Clause 61: The Pushback Blog

Because ideas have consequences

Evolution of the Workplace, 1960-2015

leave a comment »

Let me take you back to a time before we had euphemisms like downsizing, rightsizing and midlife career re-evaluation. Before there were cubicles. Do you think everyone had a private office at work? Think again; the typical office looked like this:

1950s office. From The Wall Street Journal.

1950s office. From The Wall Street Journal.

This was a time, compared to today, where labor was cheap and capital was dear. There were large numbers of people being employed, and getting green money to spend outside the company on equipment, even if the equipment existed, was like getting blood out of a stone. So labor was often substituted for capital, performing laborious tasks that could have been automated. What’s the problem? We’re paying you, aren’t we?

Capital-Centric Work Processes

Most management teams saw as their purpose to optimize existing processes, not to challenge them or blow them up. Change came slowly and in measured increments.

 

A Bridgeport milling machine. Bridgeport was to the shop what Xerox later became to the office.

A Bridgeport milling machine. Bridgeport was to the shop what Xerox later became to the office.

Capital was the bottleneck resource, and most of the capital was in plant and equipment. Raw materials and people were cheap. Therefore, the needs of the plant and equipment came first. That milling machine takes time to set up for any particular job. Therefore, you want to amortize that setup time over as many parts as you can. You determined an optimum lot size and produced that number of pieces on a work order. There were exceptions, such as the job-oriented machine shop, but they by their very nature could not realize the economies of scale that mass production offered and depended upon. Machine shops were niche players in the mass production economy.

What do you do with all those parts and subassemblies? You store them in a parts room, and staff the parts room with people to watch over them, catalog them and only distribute them to other people with appropriate pieces of paper called work orders in their hands.

Clerk in a parts room, from the 1940s. By Alfred T. Palmer [Public domain], via Wikimedia Commons.

Clerk in a parts room, from the 1940s. By Alfred T. Palmer [Public domain], via Wikimedia Commons.

Parts clerks could make a decent living, especially considering the fact that they had to have only a minimum level of clerical skills and had no pressure to produce. Some people bought homes and raised families on the money they make working in the parts crib.

Parts of a Work Order, a sophisticated control.

Parts of a Work Order, a sophisticated control.

A work order is more than just a set of instructions; it is an authorization to produce. It says that an operator should producing these parts at this time, not some other parts. It provides authorization to draw parts from the parts crib. It contains standards for productivity and scrap rates, against which the worker will be compared.

This whole dance was kept moving without the aid of computers by another small squad of people in the inventory control office. Many of them had jobs that were also clerical in nature, such as matching completed orders with receipts for materials used. Much of it was mind-numbing work. But what’s your problem, you’re getting paid, right?

At this time, it is worth reviewing the assumptions that underpin business in this era:

  • Labor is cheaper than capital.
  • Labor is more flexible than capital.
  • People come to work to do the least work for the most money. If you don’t have tight controls,
    • the majority will be goofing off;
    • the enterprising ones will be doing their own work on your equipment or converting your inventory into scrap that they can sell on the side.
  • Most people aren’t capable of brain work. They need follow-the-horsie procedures to guide them through their working day. After all, that is what the education establishment was telling us at the time.
  • We have the know-how and the processes. We won the war, didn’t we? Our focus needs to be on operating and optimizing.
  • Key success factors for the employee are punctuality, following the rules and ability to get along with others. A highly talented person who can’t be counted on to show up on time and follow rules is useless; replacing such a person with a plodder who is punctual and takes direction well is an improvement.
  • Business relationships are basically adversarial in nature:
    • Suppliers want to charge as much as they can, whereas customers want to pay as little as they can;
    • Management wants more work for less money, whereas labor wants less work for more money.
  • In the supply chain, the company with the access to capital has the upper hand and calls the shots. That is usually the manufacturer.
  • The United States is the only market that matters. Everyone else is trying to crawl back into the industrial age after World War II.
  • People all want basically the same things. Therefore, the best mass producer can obtain the greatest market share, the lowest unit costs and the best returns on investment.
  • Despite the marketing fluff, we are basically trending toward perfect competition, producing commodity products that are differentiated by price and availability.
  • Low cost through economies of scale wins.

