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    Entries in labor (69)

    Monday
    Mar192018

    What the Toys R Us meltdown reminds us about workforce trends

    By now you probably have seen the sad news that Toys R Us is in bankruptcy, and is facing the likely closure of its 700+ stores in the US in the coming months.

    Definitely a sad day for many, especially for the thousands of Toys R Us employees soon to be out of work, and for the let's say 'traditionalists' among us who still enjoyed shopping for toys and games and the like in the 'real world', and not just from an Amazon app.

    Of the many reasons that have been blamed for Toys R Us demise, competition from Amazon (and others) is frequently cited, along with the pretty staggering amounts of corporate debt and debt service payments that Toys R Us has been burdened with since its acquisition by Private Equity companies in 2005. Other post-bankruptcy analyses have pointed to Toys R Us failure to modernize its shopping experiences, inability to grasp digital commerce trends, and the fact that they lost touch with their most important customer - mothers shopping for their kids.

    But there is one other factor that has contributed to the toy retailer's plight, one that has not been mentioned as much in the coverage, and one that has much wider implications in work and workplaces as well. And it is this: people in the US are having fewer children, thus creating fewer of Toys R Us' prime 'end customers', and, eventually, fewer entry-level workers for all US firms to recruit.

    Here it the thing, the folks running Toys R Us maybe couldn't figure out what to do about this trend, but they did see it coming. Here is an excerpt from their most recent 10-K financial filing from April 2017:

    "Most of our end-customers are newborns and children and, as a result, our revenues are dependent on the birth rates in countries where we operate," the filing reads. "In recent years, many countries' birth rates have dropped or stagnated as their population ages, and education and income levels increase. A continued and significant decline in the number of newborns and children in these countries could have a material adverse effect on our operating results."

    Data from the CDC in the US backs that up - the most recent data available from 2016shows the US birth rate hitting a record low, and with no obvious sign of this trend changing, retailers like Toys R Us are going to face continuing pressure. Longer term, if this trend does continue, all kinds of employers will face pressure too - a different kind of pressure perhaps, this one stemming from relatively fewer entry-level or younger candidates, as well as the need to create workplaces that are more open, accommodating, and available to older workers too.

    Since I love charts, I will close with this one, from our pals at FRED - a look at the increase in the 65+ labor force in the US over the last 20 years or so.

    I will spare you trying to squint at the small print, but the total number of workers aged 65+ has more than doubled since 2000 - with almost 10M people in that group as of the latest data. And even if you can't read the small print, it is easy to see the 'up and to the right' trend in the data.

    Fewer babies and young kids means trouble for Toys R Us in 2018. It could mean recruiting problems for your organization too, in a few years. Don't wait until it is too late, like our pals at Toys R Us, to know how to react.

    Have a great week!

    Thursday
    Feb222018

    US companies are flush with cash, where does 'raise wages' fall on the priority list?

    Last week on the blog we noted the shift in the mix of annual employee compensation increases - companies have and are continuing to increase their use of one-time and variable comp increases like annual bonuses and lessen their use of base (and in theory, recurring), salary and wage increases. The argument, many companies make, is that variable comp awards tie comp more closely to individual and organizational performance measures and provide the organization more flexibility and adaptability to respond to changing market conditions and business performance.

    We have even seen this trend play out in the wake of two recent legislative decisions that have combined to create a pretty significant windfall of excess cash/after tax profit for many of the US's largest companies. One, the reduction in the 'stated' corporate income tax rate from 35% to 21%. And two, the reduction of the tax rate on the repatriation of US company cash that has been parked in overseas accounts, and now can be brought back to the US at a lower tax rate (about 15%).

    With all this additional cash available to many large companies (most of whom are large employers), it makes sense from an HR / Talent point of view to ask a pretty simple question: Will and to what extent will all this cash flow to employees in the form of salary/wage increases or bonuses?'

