Respect by Retrain Not Replace

Thanks to regular reader Mark for pointing me to this editorial in Computer World, discussing companies that react to changing markets by replacing employees instead of retraining them.

In that column ["Retraining Delimma"], I raised the issue of the expedient approach taken by many employers to replace rather than retrain their employees in order to meet changing skills requirements. I cited the case of Novell CEO Ron Hovsepian, who told me that in the past year, he has replaced 24% of his workforce in order to meet the immediate demand he has had for new skills.

While training is important, Hovsepian explained, it has to be balanced against the financial demands confronting Novell. "The cycle time is the biggest issue," he said. "The brutality of the pressure the company has to operate under in 90 days is what drives us."

That raised the ire of several readers, as it should have.

"I am greatly disappointed that you report without any critical analysis what the employers wish to propagate," he wrote. "What utter BS! It takes them more than 90 days just to make a decision! It's nothing to do with the 'pressure' in the marketplace, but everything to do with hiring the cheapest H-1B peasant programmer at the lowest price."

The editor, Don Tennant, then launches into a correct analysis of the value of people.

Let me be clear: The fact that I didn't fault Hovsepian doesn't mean I'm blind to the negative consequences of a company opting to replace rather than retrain its employees. As I noted last week, until we're able to figure this out, "too many companies will be forced to sacrifice invaluable institutional knowledge for the immediate cost savings that economic reality demands."

And the knowledge destruction wreaked by the short-term mindset of most public companies.

Whether we like it or not, the economic reality is that public companies like Novell are answerable to shareholders. That 90-day cycle that shareholders live and breathe in is real. We can all wonder what it would be like to live in a world in which shareholders didn't exist. But we can't allow our thinking to be clouded by confusing reality with its preferable alternative.

Choosing to respond to a changing market by retraining rather than replacing does look costly, difficult, and time-consuming on the outside.  But the off- balance sheet value of retaining organizational knowledge can more than offset those overt costs.

"Retraining is a direct cost that is easy to measure, and painful to look at. Recruiting, hiring, orienting and tasking new hires involve 'hidden' costs that are less obvious," one reader wrote. "If [companies] seek only interchangeable workers for isolated work, they are forgoing the benefits of organizational knowledge, informal work teams (how work really gets done in an organization; not how the org chart says it gets done) and the chance to build loyalty in those who can advance the company through innovation."

And what message does the decision to retrain or replace send to your employees, your suppliers, and your customers?

And what about employers demonstrating loyalty to their employees? The same reader asked a poignant question: "Why would I think you will take care of me as a customer if you can't be trusted to take care of your employees?" It's a fair question, and one I wish I'd asked.

What kind of company do you want to be?  It may not immediately show up on the P&L or balance sheet, but there's value in doing the right thing.