Saturday, September 29, 2012
The European Perspective on Labor
One reason European companies invest in their workers is because good talent is hard to find, so once they get it, they want to keep it. Our Red Hawk contingent visiting SAP received a very in-depth, professional briefing on the company and equally detailed briefings on the flexible working situations available to personnel at SAP. The company wanted some of us to apply to work at their American subsidaries. I was very impressed with opportunities available at SAP to tailor not only working hours, but also career development, to meet each individual worker's desires and needs. After going through all of the trouble and expense of finding and training productive personnel, multinational European companies like SAP go to great lengths to keep them.
European companies also invest in their labor force because workers who have a deep understanding of their trade and their company are more likely to understand the products they are making and are better able to respond to changes. RAFI is an electronics manufacturer that does plastic injection molding to make components to support production of its products. RAFI has the edge when it comes to worker training as compared with electronics manufacturers and plastic injection molding companies in the United States. RAFI has a series of 18 off-site, dedicated courses to train personnel on different aspects of production. In the United States, workers are generally provided nominal training that includes certifying that they have read procedures - that are sometimes not written in the worker's main language - and they are subsequently shown the "important" aspects of their jobs by coworkers. This process in America inevitably leads to expensive mistakes, and companies respond by hiring more managers to expain to customers why the product is still good to use - as opposed to investing in worker training to prevent those problems in the first place.
One should not overlook an important difference between the industrial/labor policy in Europe as opposed to that of the United States. In Germany in particular, industrial policy is designed to make it difficult to quickly fire a worker due to an economic downturn. There are fees and large severance packages that a company must pay when laying off workers. As we know, in the United States it is much cheaper to lay off a worker quickly. Morally, the European approach is commendable: a worker should not be used solely at the discretion of the company - the relationship should be mutually beneficial. Conversely, many Americans would focus on the flexibility businesses have because of their ability to quicly reduce payroll requirements. I would argue that the flexibility is short-sighted, and my visit to Germany reinforced that feeling for me. During our visit to RAFI, the management showed us a huge drop-off in their manufacturing demand after the start of the financial crisis. Instead of focusing on lay-offs, RAFI took the opportunity to provide more training to their workers, and two years later - when demand exceeded levels seen before the crisis - RAFI had a large enough work forced with up-to-date skills ready to meet production requirements. In the United States, the workers would have been fired quickly after the crisis and when demand returned, poorly qualified or "rusty" workers would have been hired. This approach certainly undermines the quality of American products and services, not to mention the well-being of American workers.
In the long run, it is more economical to choose talented people, train them properly, and ensure they have a positive work environment. The companies we visited in Germany demonstrated if a business shows a committment to its workers, the workers will be committed to the business. Some companies in America are able to do this, but these companies are more of the exception and not the rule. Over the long term, the European commitment to workers lowers costs for the company and increases the productivity of employees and the quality of the product. However, in America we do not always take a long-term view of things, especially in business. All too often the focus is on the next quarterly earnings report. Our companies have to be on guard against corporate raiders and companies like Bain Capital, who will swoop in and dismantle a company if it misses its earnings estimate. It is time for American business to take a longer-term view of the labor force and the overall measurement of business performance.