Mass man must be served by mass means.
— Roger Price, The Great Roob Revolution, 1970.

David Frum called pre-1970 America a “love-it-or-leave-it” society:

You didn’t like Chervolets? Tough. Your kid was home sick and wanted to watch cartoons at ten on a weekday morning? Also tough. You wanted a checking account that paid interest? Again tough. You needed to pay less than $900 for an economy ticket to Paris? Tough once more.
— David Frum, How We Got Here — The 70’s: The Decade That Brought You Modern Life (for Better or Worse).

And I would add:

  • You’re a woman with kids who has run away from your abusive marriage and has to make a go of it on your own? Tough.
  • You grew up working-class and were put off by the process of college application, but now you don’t like your factory floor job? Tough.
  • You are completely unchallenged by your job and have all you can do to get through the working day? Welcome to the club. You’re getting paid, right? (spot a theme here?)
  • You have a better idea for a car you would like to produce? Stop doing that, Mr. Tucker. You’re going to disrupt the whole industry, screw up the future sales everyone is counting on and cause people to lose their jobs. We don’t want you doing that and we won’t allow it.
Tucker movie poster

Preston Tucker: menace to society?

Knowledge Work

Knowledge work has existed for a long time, although Peter Drucker is generally credited with coining the term in his 1959 book Landmarks of Tomorrow. Here are some jobs that have been focused on knowledge work since time out of mind:

  • Military officer
  • Lawyer
  • Surgeon
  • Missionary
  • Actor

The movie business is the only business in the world where the assets go home at night.
— attributed to Dorothy Parker

What distinguishes knowledge work from other kinds of work?

  • It is non-routine in nature, and therefore does not readily lend itself to standardization and optimization;
  • Being non-routine, the unique conditions of the instance of work being performed influence what is done, how it is done and how long it takes;
  • The person doing the work knows more about the conditions of the work than the manager or outside expert;
  • The knowledge worker applies personal knowledge to the work in a way that other works do not.

On the last point, compare a software engineer to a class A machinist. Both have some elements in common:

  • Both are highly skilled occupations;
  • Both require thinking;
  • For both, one would expect experience to matter.

However, there is a skill definition for a class A machinist that practitioners recognize. Two persons both having that skill level expect to be paid comparable wages. In that sense, class A machinists are fungible.

Software engineers, by contrast, are much more varied and less fungible. When an experienced software developer leaves, it is much less easy to go get another one of similar background and plug them into the role.

You might argue that you have known people who call themselves software engineers but who are completely lost when confronted with problems outside of a small range with which they expect to solve. I would take your point; such people are not really engineers at all, but technicians. This illustrates another issue with knowledge workers; it becomes increasingly difficult to identify abilities in the traditional means available to the hiring manager.

When I was hiring, recruiters used to ask me how many years of experience I wanted in the candidates. It’s not a useful question. I can have two candidates, each of whom has six years’ professional experience:

  • Amy has six years of progressive and varied experience. She has constantly sought to expand her scope and taken initiative to resolve a greater variety of problems in the course of delivering results.
  • Bob has six years of experience. But after the first two years, he got into a comfortable routine where he can repeat the same methods over and over, at which point he allowed himself to stop growing. Bob really has two years of experience three times over.

Since 1980, for reasons I shall explore, a greater share of work in general has become knowledge work. This has caused dislocation for persons:

  • Who are not adequately prepared to do knowledge work;
  • Who don’t want to do knowledge work;
  • Who never had to do knowledge work and found themselves suddenly facing changed conditions.

Pulling the Rug Out

People tend to want to learn the ground rules and operate within them. When the assumptions on which people make long-term decisions and investments suddenly change, there is no alert that comes in the mail notifying them that they need to reconsider their life strategies. Yet if one continues on a path for which the underlying assumptions are no longer valid, one will not arrive at a happy ending.

What happened to the assumptions underpinning the American workplace since 1980?

