Employers are measuring the value of workers with ever-greater precision

by on February 17, 2014 at 6:11 pm in Economics, Uncategorized, Web/Tech | Permalink

Hannah Kuchler has a new piece in the FT on this topic, here is one bit:

Another pioneering outfit is Sociometric Solutions, which puts sensors in name badges to discover social dynamics at work. The badges monitor how employees move around the workplace, who they talk to and in what tone of voice.

One client, Bank of America, discovered that its more productive workers were those allowed to take their breaks together, in which they let off steam and shared tips about dealing with frustrated customers.

The bank took heed and switched to collective breaks, after which performance improved 23 per cent and the amount of stress in workers’ voices fell 19 per cent.

…David Lathrop, its director of research and strategy, says the sensors are now so cheap they can be put “practically everywhere”, arguing that employees could benefit by tracking their own performance.

As I have stressed in Average is Over, improved measurement of worker value is very likely to increase income inequality.  When contributions are relatively vague, the natural tendency is to have weak egalitarian norms and relatively egalitarian pay structures.  When relative contributions are more clear, pay structures will follow, in the longer run dragging norms along with them.

Larry Siegel February 17, 2014 at 6:13 pm

How invasive of them. Why don’t they just ask me whether I work better alone or with other people.

Socially Extinct February 17, 2014 at 6:37 pm

Spreadsheets and algorithms are so much more quantitatively reliable than your human input. “Our machines will explain and describe your fallibility.” In fact, today’s young managerial class is unable to look you in the eye, much less listen to your subjective impressions.

Jon February 18, 2014 at 12:54 am

Would *you* trust all of your employees to answer such questions honestly?

Further, what if you answered in a way that did not reflect what such tracking legitimately indicates? (for example, if you had higher productivity on days you worked more with other people, even though you self-reported you worked better/were more productive when you worked alone)

Crimsonic February 17, 2014 at 6:14 pm

Sounds ripe for being gamed.

Terra February 17, 2014 at 7:35 pm

Sure, but so is the current workplace.

Crimsonic February 17, 2014 at 7:42 pm

No doubt. But I mean to say that introducing such ostensibly ‘objective’ ‘metrics’ can lead to gaming over and above what would ever be possible without them, precisely because there is a false confidence in their perceived ‘ever-greater precision’ and misleading specificity/accuracy.

There is something that the metrics measure and people good at that thing will be rewarded, but what’s not obvious is that that [something] is truly correlated with workers’ ‘value’.

Nick Bradley February 17, 2014 at 6:22 pm

Interesting that you in no way find this troubling. comment from the article:
Dividend Hunter | February 17 10:44pm | Permalink

That certainly is one implication. Also, by using periods of keyboard inactivity as an indicator, managers may be able to determine how much is spent on a coffee break or eating lunch at the desk. Extraneous e-mails to colleagues also may become quantifiable. There is certain irony in leading edge technology taking us back to the age of Frederick Taylor and his industrial stopwatch.

Tyler Cowen February 17, 2014 at 6:25 pm

Who says I don’t?

Nick Bradley February 17, 2014 at 6:42 pm

your post?

Alexei Sadeski February 17, 2014 at 6:51 pm

Description does not equal prescription.

Nick Bradley February 17, 2014 at 7:00 pm

right. but no sign of concern that I see. instead, I see Tyler embracing the new work environment

Nick Bradley February 17, 2014 at 6:44 pm

I cannot wait for our glorious future where the American Middle Class shifts to a bean-centric diet.

“Don’t scoff at the beans,” he says. “With an income above the national average, I receive more pleasure from the beans, which I cook with freshly ground cumin and rehydrated, pureed chilies. Good tacos and quesadillas and tamales are cheap too, and that is one reason why they are eaten so frequently in low-income countries.”

Nick Bradley February 17, 2014 at 6:52 pm

Promising an all-bean diet is the surest path to a proletarian revolution in the United States :)

Mark Thorson February 18, 2014 at 7:15 pm

I took 30 years for me to figure out that beans cause my migraine headaches. They stopped the day after I quit eating beans. Not one migraine since then (except as tests to confirm it was the beans). I can eat soybean oil and soy sauce with no problem — it’s the bean protein (especially tofu) which causes my headaches.

