In the midst of the current US economic slowdown it is clear that the good old days are over. At least for some chunk of 2008, more likely for the whole year, we are in for some gloomy times.
Companies are being forced to cut costs and let people go. Some smart people aren’t sitting around waiting to be downsized - instead they’re jumping ship and hopping aboard another.
Editor’s note: Looking back over 2008, there were some posts on ReadWriteWeb that did not get the attention we felt they deserved - whether because of timing, competing news stories, etc. So in this end-of-year series, called Redux, we’re resurrecting some of those hidden gems. This is one of them, we hope you enjoy (re)reading it!
Whether you are let go or you leave on your own, there is an impact. Of course conventional wisdom says that everyone is replaceable. That may still be true, but the really important question is: at what cost? Is the cost of replacing someone today the same as it was 10 years ago? Just because technology is cheaper and more abundant it does not mean that it is cheap to replace people.
The fact is that we are increasingly becoming a real-time information processing society. Because of that, each one of us processes an increasingly large amount of unique information on a daily basis. Knowledge-based workers are very different from workers on a factory line, and the cost of replacing them is also very different. While companies save money in the short term, the longer term impact of losing a person is not so clear. In this post we look at the impact cutting jobs has on modern companies and try to figure out: are YOU replaceable?
Somewhere In Corporate America 20 Years Ago…
Story 1: Sorry Bob, you’ve been wonderful, but we will not be needing your services any longer. Here is Jack, fresh out of college, his salary is 25% of yours. Please train him in the next two weeks to do what you do.
Story 2: Hey boss, you’ve been wonderful, but I found a job that pays twice as much. Here is Jack, fresh out of college, his salary is 25% of mine. I will train him in the next two weeks to do what I do.
The aftermath of both stories is the same: Bob trains Jack in two weeks and then leaves. And even though Jack is very bright and had a 4.0 GPA in college, it is impossible to learn Bob’s job in two weeks. It takes about two months for him to become productive. And this is quite a find. The long term cost is substantially lower and company benefits from the employee churn.
Why Today is Different
The problem is that today, two months ramp up time is not acceptable. It is just way too long. For a startup, two months is an eternity, but even for large companies two months is a long time. Today, people need to be replaced real-time - one is out and the next one is in full-speed, day one. This is difficult, particularly because of the incredible amount of information that we end up processing daily.
Increasingly, modern business is becoming a complex, distributed information processing system. The nodes of this system are employees, tirelessly passing bits around to each other, crunching and filtering with the goal to compute, to gain competitive advantage, and to help the business survive.
The problem is that unlike factories or boxes in the computing cloud, employees in the modern company are not identical. Each one knows a unique piece of the information puzzle that makes a company tick. Two weeks is not enough to do the transition and two months is way too long to waste training the new guy. This is why the old adage that everyone is replaceable may need some re-thinking.
The Days of Slackers are Over
Certainly, there are still plenty of examples where slackers are growing old getting paid to work their 9-5 jobs while getting little done. But safe havens for slackers are rapidly diminishing, because they are losing out to smarter, more agile, and faster competition.
A few years ago my wife, who is a clinical pharmacist, worked with a character that ultimately managed to get a pink slip in a huge company that had probably only ever fired one person - him. He started his day by searching the Internet for a rich relative. Yes, you read that correctly, the guy was searching for wealthy family members. At 11am, he walked around the office and asked what people thought would be offered in the cafeteria for lunch. Between 1pm and 2pm, he spent time reading the news, and then typically called his wife to discuss the dinner menu. This is funny, absurd, and sad at the same time. But think about it, can someone like that work in your company? No way! Companies can not afford to have people like this anymore.
The Emergence of the Digital Elite
In a way, the pressure of real-time information is polarizing - the hard-working people are becoming harder to replace, while slackers and perhaps less knowledgeable people are just not needed. We have seen this trend in software engineering for a while - a handful of smart people can accomplish much more than an army of mediocre workers. A skilled, quick professional stands out these days. The people who shine are the people who get the new world - a no-nonsense approach, courtesy, and most importantly, speed.
Recently, my insurance broker switched companies. He quickly contacted me, offered an attractive new package, and then drove 1.5 hours from his office to my home to sign the papers. His commission would not want warrant the trip, but he was smart to make the investment of his time because he won me as a client. On the other hand, the cost of losing a talented employee for his old company just increased - they also lost a client, and I am sure I was not the only one.
Although my insurance agent lives in the technical world, he is part of new breed of folks that I call the digital elite. He uses Facebook to keep in touch with his friends, he was savvy enough to look up my company on the web, and he knows all the cool financial websites. In other words, he is on top of what’s going on. He knows all about the speed of information in our world. And this makes him a serious and important player, of the type that is really hard to replace.
