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September 10, 2020

Optimize or Empower The Workforce?

By Tony DiRomualdo  – Senior Research Director at The Hackett Group

As the challenges of operating a business in the Covid-19 world show few signs of letting up, the C-suite is turning its attention to dealing with the longer-term implications for the workforce. This is exposing values and beliefs of the organization and the nature of executive perceptions and levels of trust in their workers.

This issue brings to the fore a clash of management philosophies – on the one hand empowerment of workers and on the other optimization of labor. The former treats workers as an asset to be developed, the latter as an expense to be reduced.  One is fundamentally based on trust of workers, the other on distrust.

With many industries hit hard by the pandemic, uncertain growth prospects, pressure to reduce costs to survive, and a swing back to labor market surpluses, many executives are looking more closely at how they can reduce the cost and increase the productivity of their workers. The conditions of Covid – socially distanced worksites and large-scale remote working are causing worry in the C-suite about how to sustain the productivity of the workforce.

 

Two Paths to the Present

In his article, “Stop Overengineering People Management”, appearing in the September-October 2020 issue of the Harvard Business Review, Peter Cappelli of the Wharton School draws attention to two popular management theories that can be seen in a new light in the current environment – one emanating at the turn of the 20th century and the other starting in the late 1950s.

The idea of labor optimization came into being through the work of Frederick Taylor, known as “The Father of Scientific Management”. His was very much an engineering-based approach intended to find the optimum way of performing different tasks. It centered on documenting how work was performed, measuring the results and determining the best way of doing it. This concept got its start in the factory but soon found its way into white-collar work. By the 1930s, issues with Taylorism began emerging and alternative methods started to appear centered on giving workers more discretion in how to perform their work. Studies conducted in the 1950s documented the results of these alternative methods. In his book “The Human Side of Enterprise”, published in 1960, Douglas McGregor famously categorized these two different labor management concepts as Theory X (tight control of labor) and Theory Y (giving workers freedom to take initiative).

By the 1980s and into the 1990s, Theory Y approaches grew in popularity as an antidote to boring repetition and mindless work wrought by automation of manufacturing and other processes.  Led by the total quality management concepts of W Edwards Deming, this new movement emphasized front-line worker empowerment exemplified by the Toyota Production System which was widely adopted by western auto manufacturers and later spread to other industries. A core principle was equipping staff doing the work with tools and techniques to diagnose and fix quality problems. As the continuous improvement mantra became widely adopted by companies, the tools and techniques continued to evolve led by lean production and management methods.

In parallel, beginning in the early 2000s, labor optimization proponents began to increasingly adopt offshoring and offshore outsourcing to take advantage of wage differentials between mature and developing economies. Both of these strategies got a boost from the Great Recession of 2008 and remained strong throughout most of the following decade.

Cappelli notes that in recent years two new technology-driven trends have entered the picture – talent on demand models and algorithms. The former has fueled the growth of the so-called gig economy, using technology to efficiently match talent demand and supply. Managers attracted to this model want to quickly scale their labor capacity up and down to match changes in demand.  Traditionally, staffing services vendors helped manage companies manage labor supply by providing workers on a temporary basis.  Uber and other companies created digital platforms to match buyers of skills and services with freelancers and contractors supplying them. These different approaches shifted the onus of hiring and firing away from the companies and onto third parties. Use of temporary workers and contractors has grown in popularity with roughly one-third of the US workforce in this category.

Cappelli points to artificial intelligence (AI) as another powerful force pushing companies toward Theory X. AI tools often take decision making away from employees and even some managers.  They monitor all activity with a goal of finding one best way of doing a task (a digital reincarnation of Taylorism).   Cappelli sees AI as a killer of employee engagement and creative initiative. He reckons if employee empowerment is taken away by algorithms, they will have little motivation to pursue innovation.