If anyone tries to force me to eat a diet that includes beans, I will kill them or die trying.

john personna February 17, 2014 at 7:02 pm

Freshly cooked black beans and jasmine rice … mmm.

Locke February 17, 2014 at 7:52 pm

With some Cuban seasoned ground beef, a little bit of cheese and a fried egg on top.

john personna February 18, 2014 at 10:26 am


Max Factor February 17, 2014 at 9:23 pm

I don’t know if TC will regret that quote or ask for it carved on his tombstone. It’s definitely his most memorable quote, LOL.

Alan February 17, 2014 at 10:51 pm

Does your pay depend on measuring the number of people who convert to libertarianism?

prior_approval February 17, 2014 at 11:25 pm

The Mercatus Center uses other metrics.

And as a tenured faculty member of GMU, his pay relies on nothing except a continuing stream of taxpayer funding for that institution.

Larry Siegel February 17, 2014 at 10:11 pm

God forbid I should be thinking.

Bill February 17, 2014 at 6:28 pm

This has been occurring well before the phrase average is over was coined (TM2013).

In fact, if you want to read more about sociometric tagging to measure engagement, and other group tools, you might want to read: “Social Physics: How Good Ideas Spread: The Lessons from a New Science” by MIT Prof. Alex Pentland.

These tools are not so much as to can or fire people as they are to determine bottlenecks, identify ties and linkages, and improve communications and engagement within groups, as well as to ensure a group does not get caught up in groupthink and reaches out for additional ideas.

A very good book that incorporates networks and dynamics.

Nick Bradley February 17, 2014 at 6:35 pm

why not just assign digital watchers? it would be effective.

who cares if its orwellian or not if it increases margins?

Bill February 17, 2014 at 9:20 pm

More information with badges. These are quite sophisticated devices…see the book. As for digital watchers, i.e., a camera watching a room, someone has to code the data, whereas badges passively collect and download it. I recently attending a seminar in which someone presented using visual data of store tracking and sales force engagement, at it took several people to code the data. But, you have to do that since you cannot give a badge to the customer to wear.

leftistconservative February 17, 2014 at 7:00 pm

this is happening primarily because the workers cannot stop it.

Why not?

Lack of democracy, which means we cannot control the gov’t as well as we used to.

Why not?

Diversity, increased size of the nation, suburban, video game lifestyle, etc.

The more diverse the population, the less well defined the common interests, which means the populace is less able to control and hold accountable its elected representatives. Increased diversity means increased factions, leading to a fragments and ill-defined expression of shared interests.

The larger the nation grows, the more factions therein, leading to the same degradation of democracy detailed above.

The modern suburban lifestyle, video games, sitting inside instead of going to church and attending other community activities, etc, means that the ideas getting into young, impressionable minds are more likely to come from those at the top via centralized ideology-dissemination mechanisms such as hollywood, academia etc.

Marie February 18, 2014 at 8:34 am

I don’t know, it’s not a bad point, but I think sometimes factions are the only bowling leagues we have left.

I’m less concerned about the fragmentation — there always was such, somehow the colonies that were founded based on being different were able to come together enough to make the nation. But when your interests are really just video games and brands and etc., those interests (shared as they become, our diverse population all seems to like its Iphones and etc.) are not the kind to move us to do anything but consume those ideas from the top.

I’m sure the economy, etc. has a lot to do with it, but I’ve been amazed at how the creeping creepiness of business has been tolerated by employees. I can’t imagine being asked to wear a dog tag by my employer to track my movements and behavior, but the sad thing is they probably got sold as cool new devices that will improve the lives of everyone.

Game Designer February 18, 2014 at 4:23 pm

Yes, we all know that video games are dominated by Hollywood and academia. Not to mention mechanism for centralized ideology-dissemination. Curses, foiled again!