Are Leaders and Visionaries Replaceable?
Clearly, after Bradley Horowitz moves to Google, Yahoo! survives. He will be replaced by someone else just as talented and as passionate and the ship will sail forward. But saying that he will be replaced is very different from computing the cost of his departure. Losing leaders and visionaries is very, very costly. The knowledge, the vision, and the game plan that was in his head is unique and can not be replicated.
Great companies are defined by the great people behind them. There are no great companies without visionary leaders. And if you agree that all knowledge workers are becoming increasingly more valuable, the leaders are then 10 times more valuable. Retention of key leaders and managers is paramount to the success of modern large companies. So I am sure that Bradley, who grew through the ranks at Yahoo! and was one of the faces of the company, will be greatly missed.
Conclusion
And yet, churn is such a huge part of nature! Our world is based on transition and change. Changing jobs is an integral part of your career path. When people move around, society benefits from knowledge sharing and new alliances that lead to great new ideas. Remixing is good for both individuals and companies, so there is no way that churn will ever stop.
But still, it is now becoming more costly for the companies. Because of the increasing amount of information processing done by individuals and the uniqueness of each, getting replacements up to speed is more costly. Retaining and motivating the digital elite should be recognized as a high priority for any company.
So, tell us how you feel about all of this? Do you feel insecure in your current position? Are you looking for a new job? What is your company doing to motivate and retain key people?
Top image credit: New York Times
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I think you are less replaceable if you are flexible and can do many tasks. Being a good teamplayer is always important.
I live in Alberta where the oil industry boomed the last 2 years and anyone and everyone had a job in the industry. With the slowdown, my EPC company is still doing ok with existing projects on the go but new projects on hold. I had to let go 6 people out of 50. Sounds mean but it’s 6 people I’ve wanted to get rid for awhile now.
Posted by: Tracy | December 25, 2008 11:33 AM
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Great companies are defined by the great people behind them. There are no great companies without visionary leaders.
I agree with your first sentence and disagree with your second. When you look at blue chip companies, senior management ebbs and flows, but the workforce remains. Some may be there solely for the paycheck, but they also know how to oil the company in the right places for it to run.
Leaders may provide vision, but the company has no purpose without everyone else.
Posted by: Ari Herzog | December 25, 2008 6:14 PM
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Very good article. However, you’re assuming that top management understands the cost and value of knowledge workers. I think there still are a lot of people in the C-suite which see everyone in IT as interchangeable, which makes them easily replaced. Now, granted, hire/fire decisions should be left in the hands of group managers, but sometimes a decision comes down to cut 10% of your group. Who would you cut? What if from your point of view no one is replaceable? How do you stand up to those types of decisions?
Also, in these economic times, companies often have to make short term decisions in order to survive. Are they going to cut someone that they feel is key to their line of business? Or are they going to cut someone in a support role (although I still believe IT is key to all businesses)?
A good followup to this article might be how to make yourself seem irreplaceable in the current economy.
Posted by: Sarah Worsham | December 26, 2008 7:25 AM
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Alex,
This point is spot on -
“Increasingly, modern business is becoming a complex, distributed information processing system. The nodes of this system are employees.”
Even for the most social high performers, it takes at least 2 months to establish and develop functional working relationships with other people within a distributed system - building the trust that excellent teams enjoy takes even longer. When a node (employee) is removed, the network shifts to adjust - people pick up the slack caused by the missing node by strengthening other connections, and workflow, ideas and communication gets re-routed. Because of this, plugging someone back in doesn’t automatically guarantee that the human network will work the same way that it did before. The more connected the node in the system, the harder it is to replace.
Good insight.
Posted by: Steffan Antonas | December 26, 2008 11:13 AM
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Totally agree
Posted by: Ann Mobile | December 26, 2008 12:59 PM
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I find it kind of ironic when you talk about Bradley and say that it is possible to find a replacement. Because the reality is, after Bradley left, his part of the organization, ADD Advanced Development Group which included Yahoo Developers Network, Brickhouse, Yahoo Research Berkeley, Advanced Products, etc.. basically died.
Some products and teams managed to survive and find other parts of the organization, YDN and Fire Eagle, but the rest are gone.
While Bradley was at yahoo he was able to push through reforms at yahoo and innovative programs. As soon as he was not there to fight, things fell apart. Even though really good people like Chad Dickerson took over, it turns out that Bradley was was irreplaceable.
Sometimes major parts of companies fall when key employees leave.
Posted by: rabble | December 27, 2008 6:45 AM
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