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There is nothing wrong with job security - right?

If the system of family and schools are not doing the job well, it's up to management to cooperate with these agencies to improve their performance.

There is nothing wrong with job security -- except who provides it, who pays for it and how it is achieved? An often overlooked piece of fundamental economics is that all costs incurred by any business must be recovered in the selling price of its goods or services. There are costs associated with employing any of the agents of production. Management is responsible for marshalling and allocating the agents of production: manpower, material and machines (MMM) -- an easy to remember modernization of Adam Smith's Land, Labor and Capital. Manpower, of course means manpower and womanpower. The key issue is that manpower is only one of the MMM trio that must compete for an allocation of scarce resources. Management has to balance the equation to survive.

In the macro-economy, manpower must be optimized to maintain the level of living of its citizens, i.e. full employment for all persons that should be working. Not only must the workforce be kept employed but individuals must be productive at a level that supports the level of living expected in the culture. "Aye! There's the rub!," as Hamlet might say. Individuals who are rightfully part of the workforce must not only have jobs but must be productive in those jobs; productive at a level that supports what our culture calls prosperity.

It is management's responsibility to provide, not just jobs, but jobs that are productive. Be careful, too, how you define production. Economically effective production is only the production of marketable goods and services, the right products at the right place, the right time and the right price. Failure to produce any of these leads to failure of the firm. If this sort of failure is widespread, failure of the macro-economy follows.

Let's face another fact too. A preponderance of service jobs will not cut it! There has to be a multiplier. That is where the 'machines' part of the MMM formula comes in. Think of machines as a total technology. A machine (a technology) is the agency that provides the multiplication of the effectiveness of the manpower. Our modern culture is absolutely dependent on such a multiplier. Without it we would be back in the Middle Ages where production was limited to what a person could do with simple tools and maybe a little animal power. We have much higher aspirations and expectations today.

Again, it is management's responsibility to provide the optimum mix of manpower, machine and material. This responsibility is not limited to providing jobs but must extend to providing work opportunities in an environment equipped with the machines that multiply the individual's effectiveness. This, of course, means that the M1 (individual) and the M2 (technology) must match. Individuals must be educated and trained to fit them to operate the machines (M2) and motivated.

Managers cannot expect people to be served up to them all ready to operate hightech machines (M2). In our culture and our economy we have built a tradition of family responsibility for rearing children through infancy. We have delegated to government the responsibility for primary and secondary education. This system is expected to equip individuals with only the most fundamental abilities, the ability to read, rite and reason. Almost equally important is conditioning to a system of ethics.

Managers can expect no more than a person equipped with 3 Rs plus ethics. If the system of family and schools are not doing the job well, its up to management to cooperate with these agencies to improve their performance.

Beyond basic education, however, it is up to management to provide, or cooperate with others to provide, people with the knowledge, skills and motivation to operate the machines (M2) effectively. As M2 changes, as it inevitably must, business must provide the further training and guidance to equip the people involved for a continuing high multiplier relationship to the current form of M2 (technology). Business management must not support the attitude that they may use their M1 (manpower) and cast them aside as chattels whenever the M2 (technology) changes. Unfortunately, that seems to be the prevailing attitude of business at this time. If you don't need them, lay them off on their own or someone else's responsibility.

Why should business management accept responsibility for the ongoing fitness of M1 (manpower), M2 (machines/technology) and M3 (material) formula? Three reasons jump out

* Management is best equipped to know what is needed;

* Management, through the organization of its business, already knows the present capabilities of its workforce better and what changes are needed; and

* The cost of unemployment and retraining will be born by the businesses that comprise the economy in any event.

What if business management of a specific firm or industry adopts a new M2 (machine/technology) that requires fewer people to operate than the old M2? A new technology that is associated with lower cost or a better product (more marketable) should be adopted. That is progress that supports a progressively higher level of living for the population. Also, a change in the business environment may take place rather suddenly, possibly requiring retrenchment or withdrawal from an existing M2 (technology).

One possibility is that a government agency take responsibility at such a time. In a way, that is the nature of the present unemployment compensation programs. The emphasis, however, may justifiably shift from payments while seeking employment to education and training to meet the current needs. Business management should have an active leadership role in such retraining. A cooperative relationship should be encouraged with schools and training agencies.

A second possibility is a program under which each business enterprise retains internal responsibility for retraining. This would be feasible if the firm could induce growth or diversification sufficient to absorb the displaced employees.

A third way is a hybrid of the other two. An outside agency takes responsibility in the event the employing firm is unable to perform the retraining or placement themselves. The cost, however, should remain the responsibility of the employer so far as possible. Employers might share the cost of retraining with a new employer, thus encouraging a new employer to absorb people laid of by another.

The most desirable situation would be one in which the employee stays with his original employer as long as that employer remains viable. This would encourage employee-employer loyalty since a person could feel assured of continuing employment even when the environment or technology changes. The employee, however, would be endowed with complete freedom to change employers for self improvement or whatever other reason.

Employers, under these circumstances, would be less prone to pirate skilled people from another employer. They would have a workforce of their own for which they were ethically and financially responsible. They would incur an ongoing responsibility for anyone they hired away from another company. Only the most aggressive and rapidly growing companies could afford to proselyte people.

Managers of businesses held responsible for retraining employees would have added incentive to diversify, expand and modernize their operations.

The risk of curtailing labor-saving innovation must be avoided. In a free market, however, continued production with an obsolete technology would soon be discouraged by declining market demands for the product.

The process must be tailored to provide for an orderly entry of young people into the workforce. This assumes that there would be provision for the retirement or transfer of older people to positions where they can continue to contribute directly or indirectly to effective production. Mentoring, coaching and counseling might all be exploited.

John E. Thompson received his M.B.A. from the University of Chicago and an M.S. from Illinois Institute of Technology. He received his Ph.D. from Tennessee Christian University. Thompson has been an IIE member for more than 35 years.
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Author:Thompson, John E.
Publication:Industrial Management
Date:May 1, 1993
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