Walter Antoniotti February 17, 2014 at 7:15 pm

“Twenty years ago x percent of America’s workers possessed the math, verbal and interpersonal intelligence/skills required to enter the America’s high income Group define here as earning at least twice the median income. Ambition and other personal characteristics were also required. College was useful but many went right to work
and achieved success. Members of the Group earn more because they contribute more to their employers earnings/well-being.
Business has become really good at measuring these contributions and as a result the Group now earns more than twice the median income leaving less for those excluded from the Group. Recently, membership has become more difficult because a fourth intelligence/skill has been added to the mix.

Geekability intelligence/skill, the ability to learn and continually update knowledge
and skills related to technology such as computer software, computer hardware (laptops, mobile phones), the Internet and Social Networks are now required to join the Group.” …

Taken from the beginning of

Max Factor February 17, 2014 at 9:14 pm

Interesting read. If it does continue to get worse out there in the workforce it may become logical to opt for the trailer and beans as opposed to running on an ever accelerating treadmill:

“Geekability means many more people are affected and more professionals find themselves with less pay because they just don’t have the ambition required to keep up.”

Dan Weber February 17, 2014 at 7:15 pm

Tyler, have you ever thought about debating Caplan about how the thesis of “Average Is Over” affects child-raising tactics?

If only the top 10% can expect to succeed well in the future, does that affect Caplan’s “just do whatever and things will be okay” thesis?

Max Factor February 17, 2014 at 9:15 pm


I would also like to read more about having and raising kids in an “Average is Over” world.

dangerman February 17, 2014 at 9:17 pm

Would pay money to read this.

Nate February 17, 2014 at 10:09 pm


Crimsonic February 17, 2014 at 7:23 pm

P.S. As a general rule of thumb, my observation is that anything corporations think they are ‘measuring with ever-greater precision’, they really aren’t. They’re just making & circulating reports with lots of numbers in them.

CC February 17, 2014 at 8:41 pm

You’re absolutely correct. Every time I see more metrics come into play at my workplace, I laugh at the naivete of both the people designing the metrics and those interpreting the results (and they tend to have a fairly small overlap). Disclosure of my workplace bias: none of the senior managers where I work have taken any economics courses beyond either ‘Intro to Micro’ or ‘Econ for Managers’. Not sure which worries me the most: poorly educated senior managers trying to measure things they don’t understand with poor tools (all while refusing to talk to experts) or guy running the hedging shop who doesn’t know what stochastic calculus is or why it’s important for his group’s derivative pricing models.

Marie February 18, 2014 at 8:36 am

My first thought on reading this was “make work”.

Next time I’m on the phone with a corporation going through the endless litany of “If this, then press that”, I’ll remember that while they need to streamline costs by automating, they still seem to have plenty of money to hire people to do these silly studies.

JaredN February 17, 2014 at 7:24 pm

Tyler, I have not read the book so your views are probably laid out there, but I am wondering if the underlying allocation of intelligence/ability is as stratified and entrenched as you claim income inequality will become. In other words, if (1) compensation better reflects ability and value and (2) inequality increases as a result, then (3) ability must be increasingly unequally distributed. That’s kind of a troublesome notion to me since I hope that given a level playing field anyone can succeed, but that belief might be terribly naive of me. In any event, is this the sort of future you are imagining?

Tyler Fan February 17, 2014 at 7:34 pm

While, generally speaking, closer evaluation of employees might drive up income inequality, the anecdote here would seem to undercut the relevant thesis of Average is Over, as here the monitoring improved the collective’s performance, rather than identifying superperforming individuals. All of your real fans have already bought a copy of “Average Is Over”; the time for flogging it is over.

mulp February 17, 2014 at 7:48 pm

More importantly, the article points out how work rules make workers perform worse, and that simple changes can increase worker productivity and make them more relaxed.

But that should be chalked up to “most managers are idiots” just as Dilbert has been showing us for decades. But hey, a cartoon in the paper is free and worth every penny paid, while high priced consultants use data to prove managers are idiots and are worth so much more because it proves idiot managers are smart to pay high wages to consultants instead of comprehending Dilbert “lesson of the day” and acting. A common recurring theme being managers are idiots but listen to high priced consultants with stupid advice.