Old Assumption New Reality
The United States is the only market that matters. Everyone else is trying to crawl back into the industrial age after World War II. Now other nations have climbed back into the modern world with a vengeance, with current skills and up-to-date equipment. They are lean and mean, while many people here are comfortable and uncompetitive.
People all want basically the same things. Therefore, the best mass producer can obtain the greatest market share, the lowest unit costs and the best returns on investment. Once people had their basic needs reliably met, they started wanting a variety of things. In 1977, we discovered positional goods, which are goods whose value would be diminished if everyone had them. This dispersal of demand blindsided the mass production machine. Some industries, such as advertising, still haven’t entirely caught up.
Despite the marketing fluff, we are basically trending toward perfect competition, producing commodity products that are differentiated by price and availability. The opportunities are in industries that are characterized by monopolistic competition: highly differentiated products with limited opportunities for customers to substitute. This carries greater risk because you have to guess what differentiators matter and bet your company that you’re right.
Low cost through economies of scale wins.  You can run your business into the ground producing a low-cost product that nobody wants because the quality is inferior or the public perception is bad. There are other economies to be had, such as economy of scope.
In the supply chain, the company with the access to capital has the upper hand and calls the shots. That is usually the manufacturer.  In the supply chain, the company with the access to customers has the upper hand and calls the shots. That is often the retailer (e.g., Wal-Mart, Amazon).
We have the know-how and the processes. Our focus needs to be on operating and optimizing.  Our processes are not always working for us. Other countries have come in to our markets and outperformed us. Our focus needs to be on innovation.
Business relationships are basically adversarial in nature.  Co-opetition reigns supreme. For every circle you can draw where you and others are in an adversarial relationship, you can draw a larger circle where you and the others in the smaller circle have to work together to compete against the others.

These changes are external to business, larger than the American commercial environment. They are beyond the abilities of business management to change, even if they wanted to.

How did these changes influence the assumptions within the workplace?

 

Old Assumption New Reality
Labor is cheaper than capital. Between the introduction of cheap computing power and increasing fully loaded compensation costs driven by employee health benefits, capital is now cheaper than labor.
 Labor is more flexible than capital.  I can put a computer in the excess storage closet more readily than I can a person. Moreover, for a variety of factors, it is harder to get rid of people who I don’t need or who don’t work out. Therefore, I am now extremely reluctant to add people and only do it when I absolutely have to.
Most people aren’t capable of brain work. They need follow-the-horsie procedures to guide them through their working day.  There are far fewer places in this new climate for people who are not capable of brain work. More of the work to be done is knowledge work. I need people who can solve problems, not people who need me to solve problems so that they can do “their jobs”.
People come to work to do the least work for the most money. A knowledge worker with no initiative is a bust. If I have to figure out what you need to do and tell you how to do it, we’re both doing your job. I could just as well do it myself.
Key success factors for the employee are punctuality, following the rules and ability to get along with others. A highly talented person who can’t be counted on to show up on time and follow rules is useless; replacing such a person with a plodder who is punctual and takes direction well is an improvement. Nobody knows exactly what “the rules” are from one day to the next. There are a constant stream of unstructured problems to solve. I may not be able to offer the plodder sufficient direction to be effective; part of the problem I need solved is figuring out what the direction is today, which may be different from the direction last year and may not be suitable for next year, either.

The results have been visible in the years since. The basic composition of the employed American workforce in terms of skill levels and problem solving abilities has irreversibly changed.

Many factories no longer have parts rooms. Some have changed to just-in-time (JIT) production, under which an earlier operation only produces parts when a downstream operation needs them, in the quantity immediately needed. This system trusts the workers on the floor to decide what to produce. These factories have dispensed with work orders as well as parts clerks.

Even when factories do not adopt JIT, many still decide that they can’t afford a parts room full of clerks. The cost of paying those clerks now exceeds the expected cost of having workers able to draw parts without controls.

And all those parts clerks? Their jobs are gone, never to return.

The lower middle class was extensively squeezed in this way throughout the 1980s. They were not articulate people who write magazine stories, and few lost any sleep over this. Now the middle class is getting much the same treatment. It’s a national crisis! Save the middle class!

The middle class has to save itself by gearing up, skilling up and delivering value. The middle class needs to be more about competing and less about credentials.

The pre-1970 economy was not a golden age from which we strayed due to selfishness and avarice. It was a one-of-a-kind situation that will not be repeated. We need to adapt and get strategies to prevail.

Advertisements

Written by srojak

November 16, 2014 at 1:30 pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: