*The Fissured Workplace*

That is a new and important book by David Weil and the subtitle is Why Work Became so Bad For So Many and What Can Be Done to Improve It.  I take the author’s main thesis to be that corporations have, in the interests of efficiency, focused increasingly on “core competencies.”  That has led to an outsourcing of non-core jobs and the commoditization of those jobs, outside the sphere of benefits, workplace community, investing in workers, and caring about worker morale.

Here is one excerpt from the book:

By focusing on core competencies, lead businesses in the economy have shed the employment relationship for many activities, and all that comes with it.  Shedding the tasks and production activities to other businesses allows lead companies to lower their costs, since externalizing activities to other firms (particularly those operating in the more competitive markets) eliminates the need to pay the higher wages and benefits that large enterprises typically provided.  It also does away with the need to establish consistency in those human resource policies, since they no longer reside inside the firm.  This aspect of fissuring pushes liability for adherence to a range of workplace statutes (and other public policies) to other businesses.

I found this by no means a perfect book in terms of presentation.  The argument is meandering and it is not clear where the evidence is to come and what is to count as evidence for or against the thesis.  I also would have liked a clearer discussion of incidence.  If every company is producing “core competencies,” cannot the resulting boost in productivity make virtually all workers better off?  And cannot most workers end up in companies where they contribute to core competencies?  Well, maybe not, but the upshot here is not exactly clear from reading this book and furthermore the pessimistic tone of the book will then depend on other, quite separate mechanisms for distributing the benefits of these developments to capital not labor.  Still, this work presents an important idea with insight and I hope it finds its deserved readership.

Comments

Something else I've noticed... you are better off aligned with an organization who considers you core to its business.

If you are a sysadmin supporting the IT infrastructure in a company that sells cosmetics... you are a cost center.
If you are a sysadmin in an IT consulting firm that is providing services to a company that sells cosmetics, you are the talent.

The difference in treatment, compensation, etc is tremendous.

Yup.

Agree mostly but one counterexample is niche jobs. An IT consulting analyst is replaceable easily but if you are a two-person team coding a refinery's microcomputers made in the 1970's you may be a cost center and non-core yet quite irreplaceable.

> if you are a two-person team coding a refinery’s microcomputers made in the 1970′s you may be a cost center and non-core yet quite irreplaceable.

Management will particularly loathe you and long for the day when they can chuck the system and you along with it.

They may but can they? It's a risk you take. OTOH, maybe this was a bad example: niche doesn't always have to be obsolete.

Go where you can be the talent or the agent.

If you are a sysadmin supporting the IT infrastructure in a company that sells cosmetics… you are a cost center.
If you are a sysadmin in an IT consulting firm that is providing services to a company that sells cosmetics, you are the talent.

I'd agree, but it seems more common now that the only real "talent" of value is sales. Providing the service that the company sells is simply a cost center. (At least in the large contract for services industries.)

A good salesmen is able to sever the connection between quality of service and the next sale, which is why good salesmen are so valuable. (Often the consumer of the services are several ranks down the hierarchy from the people who make the purchase decisions, so that helps.)

Sadly, I'm a terrible salesman. Looks like I'm stuck being a cost center.

So the division of labor is our enemy?

A lot of this shedding non-core competencies is less about division of labor per se and more about finding cheaper labor. Many of the units & functions shed may not have been had there been no China / India.

Not so say outsourcing is our enemy, just that the answers are complicated.

So, you're saying that some firms...are trying to maximize...PROFITS?

No. What may be good for the firm need not be equally good for the workers. That's all I'm saying.

Oh. So firms are looking for cheaper labor in order to...?

He is not mentioning division of labor as much as firm specialisation.

I certainly agree with you and Quadrupole and wish to offer the following anecdote from a friend working in state admin in the UK.

He noted that when schools and the NHS hospitals started outsourcing jobs like cleaning and food cooking, the costs might have been reduced but the quality usually collapsed even faster than the price. And why? Because the contractors were using cheap labor, providing none of the benefits cooks and maids had enjoyed when working directly for the hospital or school and so morale, loyalty and the pride one could take in a job well done fell through the floor.

But, hey, it IS cheaper...

That's not always true though. At a University when we had an in house team of janitors things were quite crappy but switching to a contractor definitely improved quality. Probably the threat of competition and losing the contract etc.

The correlation between outsourcing and quality (or lack of it) isn't that obvious.

Agree. It depends on whether the company wants to outsource to a high or low quality provider. The push is often towards low price, because that's visible all the way up to upper management. Quality affecting only lower level employees is less likely to be continued, in my experience.