Marie February 18, 2014 at 8:38 am

Yes, it’s interesting that the great innovation was fixing a problem the workers had probably been complaining about for months.

But I also suspect in a few months, their fancy badges will tell them the workers have too much time together to gripe about their customers, it’s creating a negative work environment and voices are being raised, and break time should be altered again. These things come and go in waves, humans aren’t static.

Plus there’s that thing my military father drilled into my head, any time you make about any change at all you’re going to see an improvement for awhile.

ChrisA February 17, 2014 at 7:37 pm

How is this qualitatively different from what managers have always done, which is to try to find their best workers and reward them? In past times it was done by more unscientific methods, such as observation by the manager. However this is subject to all sorts of bias’s such as racism, sexism etc as has been well documented. The new method described here should not have these flaws. So those who are against more scientific methods of measuring contribution are against meritocracy or having the best people rise to the top. We all benefit when jobs are done by those best suited to the work rather than those who can fool the managers.

I would also suggest that in terms of income inequality this can go either way. For sure this will mean that the best people in any particular area will be better paid. But this kind of technology might allow better sorting of people for jobs. So you quickly learn perhaps that you are a lousy accountant, but a great physical trainer. Too many people invest a lot in their careers before they find that actually they are not suited to them. But by that time they are too late.

mulp February 17, 2014 at 7:41 pm

“The bank took heed and switched to collective breaks, after which performance improved 23 per cent and the amount of stress in workers’ voices fell 19 per cent.”

Tyler proves that employers are NOT measuring the value of workers with greater precision, but discovering instead that its management has been overpaid for years because employers forced its workers to perform below their value with stupid work rules.

Tyler clearly read what his preconceived bias is – workers need to be paid based on performance to reflect their value which is overrated and workers are overpaid, and refused to read the article which is clearly saying the employers are forcing workers to perform below their value because the employers do not understand how people are managed to maximize their abilities.

Curt F. February 17, 2014 at 7:44 pm

Tyler proves that employers are NOT measuring the value of workers with greater precision, but discovering instead that its management has been overpaid for years because employers forced its workers to perform below their value with stupid work rules.

+ 1

john personna February 17, 2014 at 8:02 pm

I am reminded of a couple past themes. Readers readily accept that there are “zero marginal product workers,” but recoil when someone suggests that “zero marginal product jobs” might be popular, and remunerative. Why, because managers know marginal product when they see it?

Larry Siegel February 17, 2014 at 10:15 pm

Actually there are lots of ZMP jobs. “You have to fax me your 1099 before I can fax you your W-9″ or vice versa is an example. I have no reason to believe they’re filled by ZMP workers. (A ZMP job is not allowed to pay the worker his or her marginal product, nor is the ZMP worker allowed to collect it, creating a wonderful mismatch problem.)

I am more worried about NMP jobs and workers.

guest February 18, 2014 at 12:11 am

have you not been following this blog. Employees are thieves of value and destroyers of capital who have to be brutalized and controlled to the maximum extent possible. Tyler knows who keeps the lights on at his center, and it aint people buying his books.

Floccina February 17, 2014 at 8:13 pm

Remember you do need to beat the bear just the guy next to you. Same here you do not need to work without a minute break just more than the bottom 5%.

Max Factor February 17, 2014 at 9:21 pm

My buddy worked at Morgan Stanley when they were cutting costs. Each year they fired the bottom person in his group even though the bottom person was still a very good worker. After three years of this my friend left Morgan Stanley and joined a government agency. Shortly afterwards, they dismantled the remainder of his Morgan Stanley group and sent the last few jobs they couldn’t automate to India.

So sometimes outrunning the other guys (and not the bear) doesn’t work. Unless you get a job for the government – there are no bears in the government.

Rahul February 18, 2014 at 2:52 am

A hungry bear does not stop after one meal. :)

Roy February 17, 2014 at 9:41 pm

We’ll see how well this measure of “value” holds up when a “disproportionate” number of “protected class” workers are fired based on it

asdf February 17, 2014 at 9:56 pm

Nothing says, “I’m a liberty loving libertarian,” more then having a spying device keep track of your every move and word.

David Khoo February 18, 2014 at 1:23 am

“When contributions are relatively vague, the natural tendency is to have weak egalitarian norms and relatively egalitarian pay structures. When relative contributions are more clear, pay structures will follow, in the longer run dragging norms along with them.”

I am not surprised by your beliefs, since you are a corporatist (i.e. libertarian) and therefore are inclined to believe that corporate leaderships would nobly enforce “egalitarian norms” when left to themselves (a risible idea to anyone who has actually experienced corporate leadership). I believe the precise opposite.

When contributions are vague, the natural tendency is to enforce an arbitrary, self-reinforcing, self-serving hierarchy. Those in power promote people like themselves, who proceed to do the same ad infinitum, as long as there is no external pressure or accurate measurement of performance. It is a common trope that those at the top have certain social traits but are actually very unproductive, while our most productive and capable individuals are lower in the hierarchy and kept down there because they are not one of “them”. It is a common trope because there is a lot of truth to it. In my experience, actual ability has very little correlation with position in the social or corporate hierarchy, and actual spread in ability between people is actually very small once proper statistical measures are used (eliminating lucky streaks or survivorship bias). Better measurement will make the world more egalitarian as this truth finally shines through. I am confident the machines will find there are very few ZMP individuals or true superstars (as opposed to lucky survivors), if only we let them.

Guy February 18, 2014 at 9:25 am

You do realize that your claim of equivalence between corporatism and libertarianism doesn’t make any sense, right? Corporatism relies upon strong central state activity to leverage. Libertarianism opposes strong central state activity in the first place. Cognitive dissonance much?

Rahul February 18, 2014 at 1:28 am

Not sure which way this pushes inequality. Sure it allows you to reward star assembly line worker A over B who’s less productive. To that extent it boosts inequality. But these differences are not as huge as say the status quo CEO vs assembly line wage differential. A large quantum of the fantastic wages we pay top bosses is based on their perceived contribution not a measured one.

Once measurement becomes accurate & clearly attributable how will the worth of vague managerial & supervisory positions change? If those wages drop it has a far stronger effect on reducing inequality.

CBBB February 18, 2014 at 2:00 am

The higher management class controls who gets measured, they will not allow themselves to be measured.

Alexei Sadeski February 18, 2014 at 3:25 am

The board measures the high management.

CBBB February 18, 2014 at 7:07 am

The board is paid off, many boards are made up of managers from other firms. They all work togetherand scratch each others backs.

Alexei Sadeski February 18, 2014 at 12:43 pm

I think you’d be surprised.

jpa February 18, 2014 at 3:28 pm

They get measured by P&L.

CBBB February 18, 2014 at 2:16 am

Anyway this will probably end up being just another management disaster in the end. Lots of data will be collected, MBA schools will offer all kinds of courses in “Employee Behaviour Analytics”, books and papers will be written by business school professors, more faddish MBA theories will be produced, and ultimately you’ll end up with overzelous managers contorting the employees into all sorts of silly schemes based on a plethora of dubious correlations they find in the data.

byomtov February 19, 2014 at 3:48 pm


Bill February 18, 2014 at 2:44 am

As far as ZMP, tenured faculty have nothing to worry about. Average is never over.

Lorraine February 18, 2014 at 3:10 am

Heya! I’m at work browsing your blog from my new iphone 4!
Just wanted to say I love reading through your blog and look forward to all your posts!

Carry on the excellent work!

prior_approval February 18, 2014 at 11:25 am

I think this blog could do with a bit better automation – like that which has worked so well in Lorraine’s case.

Not that anyone spends all that much time cleaning things up, right?

william February 18, 2014 at 4:10 am

My question is this. Managers in theory get paid more because they have greater impact on profits. So why don’t we use this tech on them? Surely small improvements in management time will have a larger impact on profit, and if they don’t, well we can stop paying them so much.

Steven Clarke February 19, 2014 at 2:08 pm

Too right. There’s a bit of an ideological blindspot where workers’ contributions need to be monitored, but not bosses’.

