A "Think Piece" Question: Hire Long or Short?

I'm not sure that the author hasn't created a false dilemma, but the setup is very interesting.

...Once a big-league strategy consultant, he now has a firm that advises CEOs on how to increase the value of their companies. "They've decided that we've touched bottom, or they wouldn't be talking to me," he said. "They're starting to think about growing their businesses again."

Welcome news, but not what followed.

"But boy, I don't see employment coming back, not for years. My clients were amazed by how much productivity they could squeeze out of their people in the downturn. They're not going to start hiring again — well, maybe temps or contract workers, but not regular, full-time employees."

Then there are a few grafs about reducing expenses, nothing surprising, followed by this:

...Smart companies have picked up on this aspect of fiercening capitalism. As Paul Vigna and John Shipman reported in a Jan. 25 Wall Street Journal article titled "Corporate America on a Diet," even as Intel has resumed "enviable profit growth," it's keeping its work force at 2003 levels.

Now he gets to the 'interesting' OR 'disturbing' graf.

For about five years now, particularly after dinners that featured wine, human-resources executives have been telling me, "We've come to realize we don't really want most employees for the whole of their careers. We want their particular set of skills when we need them — but then things change so fast, we don't need that particular skill set any more."

Ruh roh.

While companies may be doing the strategically correct thing by refusing to hire, the collective result is, of course, a catastrophe. Corporations may have concluded that they can grow profits without adding to their ranks, but meanwhile the proportion of the work force un- or underemployed approaches 20%.

Well.

If that's really the case, then the 'temporarily needed' employees who are smart cookies will raise their price dramatically for the term of employment. Like political campaign managers, they are only useful for 1 of every 2 (or 4) years, so that 1 year really has to count. Not all that different from specialization-practices in medicine, eh?

He goes on to conclude:

It used to be a joke among some of my conservative friends that there were two kinds of problems in this world. Problems that should be left to the free market to decide, and unimportant problems. Free markets may have begun to work again, albeit grudgingly sometimes, for companies seeking to buy, sell, and raise capital. But those glorious free-market mechanisms didn't work particularly well for credit default swaps or collateralized debt obligations, and we bailed them out in the interest of the larger good. Our friends, neighbors and loved ones who can't get jobs are the larger good. The supposedly self-regulating market mechanisms clearly aren't working for them. We need a nationwide crusade on their behalf, both governmental and private, even if it means surrendering some of our hallowed belief in the supposed power and ultimate goodness of the free market.

Seems to me that "old-style" hiring (for a lifetime, more or less) was predicated on the thought that management took some risks. First was the risk that their brand-new employee was 'trainable' and even 'cross-trainable', which allowed the employee to move about in the organization while actually making a contribution in each area they were assigned.

In return for that, employees were not expected to demand lotsa moneys and perks; there was an unwritten understanding that they could stay with Company X for a long time, if they were willing (and able) to learn different skills and apply them willingly. They might never get rich, but they'd always know where the rent and chow was coming from. On the other side of the table, costs wouldn't get out of hand.

That equasion was disturbed by organizing labor (and others--see, e.g., 'professional' unions) which drove people-costs up towards the bleeding edge. There was no room left for those costs in a downturn--thus the hire/layoff cycle one saw in the Big Three, (to take a highly-visible example.)

The 'newer' style (described above) maximizes returns to the shareholders, but, at least as described by the author, minimizes the cost of people. This allows retention of earnings on both the down- and up-cycles, but increases the social costs of unemployment, thus increasing tax burden.

Hmmm.

HT: HotAir