Questions and Answers

What is your personal opinion of the German Labor Laws described in a previous post?

I used to believe that the flexibility of the US approach was undoubtedly superior. In the current environment of off-shoring, near-shoring and relentless cost-cutting, I am no longer sure. Management is driven by short-term metrics, as pervasive and dangerous as the narrow horizon of the banking community. Moving jobs and cutting costs leads, in the short-term, to improved profitability – but it is not clear that it leads to long-term success. While it may be true that the cost of off-shore support is lower, it is equally clear that quality is often negatively impacted. Moreover, the manager who takes the "tough decision" to off-shore will be rewarded – in the near term – and won’t be around to clean up the resulting mess in the long term. And, while the analysts, who have no skin the game, will be happy, the company will lose the cultural knowledge and product wisdom of the displaced employees.

Aside: Note that ‘the analysts’ frequently d

isparaged financial performance of the prudent banks that didn’t jump on the sub-prime lemming track to corporate demise.

Moreover, the mess is rarely the fault of the employees who pay the price. The problem could be caused by managerial ineptitude or a changing environment. It is, for example, not possible to remain in business when the market disappears. (I wouldn’t like to be employed by someone who manufactures film for cameras and it might not be good to be in a company that prints magazines.) In this case, jobs will disappear and it seems reasonable to provide a respectable transition for displaced employees.

In other cases, what was standard practice, often for decades, simply vanishes. Automobile manufacturers and airlines, for example, provided, as a matter of course, pensions and medical coverage for retirees. New entrants, without these expenses are touted as brilliant and employees of the traditional providers are harangued as inflexible. Human nature, however, means that household levels of expenditure are based not on current income, but on past income and calculations about the future. Of course people are going to resist giving up what benefits that they have been promised. It seems reasonable to provide a respectable transition for impacted employees.

And, by the way, a 401-K plan from which employers can disengage when times get difficult, is no match for a defined pension. In addition, although the entire American medical system is dysfunctional, it is a fact that in the past, the employer paid for the insurance – and the insurance companies provided it. Both of these benefits are being eroded.

Finally, if the flexible employment system was so superior, we’d expect that the companies that fail to follow it unprofitably deliver poor quality products. Hmm.. would you rather have a BMW or a Chevy? How about GM or Audi stock certificates?

Another photo of Nazy – who is still miffed by the Iranian birth certificate debacle.