Why get excited about CEO pay piggery when outsourcing and giggery is much more likely to cost you your job? The accelerating trend towards reducing payrolls by replacing employees with outside contractors threatens our livelihoods.
Compensation people and the objects of our efforts might not survive outsourcing where work is delegated to other outfits or the gig economy in which consultants are given short focused assignments. Even handling employee remuneration and administering pay programs can be outsourced. Total reward professionals need not be involved when independent contractors are controlled by purchasing agents and cost accountants rather than human resource people. Meanwhile, employees from virtually every occupational category stand to lose what little security still comes from a regular job with an organization if they are displaced and then must seek day to day survival by continually negotiating temporary project deals as independent outside suppliers.
Don't be surprised when enterprises are quick to shed employees. Avoiding employment relationships by shipping out work to contractors certainly simplifies business. It reduces management to contract planning. Monitoring the results produced by outside vendors for whom you have absolutely no responsibility means no more "people problems", because you no longer have subordinate employees. Instead, you receive the contracted services of other entities operating at an arm's length distance and required to deliver specified results. No performance evaluations, stressful personal dealings or contentious emotional expectations.
Employee pay is replaced by a clear cost expense item without any burden rate, no taxes to deduct and no imprecision for overtime, commissions, bonus, or variable cash awards. No complicated benefit selections, no individualized payroll deductions. No long-term employment relationship commitment at all. Rather than stockpile people with wide varieties of knowledge, skills and abilities, instead buy totally fungible specialized talent as needed by immediate circumstances from easily replaceable output modules. Like today's electronic equipment -- don't fix it ... just replace the entire unit. Similarly, it is easier to drop a supplier than to fire any regular employee, no matter how problematic their performance may be.
A regressive devolution back to the exploitative practices of dark past years looms. Despite brave attempts by some organizations to introduce more enlightened environments over the last century, too many enterprises consciously accept the old sweat-shop indifference to the humanity of their workers. Instead of valuing and cultivating worker talents, they concentrate on finding the lowest cost highest quality output bidders for their product or service. They don't care who does it as long as it is produced within the proper tolerances of quality, quantity, time and cost for the highest profit possible. That is the typical mandate delivered to top executives of every organization by their owners. It is not a phenomenon restricted to commercial private businesses, either, because the same dynamics operate in the public sector. Taxpayers insist on optimum services at minimum personal cost. Even union pension funds seek high returns on their investments. None of those expectations depend on employee welfare at the enterprises that serve the customers. Whether all these demands create a workplace of robot automatons or one of collaborative independent agents, neither environment requires much HR management.
I'm struggling to articulate an uneasy gut feeling about the potential implications of negative attitudes towards the employment role of organizations. Purchasing production units is easier than hiring and managing troublesome people. Lean vendors can be deployed to supply the same output results as team members, but at the cost of accepting a different relationship ... like, hardly any, beyond that of buyer and seller. The purchase of a product can easily be callously disengaged from the lives, souls and welfare of the producers. But is this the desired future of work?
Unsure if the slide towards this scary dispassionate dystopia can be stopped. Perhaps more of us should speak out. Maybe "outing outsourcers" can become a new rite of public employer shaming that will discourage this ominous trend.
Perhaps that fat cat overpaid CEO truly deserves an imperial reward package if he or she supplies good steady jobs with living wages to regular people.
E. James (Jim) Brennan is an independent compensation advisor with extensive total rewards experience in most industries. After corporate HR posts and consulting CEO roles, he was Senior Associate of pay surveyor ERI before returning to consulting in 2015. A prolific writer (author of the Performance Management Workbook), speaker and frequent expert witness in reasonable executive compensation court cases, Jim also serves on the Advisory Board of the Compensation and Benefits Review.
"Cheap Labor to Go" image by PT courtesy of Creative Commons (magnify by clicking on it)
"Outsourcing" illustration by Frits Ahlefeldt, courtesy of Creative Commons