I've worked in a couple of companies where the internal company cafeteria was outsourced to ARAMARK, and in both cases there was substantial improvement. To quadrupole's point above, the cafeteria staff was now part of a company's core competency, and provided training and opportunities for advancement to other company installations.

If it's non-core, who cares if the quality collapses? If you can re-invest the dollars in your absolutely core business, your margins go up substantially. The key lies in understanding what your "core" competency really is, and what customers value from that. Hospitals are not in the business of making you well. Hospitals are in the business of making you feel well. I am not in the business of accounting. I am in the business of making my boss look good to her superiors and eliminating her worry that the accounts are going to the Dogs.

Frederic, this is a management problem and indicates laxness or inkompetence on the side of the hospital (or the underlying bureaucracy). There are tons of cleaning businesses around and chucking one and trying another is easy. After all, the supermarkets and the banks are clean.

I cannot rule out that the problem is really in the NHS again. Perhaps the hospitals are not allowed to choose their providers, and the cleaning services are decreed to be outsourced to some ministerial nephew's company for the entire England and Wales.

Not having read the book, there seems to be a dim reference to lack of healthy anti-trust enforcement. I can only envision "lead businesses" extracting razor-margin outsourcing deals if there are relatively few lead businesses---but many smaller ones, who badly need contracts with the big guys. (And it certainly helps the lead businesses if their size enables them to shop on the international market, but the smaller ones can't as easily hawk their wares overseas.)

I work at a very large company where it's been stated in meetings that a huge determinant of our future success will be: use of our size to strong-arm suppliers to their thinnest margins possible. Truth is, we have been working hard at that for years now. In response, several suppliers have merged or gone out of business...leaving only the biggest, and reducing our strong-arm ability. Where does all this end? Too big to fail?

In a fully realized free market, everyone must accept market prices; nobody is big enough to move the market, and if they are, the government looks to break them up or penalize, should the outsized company exercise that power.

If Mr Weil's book covers the need for beefier anti-trust activity, I hope it draws attention to this important matter.

He says it as if it is a bad thing. Sure there are some things that are outsourced to low cost jurisdictions, but there are more that are local due to the exigencies of the work.

An anecdote. A friend who is an electrician did some work for the local Walmart. They got a purchase order, did the work and the money was transferred before he got back to the shop.

Another one. I do quite a bit of work for large grocery chains, and for the last few years have seen a concerted effort to outsource as much of the payables paperwork onto us. One client takes at least an hour to process an invoice. That hour gets charged at our chargeout rate. Instead of paying someone $16 an hour to do it, they pay quite a bit more. Never has made much sense to me. I suspect stuff like this is why the productivity improvements from computer technology have stalled.

Union screeds rail against this type of stuff because they can't organize a bunch of disparate workers who are generally quite happy with their work and the freedom that comes with not working for a large firm and dealing with an HR department.

The what workplace? Strange metaphor; the word "fissure" is an anatomical term

A fissure is any split in something. In anatomy, geology, relations, etc. It's not just anatomical.

The left loves big companies. They're easy targets for implementing social policy. In the short run.

In other news, apparently water seeks its own level.

Not to derail the thread, but they also like minimum wage hikes as they can absorb the labout costs more easily than smaller competitors. This solidifies their market position in the short term, and grows it in the longer term.

Corporate employers do the bidding of a (our) nanny state. If you work for one, you're dependent on them for your and your family's wage, healthcare, retirement fund. You can't say or write what you want if it goes against the PC zeitgeist; you could get fired or your career poisoned by the most spurious accusations of racism, sexism, harassment, or contributing to a "hostile work environment."

However, for monopsony-related reasons, it's tough for labor supply per se to change this suffocation--there aren't too many alternatives for would-be employees. Entrepreneurship, ex-patting, or academia isn't for everyone.

Isn't that viewpoint a sort of corollary to "The Theory of The Firm?"

Outsourcing means that more people can work at places where their skills are core to the business. Accounting departments are overhead in almost all businesses. In accounting firms they are core. If you're an accountant, work at an accounting firm.

The large monolithic corporation might take better care of workers who would be marginal wherever they work, because it has a higher benefits floor than a company focused on providing that service. However, that business model is no longer competitive in most industries.

The ongoing reduction in transaction costs via automation and other improvements is continuing to lower optimal firm size and permit ever greater firm specialization. The # of 1-person "firms" is growing rapidly.

Outsourcing is great. A few large companies have more ability to manipulate the political process and engage in anticompetitive conduct than many smaller companies. Beware of concentrated power in both the public and private spheres.

It sounds more like a description of the British civil service than of big corporations.

I'd be interested to see if the book explores the roles of management consultants in this transformation of the nature of the firm.

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