In an Observer exclusive, Rich Rothacker reported that Wachovia
is looking at outsourcing human resources functions as part of an
initiative to reduce expenses, just as Charlotte's Bank of America
has already done.
Predictions of a "harder" corporate management philosophy are
sadly becoming true, and now dominate America's corporate
Sometime in the early 1980s, I attended a meeting of the
Association of Management Consultants in Atlanta. In one session, we
described the kinds of consulting we were doing and the kinds of
requests that corporations were making. Our conclusion: "soft"
consulting was out, and "hard" consulting was in.
Soft consulting is basically the human resources development
approach that recognizes an organization as an association of human
beings, all of whom contribute to the production of a quality
product or service at the lowest cost. For best results, it is
necessary to pay all levels of employees a decent wage, with
periodic increases in return for loyal and conscientious service,
and to treat all levels with respect -- seeking, listening to, and
reacting to their suggestions, questions and concerns.
This isn't easy. It takes actual management skill to effectively
deal with large numbers of people. It also takes a genuine
commitment to the ethical treatment of everyone in the organization.
Otherwise, you simply won't get the kind of teamwork that is
necessary for a truly competitive organization.
Hard consulting is different, with drastically different effects
on the corporation and on society itself. It's based purely on cost
reduction -- not true efficiency -- and it fits perfectly with
Milton Friedman's frequently quoted justification for management and
investor greed: "So the question is, do corporate executives,
provided they stay within the law, have responsibilities in their
business activities other than to make as much money for their
stockholders as possible? And my answer is, no they do not."
Lower level employees are not seen as human beings with families
to support, or even as legitimate members of the organization. They
are merely costs to be minimized, no matter how much they have
previously contributed to the corporation's success. Ethical issues
of fairness and justice to lower-level employees have no role in top
management's decisions -- all that counts is the return for
shareholders and increased bonuses for the top executives.
This hard management style is changing the nature of our society.
We're becoming a nation of highly paid investment bankers -- and
workers who must compete with each other in the race to the bottom
in wages and working conditions.
Prior to the outsourcing rage, corporations correctly thought
that the best way to improve the bottom line was to build a loyal,
educated, motivated workforce.
That's simply no longer true. The easiest, most reliable way to
realize quick and significant profit improvement is to transfer
corporate activities to other American firms with lower moral
standards for the treatment of employees, or to countries with
terrible labor records and much lower wages.
For example, Ford Motor Co. has already outsourced many of its
manufacturing, technical development and clerical functions. But,
more importantly, hard consultants are now arguing that it shouldn't
even be in the business of assembling its cars. This is called the
"asset-light" strategy, made famous by Enron. Top corporate
executives transfer the headaches of dealing with people -- and the
risks of actually manufacturing a product -- to others who compete
with each other to deliver products as cheaply as possible.
To the extent that executives outsource their organization's
functions, they become, in effect, investment bankers instead of
managers. And when their ex-employees suffer lower wages and worse
working conditions in their new jobs, the executives can still claim
the ethical high ground. They are not responsible for the actions of
employers who have lower standards for the treatment of
Of course, the outsourcing of human resources functions is doubly
bad. The outsourced employees will have trouble finding jobs of
equal desirability, especially those with longer tenure. But, just
as important, other employees will lose their representatives in
management -- the ones whose jobs include maintaining the quality of
work life for all levels of the organization. This function will be
turned over to outside people who don't have active contact with
There are undoubtedly many reasons for the exploding gap in
wealth and income between America's rich and poor, and even between
the rich and our dwindling middle-class -- but outsourcing, and the
switch from soft to hard management, has to be a major one. It's the
natural outgrowth of a philosophy that top management's only concern
is profit and the financial return to their shareholders.
Chuck Kelly is a retired management
consultant living in Tega Cay, S.C., and author of "The Destructive
Achiever: Power and Ethics in the American Corporation" and "Class
War in America." Write him at email@example.com.