    Well, sadly for most employees, and for HR and Talent leaders who might be advocating for increased investment in people, the short answer to the question is 'Hardly'. Take a look at the chart below, from a Fortune piece citing some recent BofA Merrill Lynch research on just what these companies plan to do with their soon to be repatriated earnings:

    Looking though that list of top six likely uses of this repatriated cash, maybe you could argue that the one that came in sixth, 'fund pension' has some direct benefit to current employees. Share repurchases, which we will see again in a second when looking at the knock-on effect of lower income tax rates, could also benefit employees who participate in ESOP plans or have a decent bit of their 401(k) tied up in company stock. But that is an indirect, and incomplete benefit at best.

    Another review, this time by the financial firm Goldman Sachs, paints a similar picture of who the likely beneficiaries will be from lower corporate tax rates. From a piece reported by Marketwatch:

    Buyback announcements are up 22% this year to $67 billion in just six weeks, Goldman Sachs said in a note to clients. This follows a report by benefits consulting firm Aon Hewitt finding that 83% of large companies don’t expect the tax cut to boost salaries at all — just help pay for small bonuses companies like WalMart  and AT&T, gave workers, which reporters soon discovered were, themselves, skewed toward higher-paid, longer-tenured employees in many cases.

    And it comes as Goldman finds companies have raised guidance on re-investment in their businesses — the putative reason for cutting corporate taxes at all — only 3%.

    A couple of things to note here. CEOs and Boards do have a responsibility to their shareholders - some would certainly argue that the shareholders' concerns matter more to corporations than any other stakeholders. So moves to increase the share price (repurchases), and return profits to the holders, (increased dividends), are definitely proper and prudent uses of excess cash/profits.

    But the really small levels of internal re-investment, and commitment to improving the long-term compensation levels for employees is a little bit disconcerting. But it also reminds us of something really important. Namely, that for most large organizations labor cost, (and by extension, their investment in people), is just that - a cost that has to be managed.

    What the organization is willing to invest, and whether they are willing to increase this investment is subject to a complex set of variables - competition for talent, product/service strategy, overall labor market conditions, the impact of automation and outsourcing, and even the legal/regulatory climate.

    But what does not, yet, seem to be moving the needle on investment in people and employee compensation,(aside from the slew of copycat one-time $1,000 bonuses we heard all about), is this sudden windfall of excess corporate cash/profits as a result of recent corporate tax changes.

    More simply put, organizations increase what they are willing to pay for any resource only when they have to, not because they are able to.

    Apple won't volunteer to pay more per piece to their supplier of iPhone screens just because they can.

    And they won't volunteer to pay their engineers, accountants, and facilities staff more just because they can as well. Interesting times for sure.

    Have a great day!

    Thursday
    Feb082018

    CHART OF THE DAY: There are too many open jobs, (or not enough people to fill them)

    A really quick shot for a busy Thursday - from the most recent JOLTS report (that's the Job Openings and Labor Turnover Survey and you should have this page on permanent bookmark), the most recent (as of December 2017) data on the ratio of Unemployed workers to job openings in the US.

    Here's the data...

        

    The actual chart on the BLS site is interactive if you want to play around with it, but I will save you the time and let you know that as of the end of December 2017 the ratio of unemployed workers to open jobs was down to 1.1. Basically, the US economy is closing in on having nearly the same number of unemployed workers, (about 6.3 million ) as there are job openings (about 5.8 million) as of the end of 2017. The ratio of 1.1 has been steady for most of 2017 and ties the all-time low in the this data series' history.

    I have not much else to add to this, beyond what you already know. The labor market continues to be at or near record levels of 'tightness'. It will be really interesting (and fun if you are a data geek like me), to see of the ratio goes below 1 at some point, a situation where even if every open job in the US was suddenly filled by an unemployed person, there still would be open jobs remaining. I guess then we will have to build more robots to fill those jobs.

    Have a great day!

