Monday, September 3, 2007

Severance Insurance

Let's start with the idea that companies hire skills and fire people. If there is any truth to this, that means that training new workers with "in demand" skills is going on virtually full time in order to keep the pipeline full, because we know that companies are hiring even as they are firing, but I sense it is going on outside the universe that requires the skills (more in a minute). Also, figuring out what those new skills are is pretty interesting challenge. But both (identifying new skills and training workers to them) are going on; think tanks, universities, community colleges, vo-tech programs, you name it. They're doin' (sounds like Bush) it, as are plenty of others.

So, as I suggested a few sentences ago, ask yourself how much of that sleuthing is actually being done by the corporations who are the end users of the skills? Some, I'm sure...but probably no where near as much as should be done. Wow! Maybe I've just stumbled on a new and credible reason for HR to exist...something that they could do that would actually render direct value to shareholders. There I go cynical view of HR. My apologies to those of you who hang out in that space. You can tell. I've been burned.

My thinking (rambling?) on all of this was prompted by reading a review in yesterday's NY Times by Stephen Kotkin of Robert Reich's new book, "Supercapitalism". It's interesting to me that Reich has the word "capital" imbedded in his title, because evidently he spends a whole lot of pages talking about labor, not surprising for Clinton's former Secretary of Labor. I guess he differentiates between capital and labor. Maybe he doesn't. I'm going to have to read the book.

What is really interesting to me is that I have taken the position more than once that corporate executives in America treat labor as capital. They accumulate it and spend it. Until I read Reich's book I can't tell whether Reich agrees. He certainly spends a lot of time on the imbalance of CEO/worker compensation. He suggests that the CEO compensation package should bear some relation to workers' total compensation....hmmmm, return on...human capital? Interestingly, he also suggests that CEO's could devote more of their "considerable talents" to raising the skills of loyal workers. Interesting thought!

Question: What percentage of a displaced group of workers from a corporation would that corporation want to keep if those people could be given the right skills? If there is even one, why wouldn't it make economic sense (it certainly would make human and social sense) to allocate the dollars that were going to be paid out in severance to retraining. If the corporation were into instant gratification, this wouldn't work, but if they weren't, it actually might work and actually position the corporation as a socially responsible employer.

Some conclusions:
  • Labor is capital
  • That could change if corporations were more progressive and re-trained the current workforce as a result of internal "future skill studies"
  • Re-training could be funded through the re-allocation of severance dollars
  • Corporations would build more loyal workforces
  • Productivity would increase
  • Quality would improve
  • Credit markets would be less pressured during times of substantial worker displacement
  • Federal/state programs for the unemployed would be less pressured


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