Now comes Covid-19 and the massive shift to remote working, providing a further impetus to leaders to pursue labor optimization. Initially, many top leaders went against type (according to Cappelli, over 75% of CEOs have a background in engineering or finance, disciplines in which the optimization ethos is predominant), demonstrating heretofore unseen levels of empathy and concern for employees.  They were pleasantly surprised by the success of the shift to remote working and several have been re-evaluating their future office space plans as a result.

Lately, however, there have been calls from some C-suite executives for new methods to measure their productivity worried about the productivity of remote workers.  These proponents of labor optimization are worried about whether people they can no longer see are really working. An increasing number are turning to monitoring technologies on computers, mobile devices and in badges, to track every activity and movement of employees to ensure productivity levels are maintained.

One wonders whether this approach will prove to be a winning formula? Perhaps in the short run. With unemployment high, most workers will grit their teeth and endure (or find ways around it).  Longer term, however, the effect is likely to be largely negative.

There are other corporate leaders that are further embracing worker empowerment. They are seeking to identify and remove any obstacles getting in the way of their workers’ ability to perform their jobs well, whether at home or at a worksite newly configured for social distancing. They are putting worker health and safety first, are worried about burnout and are rejiggering health, wellness and family benefits to help staff get through the rigors of the pandemic while performing their jobs as best as possible.

 

A Third Way to the Future

Must leaders choose between Theory X and Theory Y – optimizing versus empowering their workforce – or is there a practical compromise between the two approaches?  Cappelli suggests there is a third way, and that blending optimization tactics with employee empowerment actually works better.  He points to lean production methods as proof. It’s a data-intensive approach that gives front-line workers a say in improving productivity and quality.

I agree with Cappelli but add these caveats: Leaders should seek to optimize processes not people. Labor optimization should focus on getting the best, not the most, out of workers. In some respects, a delicate balance between the two approaches must be maintained.  Mix inspiration to do the right things with guardrails to guide behavior. Create incentives and inspirations that pull people into the right direction and behaviors rather than rely on enforcement mechanisms.

Three things – focus, skills and motivation – are especially important if people are to give their best efforts and perform their jobs successfully. A clear understanding of objectives and goals keeps people on track. The right tools, skills and knowledge equip workers with what they need to succeed. Having a motivation and mindset to perform the work effectively creates enthusiasm and energy to excel. Leaders should apply a mix of optimization and empowerment tactics in all three of these areas.

Focus

There are myriad effective ways for identifying and tracking goals – new apps help managers and employees to document and monitor progress towards achieving objectives. But leaders should also pay attention to the purpose and mission of their organizations and teams. Connecting the work to a higher purpose, especially one articulated with the participation of employees, adds an extra emotional link for individuals to personally identify with the broader organization agenda.

Enable

Digital technologies have become so advanced and pervasive that nearly every task, activity and even the emotions of workers can be measured and monitored. Leaders should resist the temptation to wield this data as a cudgel or use it to micromanage staff. Collect the data but enlist workers to decide who should see it and how to best use it. Focus insights from analytics and AI on helping workers to improve their skills and performance.  Encouraging experimentation and learning on the job is an effective way to sustain productivity and generate a flow of fresh improvement ideas among the workforce.

Engage

Use multiple methods to track employee sentiment. Focus on identifying the drivers of engagement and performance and take whatever steps are necessary to sustain them, including removing obstacles to productivity. Don’t be afraid to trust workers by granting them autonomy and flexibility to decide where, when and how to perform their work. These steps will not only keep morale high but help to build commitment to your organization.

In my view, the chief people management challenge of the decade of the 2020s and beyond will be figuring out how scientific methods and humans can productively co-exist in the workplace.

Ultimately, we should use technology to enable humans to excel at what they do best such as problem solve, invent, inspire, innovate, care, empathize, and express creativity. Whatever your role in the work world, be it leader or follower, front office or back office, white collar or blue collar, I ask you, would you rather be optimized or empowered?