    Wednesday
    Feb072018

    UPDATE: On striking for a 28-hour work week

    A few seeks ago I shared the story of the largest metal and steel worker's union in Germany whose members were threatening to strike for the right (among other things) for the ability to reduce their work week to 28 hours per week for up to two years at a time - mainly in times where a worker has increased child or elder care responsibilities. As a reminder, this is what the steel workers were trying to accomplish:

    Workers have downed tools at more than 80 companies across Germany as the country’s biggest union stepped up its campaign for a 28-hour working week to allow employees to improve their work-life balance.

    In what is shaping up to be the biggest industrial dispute in the metalwork sector in three decades, more than 15,000 employees took part in warning strikes at factories including those of the carmaker Porsche.

    The IG Metall union, which represents around 3.9 million workers, wants every employee in the metal and electrical sector to have the option to reduce their working hours for a total period of two years, with the automatic right to return to full-time employment afterwards.

    In mid-January I offered the take that we shouldn't look at these worker's demands as another example of the 'soft' or laissez-faire approach to work that we in the US like to think is common in Europe, and let ourselves believe that these kinds of increased worker calls for more benefits (including fewer hours potentially), could not become an issue here eventually. Workers in all kinds of industries likely have more power than they are currently exercising.

    Fast forward about three weeks - how did it turn out in Germany?

    UPDATE - German metal workers union secures right to 28-hour work week.

    From the piece in Business Insider:

    A German industrial union has won its workers the right to work just 28 hours per week in a deal that could eventually impact almost 4 million people in the country.

    IG Metall, the biggest trade union in Germany for metal and engineering workers struck the deal which will allow staff to go down from 35 hours to 28 hours per week for as long as two years, in instances where they need to care for children, elderly, or sick relatives.

    The agreement between the union and industry impacts some major, global manufacturers like Porsche, Airbus, and Mercedes, and also includes a 4.3% pay rise for the workers. It is a pretty major win for the workers, who seem to have gotten just about everything they were looking for in the deal.

    Why does this matter, especially to US readers, in a time where unions and labor rights movements in general have been declining for ages?

    I would say to think about this deal, and why the workers were looking for it, as less of a 'union' issue and more of a work/life issue. One of the major benefits of the so-called 'gig' economy is the schedule control that most gig workers have. There is a tremendous amount of flexibility and even power that comes with being able to self-determine how many hours you will or can work in a given day or week or month. Some times you want/need to work more, and other times fewer hours. Especially when dealing with child, elder, or other personal responsibilities.

    This effort by the metal workers union is really an attempt to try and marry some of the best features of the 'regular' employee (steady pay, benefits, some level of security, commitment to one company), with the 'gig' worker economy, (flexibility, work/life balance, control and freedom).

    Gig working is not for everyone. It can be uncertain, scary, can have pretty major fluctuations in compensation and benefits. And 'regular' work also has its downsides - lack of schedule control, long hours, stress about work/life. So what the German metal workers are really trying to do is find a kind of compromise between the two - by crafting a design where they are still 'regular' employees, but have more flexibility to determine when they need to reduce (or increase) their working hours based on personal and family circumstances.

    That is the way to think about this story if you are a business or HR leader in the US or anywhere really - this is not about the union or some kind of Euro-socialist approach to work.

    It is about workers trying to find the 'right' kind of work/life balance and arrangement that fits for them in the modern world. And it is about companies trying to find ways to ensure their goals can also be met, knowing that for most of them, these goals can only be met through the success and well-being of their workforces.

    Have a great day!

    Friday
    Feb022018

    New tech won't just replace workers, it will track them even more closely

    I won't do another run at the 'Robots are going to take all the jobs' gimmick today, there is plenty of that you can find pretty much everyday and everywhere. No, today I want to highlight two examples, from different perspectives and contexts, about how tech will not just replace some/most/all jobs one day, but along the way tech will continue to provide ways for employers to track/monitor/coach/guide/punish/reward employees even more closely.

    Example 1 - from our pals at Amazon (the most interesting company in the world) - Amazon could make a bracelet that tracks worker's movements and buzzes them if they move in the wrong direction.

    From the piece on Business Insider:

    Amazon may be looking to improve its workers' efficiency in new ways.

