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Sunday, June 27, 2010

The Golden Rule for Employers

Dr. Gary Roberts
Robertson School of Government

It is very tempting for employers to take advantage of workers during recessionary periods. The high unemployment rate in conjunction with few job openings provides employers with a powerful “hammer” to increase workloads, decrease staffing levels, cut wages, reduce safety standards, and eliminate or reduce benefits irrespective of the actual fiscal stability or health of the organization.

 These strategies may increase short-term productivity and profitability, but generate great near and long term moral, ethical, mission and organizational effectiveness costs.

Employees are inherently aware of the challenging labor market realities and are thereby more sensitive and responsive to employer priorities and concerns, even at the expense of their overall health and well being. This awareness reflects self-interested survival, but also entails a good faith ethical and moral commitment to the prosperity of employers and the interests of their fellow workers.

What is the “fruit” produced by many of these short-term, cost-cutting measures? According to the U.S. Bureau of Labor Statistics, productivity rose by 2.9% in the non-farm business sector during the current recession (2007-2009), its highest level in fifty years. However, the productivity gains come at a high price. The cost is reflected in the dramatic erosion in employee job satisfaction with fewer employees doing more work. A recent Conference Board Report indicated a drop in employee job satisfaction from 61 percent in 1987 to 45 percent in 2009. This reflects not only the changes to working conditions, wages and benefits, but a general erosion of respect and Golden Rule treatment of employees.

Management can intimidate and bully employees with the viable threat of easy replacement, but that is a high price given the rate of job satisfaction is directly linked to turnover, customer satisfaction and other key organizational health indicators. Hence, dissatisfied employees are more likely to leave when conditions improve and work with less effectiveness while employed. The employees that do leave for greener pastures are often the most valued and productive. Hence, the long term result is a loss of institutional memory and an erosion of competence.

Secondly, what about the effects of layoffs? Almost all of the research data indicates that layoffs reduce long-term profitability and organizational effectiveness imposing high costs on employees through “survivor’s guilt” and fear. The remaining workers are saddled with increased work hours and effort levels and a “witch’s brew” of negative mental and physical health effects including higher rates of cardiovascular disease and depression. Hence, employers are creating a Darwinian “survival of the fittest” culture that imposes great burdens taxing employees and their families.

What is the Golden Rule employer response? First, recognize that employees are not inanimate “assets” or “costs” that are mechanical instruments of production. Employers possess an obligation for good faith treatment of their employees and the associated web of relationships including the family and the community at large. Not only is it ethical to place “people over short- term profits,” it makes good business sense. When cost-cutting measures and layoffs are a last-resort option, and the company or organization is willing to endure higher costs or lower profits to protect employees, workers return the loyalty with increased levels of motivation, commitment and productivity.

Golden Rule employers empower employees to generate means of reducing costs and increasing profits through productivity enhancement programs such as Total Quality Management and Six Sigma. In lieu of layoffs, Golden Rule employers utilize other options such as voluntary furloughs to retain jobs and share the burden. Management takes the lead in reducing or eliminating bonuses and other forms of compensation not linked to performance. A great historical example of these principles is Malden Mills, the Massachusetts textile company. In 1995 the plant burned to the ground, and the company was faced with closing its doors and laying off 3,000 employees with devastating consequences to the community. The owner of the company, Aaron Feuerstein, rejected the path of expediency and embraced the Golden Rule and paid the employees while the plant was rebuilt generating tremendous good will and loyalty leading to long-term prosperity.

If more employers would embrace a covenantal, long-term approach, we would create a more just, equitable, and prosperous workplace and society.

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