makes my two-year-old post timely. It goes directly to the nub of the problem: why can't American labor and management be on the same page in the global marketplace? Read James Fallows' article in the Atlantic and think on that question. The Chinese model is setting the pace for the rest of the world. Dangerous? Immoral? Unprincipled? Cut-throat? You bet, and more...all of the above. But that's the way it is, and they aren't going away.
These are questions to ponder as you read the rant that follows...
* * * * * * *
The most important of all social contributions is providing jobs. The rest is virtually cosmetic. I think an argument can be advanced that the more jobs there are, the greater the social contribution, with recycling, charitable contributions, green space, reduction of toxins and all the rest of what companies like to brag about falling somewhere down the list. Without jobs, all the rest is cotton candy.

The most important perquisite isn't a perk at all. It's wages. And again, anything more is just fluff. (I think Scott would land in the same place with his post, because his list included a number of items that probably cost nothing to provide, and in fact were nothing more than a second-level service sector selling a convenience. ATM's, travel agencies or photo shops, like company cafeterias, allow employees to stay on the property during breaks without costing much. Most of these conveniences make for a win-win situation for employees, host companies and providers alike.)

Having stripped CSR and Perks down to the bones, jobs and wages, take a look at what is really at stake. Economists like to speak of The Marketplace, but they normally are referring to that wonderful macro-universe that captures the attention of analysts, professors and Alan Greenspan. Boy, when you get out there in space you can swim about in an ocean of economic theory and argue til the cows come home about interest rates, trends, world climate and an endless list of fun topics. But I can tell you that when you are at the grassroots of the economy you see things a lot differently.

By "grassroots" I'm not referring to unit managers or field-reps, which is what mostly comes to mind when the word is mentioned. The term "grass roots" calls up messy problems like "turnover" or "liability claims" or "wage pressures" or some of the other boring, nitty-gritty details of operations. But everyone knows that those are like the wheels of a car, the paint on the house, cutting the lawn...that's just everyday stuff that has nothing to do with the real issues of economics. Right?

Wrong. Those are the foundational issues driving the entire economy. From the time that Henry Ford build a car he understood that if no one could buy the thing, all the assembly lines and efficiencies in the world would be of little use. Here's where corporate responsibility and "perks" connect, where the rubber meets the road.

One of my hobby horses has to do with outsourcing, which is another way to say "We don't want to go to the trouble to teach anybody to do something, so we will go elsewhere to get it done." I have watched this trend up close and personal for my whole career. Outsourcing in the food business means getting a factory to furnish what used to be done by ordinary people. When I first started in the cafeteria business every unit was its own little factory. We did everything from scratch. Hanging meat was butchered into everything from steaks to ground meat, and everything in between. We rendered the suet to grease the griddle, boiled the bones to make the best-tasting beef stock, and when we were done, sold what could not be used to a company recycling tallow. Pie shells were hand-made, as were rolls, biscuits and cornbread. Even loaf bread used to make garlic bread was made from scratch at each location. We never used it, but there was a recipe in the file to make jelly from the apple peels that were a byproduct of apple pie.

Everything that I have described was accomplished, not by culinary experts, certified by the CIA [that would be Culinary Institute of America, not the other one] but ordinary people who usually started by washing dishes, clearing dirty tables in the dining room, or serving food on the line. The term "entry level job" had a serious meaning in that context. It meant that if you were not willing to do dirty work, then someone else got the job and you were back in the street. If you wanted to do better after landing that "entry level job," then you could wait for the next available job in the bakery, kitchen or salad department where you would be taught to do something better by a head baker or chef or lead salad maker who got their respective jobs by climbing a ladder, just like you were about to do.

So what about the perks? What about corporate social responsibility?

Corporate responsibility was expressed in the ongoing creation of jobs, a corporate function that clever people in high places saw as "the cost of labor," an expense that needed to be controlled. You can see where this is going. I worked in a situation where the first item on any list of "corporate responsibilities" was being systematically abandoned. In the same way the the doctor's oath says "First, do no harm" the beginning of all corporate responsibility is (or should be) "First, don't cut off the lifeblood of your employees."

Well, control they did, those clever people in high places, by outsourcing -- until the essential staff that once numbered by the score was reduced to a skeletal remnant of functionaries (it's not right to call them cooks any more) whose principal talent is expressed in opening frozen, canned or boxed products and artfully putting them into a display. (And don't get me started on what has happened to the flavor profiles...)

And the perks? I can tell you about the perks. Perquisites are what the company can furnish beyond wages that do not, cannot, will not cost anything to provide. That's why they are called perquisites. When the definition says incidental to regular salary or wages it truly means incidental. You can be sure that anything that adds up as an expense will be monitored, measured and controlled by those same clever people who eliminate jobs by controlling labor costs. In the end, it is up to the resourceful boss to come up with perks for his people.

And despite the cynical tenor of what I am writing, I can assure you that there are real, important, well-understood and deeply appreciated perquisites in the tool box of any good boss. All he has to do is take them out and use them. They include treating everyone with dignity and consistency, bending over backward to be fair to all, and holding experienced people more accountable than new people. (What? Did I say giving newcomers a break that you don't give old-timers? You bet. And you get away with it by reminding every one of the old-timers that they were once new, and had no one given them a break, they would not be where they are today.)

Other perks might be awarding desirable schedules to deserving people, rewarding those who do well by not pinching off those little bits of overtime earned by doing extra work, or simply making a deliberate effort to speak to everyone, every day, in a tone of voice that really connects and says "I appreciate you and your good work. It is a privilege and a pleasure to be working with you." That's not easy to do when the person must be assigned to a job that can't be seen by the public because either the job or the individual might spoil even the biggest appetite.

I'm sure that Chris and Scott had no idea that their posts would trigger this kind of response. In fact, after reading what I have written I have to admit that what I have done is basically a rant, off-topic for both of those well-done separate posts. I really mean no disrespect for those "clever people in high places," because many of them got to where they are by climbing the same ladder that I have described above. The difference is that they just kept climbing. Nevertheless, it has done me good to get it out of my system.

However, I do wish that with the growth of large corporations more thought could be given to people, the real base of all success. It is true that profits and the marketplace drive everything else. It is not the company that sets wages, it is the marketplace. Prices, like wages, are also set, not by companies, but by the laws of supply and demand. In the end, Chris' quote from Friedman is correct, there is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception and fraud. Or stated more simply years ago: the worst thing that any company can do - to its employees, its owners or its customers - is to go out of business.

It is that inarguable law of survival that drives all of economics. That law, as unforgiving as the law of gravity, is what causes so many to worship at the altar of profits. Maybe it is for that reason we have allowed corporations to enjoy the same legal status as people. It's too bad that people must cope with survival, and in the end, their inevitable mortality despite all they might do to delay it, without the same safety nets afforded their corporate competitors.

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