By John Tamny
‘Firing people was easily the worst part of the job.” Those are the words of a great friend of mine who for decades ran a very successful financial corporation. The sleepless nights that preceded gently telling people they weren’t measuring up were agony for him.
The popular notion of indifferent-to-employee CEOs is so very divorced from reality. I’ve never met one who enjoyed being the bearer of bad news to workers who, in many instances, had dependents.
My friend ultimately devised a fix so that he could avoid what was so disagreeable. He designed a production-based compensation structure so that the employees could succeed or fail on their own. So quantitative was it that some of the highest paid employees worked the fewest hours, and vice versa. No sucking up to the boss, no necessary “face time” in the office, just production tied to compensation. And if they didn’t produce they would know this without being told. It would show up in pay. Basically, they would “fire themselves.”
Hall of Fame football coach Bill Parcells once said, “you are what your record says you are,” and this CEO essentially applied Parcells’ maxim to the workplace. He was able to sleep easier as employees self-selected out of his company, as opposed to his having to tell them to leave. His employees were happy and so was he.
All this came to mind while reading Matthew Walther’s recent piece from The Week in which he accused Amazon of being a “sweatshop.” Walther laments the “human suffering” that allegedly takes place at Amazon since its warehouse workers are “collectively subject to an oppressive system of automated performance review.” It’s no insult of Walther to suggest he’s likely never run a business, and that he’s unfamiliar with the acute agony associated with letting people go.
Had he run one, and were he familiar with how awful it is to tell individuals it’s not working out, he would understand that quantitative parameters very much redound to the employee as much or more than they do the CEO. For one, they make it possible for marginal candidates to get hired in the first place. Forget connections or anything else that leads to employment; quantitative measuring exists as a path for individuals to prove their worth.
Indeed, how often have readers said something along the lines of “If I could just get my foot in the door I would show them”? Amazon has, if Walther’s analysis is to be believed, designed a system that creates a pathway into one of the world’s most valuable companies. And a path to increased pay, if its more open door leads to the arrival of productive employees.
Useful here is that Amazon is hardly alone in setting standards. Nearly all great companies do, and nearly all great companies make plain that they’ll shed the low performers on an annual basis. That they do similarly redounds to the worker. Employees know in advance what’s expected of them, or at least know their continued employment will be a consequence of their executing in above average fashion. Why would anyone want to be well below average, and expect to be paid in perpetuity for it? That’s only possible in government…
Quantitative performance measurement also once again makes it possible for the eager to get the job in the first place. To understand this, it’s worth remembering why unemployment in Europe is generally higher than it is stateside. One driving factor is that it’s hard to fire employees who aren’t making the cut. Better yet, it’s very expensive for businesses to hire in consideration of all the rules related to severance and the like. So with shedding the underperformers in Europe a difficult process, so is hiring them to begin with. Amazon, by virtue of it laying out what must be achieved in advance, is creating opportunity. Absent “automated performance review” that weeds out those who aren’t up to the job, Amazon wouldn’t be able to give a chance to the many individuals who are up to working for the Seattle retailer.
Walther further laments that “[W]henever 75 percent of employees are meeting certain pre-assigned goals, the numbers reportedly can be increased.” Well, of course. Without knowing how Walther is compensated, does he really think he could continue to toil as a writer (salary or hourly wage) if his output (and quality of it) in no way grew? Can the readers reading this piece say with a straight face that they shouldn’t be required to improve at whatever they’re doing? Would anyone want to do anything day after day, and year after year, without getting better at the chosen activity? Work and life would be miserable without improvement.
And while it’s shooting fish in a crowded barrel to state the obvious about how businesses aren’t charities and that productivity increases are the only way to keep the doors open, sometimes the obvious must be stated. Furthermore, how very cruel to the worker if the employer thinks so little of him as to not demand relentless betterment. As individuals we all remember – frequently fondly – the people who got more out of us than we thought we had.
It’s also likely that Walther leaves out another driver of Amazon’s routine increases in terms of “pre-assigned goals.” Logic dictates that the company regularly invests in productivity enhancements that enable greater and greater work specialization. Rising productivity is naturally a consequence of investment, so the boost in “pre-assigned goals” that has given Walther the vapors is actually quite logical.
Notable about all this is that workers plainly agree that Amazon’s working conditions are pretty logical. Indeed, according to The New York Times, Amazon reached 300,000 employees faster than any public company in history. It wouldn’t have if conditions were of the “sweatshop” variety, and if the work culture were defined by “human suffering.” Unemployment is presently low, there are countless employers out there that aren’t Amazon, yet people flock to Amazon.
They also flock to the city in which Amazon is headquartered. As the Times recently reported, Seattle has had more giant construction cranes than any other U.S. city for three years running. Workers go to where the opportunity is, which means Seattle is increasingly populated by individuals not from there. It seems actual workers similarly know something Walther does not.
John Tamny is a speechwriter and writer of opinion pieces for clients, he’s editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). His new book is The End of Work, about the exciting explosion of remunerative jobs that don’t feel at all like work. He’s also the author of Who Needs the Fed? and Popular Economics. He can be reached at firstname.lastname@example.org.
Reprinted with permission from Real Clear Markets.
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