How to destroy human capital

I thereby nominate IBM for the Circuit City award for how to destroy your human capital. You may remember how Circuit City fired its most experienced workers as a cost cutting measure — only to see the company go into a death spiral as their human capital ebbed away (see earlier posting). In the Circuit City case, not only did they get rid of key human capital, they destroyed that organizational bonds that enhanced that human capital through structural and relational capital.
Well, now come word in a story last week in Computer World that IBM may top that. The story, “IBM cuts pay by 10% for workers picked for training”, describes a new IBM directive that certain employees in the Global Technology Services (GTS) division will be required to undertake mandatory training one day a week for 23 weeks. Sounds fine up to now. Here is the kick in the teeth: those employees will have their pay cut 10% during that time period.
They call it “co-investing”. It looks more like punishment. Remember – this is a mandatory pay cut. With apparently no guarantee that they won’t be fired at the end of the training.
Some have tried to defend the idea – saying it is better than firing the employees. So is the choice IBM is setting up is this: be fired or pay for your own training (and we will see if you measure up).
As Marie G. McIntyre wrote on CNBC blog: “Advice to IBM management: Don’t be jerks“:

IBM has every right to make such a decision, yet something about it feels wrong. For one thing, this action seems to violate an implicit pact between employers and employees regarding skill development.
Simply stated, companies are generally expected to provide the training required to keep basic competencies up-to-date. Nurses will be taught to use electronic records. Lawyers will attend annual seminars on legal changes. Auto repair techs will learn to service heavily computerized cars.
But not in the GTS division, where a technician making $60,000 a year will now be required to sacrifice about $3,000 for training “to address changing client needs, technology, and market requirements.” Since this helps IBM compete, shouldn’t the company foot the bill?

Of course, the standard argument companies use to justify not paying for training is that employees are mobile. Training helps the employee get a better job so they should pay. Why should we pay for something that will walk out the door? Well, such an attitude a self-fulfilling prophesy — exact the type of environment that encourages employees to walk.
An example of this attitude is illustrated by another point McIntyre raises that only a certain group have been singled out for this action:

The GTS group is being retrained in CAMSS — cloud, analytics, mobile, security, and social — IBM spokeswoman Trink Guarino is quoted as saying in the Computerworld article. Given that many IBMer’s have been with the company for decades, odds are that other folks have also lacked expertise in these areas.
For example, those technologies certainly weren’t around when CEO Ginni Rometty joined IBM 33 years ago. So, did she give up 10 percent of her salary while going through that learning curve? And how about the board? With an average age of 64, they surely required some technical updating – but did they pay for it with a cut to their $250,000 annual fee?

Companies routinely pay for “executive education” for the top of the hierarchy. But apparently those rules don’t apply to front line IBM workers (shades of Circuit City).
Peter Cappelli of Wharton’s Center for Human Resources is quoted in the New York Times as saying co-investing is “where we are going to end up going in retraining.” If that is where we are going, then the economy is in big trouble. First we saw cuts in employer investments in human capital. Now we see a mandatory requirement that employees pay for training. Apparently corporate America has forgotten about the glue of the relationship between organization and knowledge workers that creates intangible capital – and therefore competitive advantage.
Something is very very wrong when IBM has decided to take the Circuit City approach.


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