Anonymous February 18, 2014 at 6:27 am

“The bank took heed and switched to collective breaks, after which performance improved 23 per cent and the amount of stress in workers’ voices fell 19 per cent.”


I have been involved in many productivity improvement programs at banks and other organizations, and if this refers to any non-trivial definition of “performance,” and non-trivial group of employees over any non-trivial time, this is nonsense. You would think a competent reporter would investigate an obviously self-serving claim like this for an extraordinary improvement in human productivity.

Think of what this implies for the output of, say, a bank branch. You could go, for example, from 12 tellers and 4 platform staff to 10 tellers and 3 platform staff, and get the same number of transactions processed and loans made. With no reduction in quality. And have less stressed employees. All because you watched to collective breaks.

Rahul February 18, 2014 at 8:46 am


This sort of synergistic press release is a common fraud. It hurts neither BoA nor Sociometric Solutions to claim they are heralding spectacular efficiency improvements.

Doug February 18, 2014 at 6:38 am

My guess is this trend is just transitory. Any job where productivity can be so easily tracked and measured probably is a simple enough job to be automated sometime in the not too distant future.

Marie February 18, 2014 at 8:49 am

How is this measuring the value of employees, even as employees (which is what I’ll assume is implied)?

Measurement is only as good as what you choose to measure.

In a well adjusted economy in a free country, a valuable worker would be an educated, thinking citizen with virtues like honesty and a sense of responsibility which drives him to give his employer good value for his salary.
When you make your employees wear devices to record their voice levels, you are discouraging from your workplace those kinds of people.
The corporate employers that seem to get the most from their workers are the ones that vest responsibility and trust in them. Contrast dealing with employees at BOA with dealing with workers at Chik-fil-A. The difference isn’t precision measurement. It’s treating human beings like human beings that you are working with to produce a product or service of quality.

Locke February 18, 2014 at 9:30 am

Might this trend (should it pick up) encourage a shift from employment based work to contractual based work? Spying on company assets (ie, employees) is one thing, spying on company peers (ie, contractual relationships) is another.

Mbutu O Malley February 18, 2014 at 11:31 am

Is this just rediscovering the Hawthorne effect?

A.B Prosper February 18, 2014 at 1:56 pm

The best solution to a great many of our problems and the one that will not ever be endorsed or applied is a combination of enforced inefficiency and social credit. This will give people an “in” to the society and a means to purchase production. The current solution efficiency uber alles is simply cannibalizing the consumer base and is not only in the long term destructive to profits its just not conducive to a safe society either. Speaking for the US its part and parcel of why so many states (essentially all of them) are now moving to “must issue” concealed carry

IMO anyway I doubt an average is over world will be all that wealthy It will probably resemble Mexico with extreme levels of corruption a fearful execs living in gated communities and a mass of very angry people fed up with beans, figuratively and literally. The US will also have lot of weapons and demographic instability too. Not fun

With the democratization of technology, 4GW and global guerrilla concepts may lead to interesting times indeed. The real danger too is that the street gets smarter.In a middle class society, the street usually doesn’t have the same intellectual capital as the the rest of society, smart people have better things to do.

However even in an AIO world, education will be cheap (probably unless the elites ban literacy or books which they might try) and a lot of capital that would be contained or used for the social good won’t be there, Most will try to scrape up a living but it only takes a few to create havoc. The current Target card theft was a good example, its liable to cost millions maybe billions and future hacks might be worse. They might also be directed at political ends, more so than the Snowden half hearted political message (in his own mind he was a reformer, not a destroyer) might cost US companies billions.

Hopefully I’m wrong but we may well find that are technology is our trap and a one way trip to a collapse not our salvation.

gregor February 18, 2014 at 7:56 pm

Evolv and the technology that it is developing is evil.

byomtov February 19, 2014 at 3:56 pm

Don’t these sorts of things historically lead to what I think used to be called “rate-setting” – the establishment of informal limits on productivity by workers in factory environments? As I recall, “rate-busters,” those who much exceed production expectations, were subjected to peer pressure to cut back and not embarrass their co-workers.

After all, it’s not like performance measurement is some magical new idea.

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