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November 22, 2021

Productivity and Attrition: The Last Straw? [Joe Mannix]

Productivity has been a mixed bag recently. According to the BLS, productivity is down sharply in Q3 of this year, and costs are up. Over the past couple of quarters, productivity has been falling across many service industries, mining and manufacturing. Wholesale and retail trade productivity has been rising, but this is likely a COVID artifact since so much commerce is now centralized in the mega-players like Amazon and Wal-Mart who are, after all, very efficient. The base figure of productivity - "labor production per hour" for all non-farm employment - spiked significantly early on in COVID and then corrected, rose again, and has fallen again in Q3, this time pretty dramatically.

Attrition is harder to get a handle on, because it isn't a centralized figure. Each company and divisions within those companies track their own attrition. Labor turnover is tracked by the BLS and it has been rising for the past few quarters, but the broad spectrum measurements are hard to contextualize. In my personal experience at my current company and those where I have contacts, attrition is skyrocketing. It's running close to 25% in my company and between 20% and 30% elsewhere based on my conversations. That's bad based on historical norms.

Attrition is up and productivity is down. Why?


It could be a fairly simple answer. Productivity could be responding to the dislocations that happened in the beginning and middle of the COVID response, and mean reversion is back - this is just noise due to all of the economic oddities with the response. My company attributes work-from-home as a driving factor in attrition, as more people have realized there are more opportunities when you're not bound to an office. And people like working from home, so ending it will cause even more attrition (essentially, management is trapped). Businesses need to figure out the new rules of workforce dynamics and then things will stabilize.

That's a happy scenario. What's the unhappy one?

I think there is a darker undercurrent in all this, and the COVID vaccine mandate may have been the last straw. Why do people work in the first place? A big answer to this, of course, is "for the money." This is certainly true, but it is only true to a point. It's different for everyone, but at some point - and I suspect it is a lower point than most would expect - money becomes less important than intangibles for a lot of people. The big intangible is respect. The vax mandate is a respect black hole. The aggressively pro-vaccine crowd is pissed because it took so long and the companies lacked the courage to act independently. The anti-mandate crowd is pissed because no one at the company stood up for them. The neutral crowd who couldn't care less one way or the other resents all of the jawboning and time wasting and paperwork hoops they have to go through. Absolutely nobody feels respected in this matter, and it is a major matter.

Moreover, this may well be piling on to the casual disrespect that is increasingly common. Racist CRT-derived training material. Hiring quotas. Promotions and jobs granted on the basis of identity group rather than skill or achievement. Constant activity around "compliance" and ever-increasing communication and material about whatever new rule is in place this week. None of this breeds directional or mutual respect. And if you don't feel respected by the company, you won't feel respect for the company. You'll either coast through and do the minimum to keep your job or you'll become a mercenary and jump to whoever cuts you a bigger check to get while the getting's good because in the absence of respect or honor, you might as well get paid. But what you won't do if you're disrespected is go the extra mile or work the extra hour. You won't give your all to an organization that you think hates you.

The corporate culture generally, not just in one company or one industry, is increasingly hateful and toxic. They're disrespectful and contemptuous and they're destroying the desire and incentive to produce more and go beyond the paycheck - and they paycheck isn't enough to offset the constant low-grade humiliation factor. So what to do? Slow down and take it easy, or jump ship. Reduced productivity, increased attrition.

If you're an employee, ask yourself, "do I feel respected at work? Is there any honor in my employment?" If the answer is "no" then ask yourself, "is this because of my boss, or because of my company, or both?" If it's not your own boss, ask yourself, "can my boss be good enough to offset what the company is doing?" If you're an employer or a boss, ask yourself those same questions and then consider them from the standpoint of your employees. I have done this scatter-shot within my small professional network. No one feels respected, and most consider the companies themselves to be the cause, rather than their direct bosses.

If this is the case and the level of disrespect has grown to the point of mutual contempt, then this will not be a transient mean-reversion and equilibration period after which things return essentially to normal. If this is the case, then the declining productivity and increased turnover are just getting started and we're going to be in for a very rough couple of years in terms of the economy (all the other economy-damaging nonsense notwithstanding). Many people will point to the vax mandate as the cause, but don't be too quick to jump on that bandwagon. It will only be true in a proximal sense.

When I was in college, I had an excellent professor of statistics who also tried to impart life lessons to the class. He told a story of a job he had in the past where the team was catastrophically dysfunctional. They all hated each other, the boss was incompetent, the company was indifferent, the personalities all clashed, etc. On meeting days, they rotated through the staff and one of them would bring doughnuts. One meeting day, the person brought jelly doughnuts. It was the tipping point. The pro-jelly and anti-jelly factions started sniping at each other. The boss couldn't keep order. The meeting devolved into an aggressive shouting match that eventually came to blows. The entire department failed that day and there was massive attrition and a layoff that followed. What seemed to start as a fight over doughnuts killed the department. When the professor got to the moral of the story, he said, "it's never about the damn doughnut."

The vax mandate may be the last straw that kicked off a disaster. It is a big, heavy, monstrous straw, but it is not the only one. It is the last in a long line of abuses, disrespect and dishonor that have been growing in corporate America for more than a decade. If the unsettling trends continue and accelerate, then the vax mandate will turn out to be a jelly doughnut - the thing that brought it all into the foreground.

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posted by Open Blogger at 07:35 PM

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