    As was spotted by Geekwire, the company was just awarded a patent for a device that would attach to its warehouse workers' wrists and track their movements using ultrasonic waves. In conjunction with a receiver unit, those ultrasonic waves could track where the worker's hand is in real time and guide it to pick out items, then pack them in boxes.

    If the worker's hand moves in the wrong direction, for example, a slight vibration in the wrist would let them know.

    The idea is to help reduce the time that Amazon warehouse workers spend looking for items, sorting through boxes and shelves, with the idea of helping them be more efficient at selecting the necessary items for a given order. But as the BI piece points out as well, this kind of technology could also be used to measure employee performance and improvement (or regression) down to the micro-level - the gesture.

    I had a summer job working in a perishable food distribution center a hundred years ago, and we were measured (back then), on one metric - how close we came each day to completing our orders in the estimated amount of time allotted for them. So if a given order was meant to be completed in 30 minutes, and it took me 40 minutes to actually turn in the order to the shipping dock, then I would be at 67% (10 minutes overage on a 30 minute order). Each week we had to be a certain percentage rate, (I think it was 85%) in order to stay in good standing. Too many weeks below 85% and you'd eventually get canned.

    Back then we thought that was a harsh, 'Big Brother' type monitoring system. But at least it did allow for some slack, for having a bad shift or two, and for a little bit of gamesmanship. It didn't take too long to find the gaps and wiggle room in the system, and find ways to beat it. And since we were provided a real-time update on our percent completion rate after every order, you could also determine come Friday just how much you had to hustle (or slide), in order to maintain the 85% for the week. Looking back on it now, it seems pretty reasonable overall, to both the company and the workers. But if we thought aggregated performance measurement and targets were 'Big Brother' back in the day, I can't imagine what we (or anyone), would think about performance monitoring and measurement at the gesture level. Wild.

    Example 2 - From the world of sports, taken from an analysis of NBA player John Wall, and his case for being included on the NBA All-Star team this season. Here's ESPN's Zach Lowe providing a bit of data about Wall's performance this season:

    Wall is shooting 42 percent, his lowest mark since he was a rookie, and he just hasn't played with enough vigor on either end of the floor. One measure of that: He has spent 76.57 percent of floor time either standing still or walking, the largest such share among all rotation players, according to tracking data from Second Spectrum.

    Ball-dominant stars need to conserve energy. Some guys shift from walking to turbo mode without spending much time in between.

    But regardless: Wall should not be freaking last. He too often stands around when he doesn't have the ball, or when a shot is the air and he might be able to help on the glass. He switches constantly on defense to avoid chasing his guy around picks.

    That professional athletes have their performance measured and monitored to a greater degree than most other professions is not that surprising - after all metrics and statistics like points scored, rebounds, and assists have been a part of NBA box scores for decades. But what is new('ish) is the technology advances in both video capture and motion analysis that provide data on every step that an NBA player takes during a game. So now instead of just looking at how many points a player scored in a game, and judging his effectiveness based on a combination of things we can count, (like point), and an 'eye test' judgement of their effort level and hustle, NBA teams now can analyze and examine exactly what a player did every second he was on the court.

    Look again at the statistic mentioned above - Wall has been walking or standing exactly 76.57% of the time he has been on court this season. His activity is being measured to hundredths of a percent for crying out loud. Can you imagine working in a job where your management had access to your effort down to that level? Every second you are supposed to be at work? Also wild.

    These two examples (and I am sure there are lots more), point out that the impact of new technology on work and workplaces is not limited to total or direct replacement of workers and human roles. Technology also has the effect (or at least can have the effect) or driving ever closer measurement and control over workers and work performance. I don't think this is necessarily a bad thing - organizations and workers have to be able to understand their work, how to improve, and companies need to continue to get more efficient in order to compete. But, there needs to also be consideration of the balance between measurement, control, and workers' ability to exist as people, in a setting that may not be replacing them, can be seen as de-humanizing them. And until the robots are ready, your organization still needs these people.

    Have a great weekend!